Anheuser-Busch InBev SA/NV Q4 FY2022 Earnings Call

Welcome to Anheuser-Busch InBev’s Full Year and Fourth Quarter 2022 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. Michel Doukeris, Chief Executive Officer, and Mr. Fernando Tennenbaum, Chief Financial Officer. To access the slides accompanying today’s call, please visit AB InBev’s website at www.ab-inbev.com, and click on the Investors tab and the Reports and Results Center page. Today’s webcast will be available for on-demand playback later today. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements. These expectations are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev’s future results, see risk factors in the Company’s latest annual report on Form 20-F filed with the Securities and Exchange Commission on the 18th of March, 2022. AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukeris. Sir, you may begin.

Thank you, Jessie, and welcome, everyone, to our full year 2022 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our full year and fourth quarter operating highlights and provide you with an update on the progress we’ve made in executing our strategic priorities. After that, we will be happy to answer your questions. Let’s start with our operating performance. We are very pleased with the continued momentum of our business and the strength of the beer category across our footprint in both the fourth quarter and the full year 2022. For the full year, our top line grew by 11.2%, with volumes increasing by 2.3%, reaching a new all-time high. Revenue per hectoliter increased by 8.6%, accelerating in the second half of the year, driven by revenue management initiatives and continued premiumization. Driven by the consistent execution of our strategy and top line growth across all operating regions, our reported revenue is now $5.5 billion above full year ‘19 pre-pandemic levels, with our volumes 5.8% ahead. EBITDA increased by 7.2%, at the upper end of our medium-term growth ambition and 2022 outlook. Underlying EPS was $3.03, a 5.2% increase versus last year. As a result of our performance and strong free cash flow generation, gross debt decreased by $8.9 billion this year, leading to a net debt-to-EBITDA ratio of 3.51 times. Following our deleveraging progress, the Board has proposed a full year dividend of €0.75 per share, a 50% increase versus 2021. In the fourth quarter, we delivered top line growth of 10.2%, with accelerated revenue per hectoliter growth of 11.2%, driven by the implementation of price actions, ongoing premiumization, and other revenue management initiatives. Our volumes declined by 0.6%, driven primarily by the significant impact of COVID restrictions in China and a softer industry in the U.S., which was impacted by the phasing of price increases and abnormally cool weather in December. We delivered an EBITDA growth of 7.6% and underlying EPS of $0.86, a $0.12 increase versus quarter four ‘21. Our diverse geographic footprint provides a unique combination of growth and reliable cash flow generation, positioning us well to deliver superior value creation. In 2022, we delivered broad-based growth with a top line increase in all five of our regions and volume growth in over 60% of our markets. Now, let me take you through the operational highlights for the year from our key regions, starting with North America. In the U.S., we continue to transform and premiumize our portfolio. Our business delivered another year of top line growth and stable EBITDA, despite the elevated cost environment. Our above-core portfolio continued to outperform the industry this year and combined with our Beyond Beer brand now represents over 40% of our revenue. While industry volumes in the fourth quarter were soft, we are seeing improved performance to start 2023, with year-to-date beer industry volumes down 1%, and U.S. dollar sales up 5% through the 12th of February, according to IRI. Our business in Middle Americas continues to deliver outstanding results. In Mexico, we delivered another year of double-digit top and bottom line growth, with record high volumes continuing to outperform the industry. Volume growth was broad-based across all segments of our portfolio, with our above-core beer brands growing over 20%. In the fourth quarter, we completed our Oxxo channel expansion with our portfolio now available in approximately 20,000 Oxxo stores nationwide. Looking ahead, we are focused on continuing to build the partnership and we are excited by the opportunity to activate our brands and gain our fair share across the network. In Colombia, our business delivered double-digit top and high single-digit bottom line growth, led by the consistent implementation of our category expansion levels. The beer category continued to grow, gaining 80 basis points share of total alcohol this year and with 2022 marking the highest beer per capita consumption in over 25 years. Moving on to South America. Our business in Brazil reached record high volumes and grew top and bottom line by double digits as we continue to expand our market share. Our performance this year was led by over 20% revenue growth of our premium and super premium brands. Now let’s talk about EMEA. In Europe, we grew top line by double digits and EBITDA by high single digits. Our portfolio continues to premiumize, with over 55% of our revenue now coming from premium and above premium brands. In South Africa, we delivered record high volumes this year, growing both top and bottom line by double digits, despite capacity constraints in the fourth quarter. And finally, APAC. In China, both the industry and our business were impacted by significant COVID-19 restrictions throughout the year, leading to a total revenue decline of 4.2% and EBITDA decline of 10.8%. While 2022 was a disrupted year, underlying demand outside of COVID-19 restrictions remained strong. As restrictions have eased and infection rates declined, we are optimistic about the industry recovery and returning to growth as channel traffic and mobility normalize in China. Now, I would like to share with you a few highlights of the progress across our sustainability priorities. Our priorities are centered around the beer category, which is inclusive, natural, and local. With these priorities embedded into our commercial strategy, we can create value and share prosperity for our business, our communities, and our planet. We continue to make progress across our priorities. Highlights include: investing over $700 million since 2016 in social norms market campaigns, promoting Smart Drinking and Moderation, reducing Scope 1 and 2 absolute emissions by 39% and improving water efficiency by 14% versus our 2017 baseline. We are working with nearly 24,000 farmers in our direct sourcing programs through research, technology, and hands-on support to help skill, connect, and financially empower them. Additionally, we progressed our circular packaging goal, with 77% of our products now in packaging that is returnable or made from majority recycled content; we kicked off the Cohort of our 100+ Accelerator program that continues to densify breakthrough sustainable and innovative solutions; and we increased the representation of women in the top 5 leadership levels of our business from 19% in 2017 to 28% today. Now, let’s move on to our strategic pillars. Let’s start with pillar number one, lead and grow the category. This year, our volume reached all-time high with growth across more than 50% of our markets. This is a direct result of our commitment to lead and grow the category by investing in our brands, innovation, and category expansion levers. Our total volumes are now 5.8% ahead of pre-pandemic levels. Our above-core beer brands have led the growth, increasing almost 17% versus 2019; with Corona, the star performer, growing volumes by 42% outside of Mexico. Despite the challenge of COVID-19, we invested an average of $7 billion per year over the last four years. On a currency-neutral comparable basis, in 2022, we invested more than $400 million in sales and marketing versus 2019. The consistent investments combined with our digital capabilities and increased effectiveness are driving the power of our portfolio and the organic growth of our business. In 2022, we were named Creative Marketer of the Year by Cannes, the Most Effective Marketer Worldwide at the Effie Awards, and the number one advertiser in the Creative 100 by the WARC Advertisement Research Center. Once again, congratulations to our teams and partners for these truly remarkable achievements. We continued to execute on our five levers to drive category expansion and delivered a strong year of consistent and profitable top line growth. We are making the category more inclusive, offering superior core propositions, developing consumption occasions, and expanding our premium and Beyond Beer portfolios. Our global brands continue to scale and are driving premiumization across our markets. The combined revenues of Corona, Stella Artois, and Budweiser grew by 8.9% outside of the brand’s home market, led by Corona, which grew by 18.6%. Budweiser's growth of 2.5% outside of the U.S. was significantly impacted by COVID-19 restrictions in China, the brand’s largest market. Excluding China, the brand grew revenue by 12.6% in 2022. Innovation continued to support category expansion across each of the five pillars with innovations contributing approximately $5 billion in net revenue in 2022. From expanding our non-alcohol beer portfolio by launching Corona Cero in 11 countries to growing our Beyond Beer portfolio by scaling Cutwater and NÜTRL within the U.S., our focus remains on driving sustainable long-term growth. Now, let's turn to our second strategic pillar, digitize and monetize our ecosystem. This continues to accelerate, usage and reach, capturing $32 billion in GMV this year, a 60% increase year-over-year, reaching 3.1 million monthly active users. Since BEES began its rollout in 2019, our initial focus market has strengthened customer engagement with the weighted average Net Promoter Score improving to positive 56 as of year-end 2022. In 15 of the 20 markets where BEES is live, our customers are also able to purchase third-party products through the BEES Marketplace. Customer adoption is increasing, with 56% of BEES customers now also BEES Marketplace buyers. In 2022, BEES Marketplace generated approximately $850 million in revenue. As an example of how BEES is improving our business and enabling us to be a better partner to our customers, let’s take a look at one of our countries, Brazil. BEES is enabling us to be closer to our customers and solve their most pressing pain points. Since the rollout of BEES in 2019, we have expanded our customer base in Brazil by over 250,000, increased the total number of annual deliveries by 3 million deliveries, and broadened the availability of our portfolio. Most importantly, our relationship with our customers has improved significantly, with the NPS score increasing by 24 points. Digital transformation is a key pillar of our strategy and has enabled our accelerated growth in Brazil. Since 2019, the beer category has gained share of total alcohol, with beer market share expanded and our beer volume grew by 17%. One key learning from BEES is that when our customers grow, we grow. Now, let’s talk about how we are strengthening our relationship with our consumers. Our digital D2C products, Zé Delivery, TaDa, and PerfectDraft are now available in 17 markets and generated over $450 million in revenue and 69 million orders this year. That is 69 million opportunities to better understand our consumers and their consumption occasions. The FIFA World Cup offered an exciting opportunity for our digital DTC platforms as we launched the biggest digital campaign in our history. Our D2C activation yielded impressive results, increasing daily average orders during the FIFA World Cup and attracting nearly 0.5 million new consumers to our platform. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business. Fernando, over to you.

Thank you, Michel. Good morning. Good afternoon, everyone. We aim to maximize value by focusing on three areas: one, optimizing resource allocation; two, robust risk management; and three, efficient capital structure. With respect to capital allocation, we are focused on maximizing long-term value creation by dynamically balancing our priorities. We continue to invest in organic growth to support our strategy to lead and grow the category and digitize and monetize our ecosystem. The excess cash generated by our business is then dynamically allocated to our other three capital allocation priorities: deleveraging, selective M&A, and return of capital to shareholders. Investing in the organic growth of our business is our number one priority, and we have no shortage of investment opportunities. In addition to sales and marketing, which, as Michel mentioned earlier, has averaged around $7 billion per year since 2019, we also continue to invest in our facilities and capabilities, allocating $4.8 billion in net CapEx in 2022. Over 50% of our CapEx spend is to support capacity expansions, new capabilities, digital transformation, and other growth initiatives. In 2022, we invested a combined $11.7 billion in sales and marketing and net CapEx. And since 2019, we have invested over $45 billion to fuel growth. As you can see on slide 33, 2 times net debt-to-EBITDA remains the point at which we maximize value, though approximately 90% of the benefits from deleveraging can be captured as we approach 3 times net debt-to-EBITDA. This year, we continued to deliver strong free cash flow generating approximately $8.5 billion. Gross debt reduced by $8.9 billion to reach $79.9 billion. As a result, we have made significant progress on our deleveraging journey with our net debt-to-EBITDA ratio reaching 3.51 times. Our debt maturity profile remains well distributed with no bond maturity in 2023 and no relevant medium-term refinancing needs. If you look at our debt maturity profile, we have $3 billion worth of bonds maturing through 2025 and more than sufficient liquidity today to redeem all of these bonds. Our bond portfolio has an average pretax coupon of around 4% and a weighted average maturity profile of approximately 15 years. Moreover, our debt portfolio does not have any financial covenants and it is comprised of a variety of currencies, diversifying our FX risk. Ninety-five percent of our bonds have a fixed rate, insulated from interest rate volatility and inflation. Now, let me take you through the drivers of our underlying EPS this year. In 2022, we grew underlying EPS by 5.2% versus last year, delivering $3.03 per share. This increase was primarily driven by nominal EBITDA growth, which accounted for a $0.29 per share increase. We continue to optimize our business, reducing net interest and income tax expenses, mostly offsetting headwinds in other line items. To simplify our disclosure, as of January 1, 2023, mark-to-market on derivatives related to the hedging of our share-based payment programs will be reported in the non-underlying net finance line. As a result, we will discontinue disclosing normalized EPS as a separate metric. As we continue to optimize our business and bring our dynamic capital allocation priority to action, in 2022, we invested $11.7 billion in sales and marketing and net CapEx to drive organic growth. We reduced gross debt by $8.9 billion and reached a net leverage of 3.51 times. As a result of our continued momentum and consistent deleveraging progress, the Board has proposed an increase of the full year dividend by 50% versus 2021 to €0.75 per share. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session. Michel?

Thanks, Fernando. Allow me to take a few minutes to recap my key takeaways from the year and how we are prepared to continue to meet the momentum in 2023. We lead a big, profitable, and growing category. Beer is resilient and is gaining share of throat globally. We made significant progress in 2022, executing across each of our three strategic pillars. Driven by the increased strength of our brand portfolio, we delivered all-time high volume and gained share across key markets. We made important strategic choices in revenue management, driving accelerated net revenue per hectoliter growth of 11.2% in the fourth quarter. We progressed our digital transformation with 63% of our revenues now digital. Fifty-six percent of BEES customers are now also BEES Marketplace buyers. Our digital D2C products fulfilled more than 69 million orders. We delivered another year of strong free cash flow and underlying EPS growth of 5.2%. As a result, the ABI Board has proposed a full year dividend of €0.75 per share. Looking ahead to 2023, we are focused on the relentless execution of our strategy and driving the momentum of our business. We have an industry-leading portfolio of brands across all price points, an advantaged geographic footprint, and superior digital products that are bringing us closer than ever to our customers and consumers. We are well-positioned to meet the moment in 2023 and to create a future with more cheers. With that, I will hand it back to Jesse for the Q&A.

Our first question is coming from Simon Hales with Citi.

Thank you. Hi Michel, hi Fernando. I have a couple of questions. My first question, Michel, is about Mexico. Could you elaborate on what’s been happening there? The Q4 volumes were weaker than expected, possibly slower than the first nine months of the year. More importantly, how do you see the market developing as we approach 2023, especially with the Oxxo rollout in the North? Additionally, what initiatives are you implementing in Brazil with Oxxo stores to ensure you capture your share of consumer demand? That's my first question. For my follow-up, I would like to discuss the U.S. market. Michel, you mentioned that volumes are down about 1% year-to-date for the industry. What is your outlook on the state of the U.S. consumer for 2023? What are your thoughts on the beer market trends for the full year, and how are your brands performing in terms of price elasticity?

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

Our next question comes from Mitch Collett with Deutsche Bank.

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

Thank you for the question. I recently returned from a week-long trip to China where I focused on BEES. You are correct that China is one of the markets where BEES is being developed for a different role in the market. The deceleration we’re seeing here is different from what we experience with direct distribution. I was pleased to find that the product is performing excellently and scaling quickly. Retailers are using it well and are very satisfied, reflected by a high NPS. One complex point about BEES in China is related to the multi-tier distribution system. This creates challenges for consumer packaged goods companies in terms of product tracking and market visibility. However, by incorporating QR codes and utilizing BEES for geolocation, we have achieved remarkable visibility across the network. This means we can track sales on a pack-by-pack basis even with additional tiers in the distribution chain. This integration is enhancing our revenue management, promotional efforts, and logistics network. I believe BEES will continue to grow rapidly in China, with both wholesalers and retailers appreciating the improved data quality and visibility we provide. The positive effects in China are likely to mirror those seen in other markets, leading to increased sales, enhanced trade programs, better alignment with marketing campaigns, and overall greater efficiency. It’s proving to be highly effective for us.

Our next question comes from Brett Cooper with Consumer Edge.

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

Hey. Thank you for the question. I think that the first point is really a matter of balance. We need to be able to invest in core and renovate, creating excitement around our core brands. As you said, best-class work is being done in Brazil for Brahma Duplo Malte. If you think about Cass in Korea, there are incredible results, and Victoria and Modelo in Mexico are doing extremely well. At the same time, we know that we have penetration opportunities and we can gather more consumers and be present on more occasions. We need to continue to innovate in this Beyond Beer space that offers us incredible opportunities for growth, especially with female consumers and sourcing a lot from liquor and wine. One of the key learnings, I can talk about this for a long time, but I’ll try to summarize the biggest learning that we’ve had so far. The brands that we create that are catered to this consumer and the occasions we want to gain share work better in the long term. They start lower than when you extend brands from our core brand, but they build a much more sustainable model. And the learnings that we’ve seen from Brutal Fruit in Africa to BEES in Brazil to what we’ve observed with Cutwater and NÜTRL in North America show that these brands are champions of the future that we are consistently investing in. It’s a very effective way to expand the portfolio. We’ve been doing things both ways, when we need to do something fast, using our core brands with extension lines, but we’ve also been creating new-to-the-world brands, and they are doing very well. This is true in the physical world with NÜTRL and Brutal Fruit, and it’s even more true in the digital space. For example, what we are doing in TaDa now in the direct-to-consumer ecosystem is a multi-country, already born global brand that is expanding very quickly.

Our next question comes from Trevor Stirling with Bernstein.

I have two questions. First, Michel, you mentioned that volumes have increased by nearly 6% compared to 2019. My calculations show that revenues have risen by 24%, but margins have declined, specifically the EBITDA margin is down about 600 basis points. How much of that do you think can be recovered? I understand there have been input cost pressures, transactional foreign exchange issues, and negative operating leverage due to COVID. However, what do you consider a realistic recovery and over what time frame, especially since it seems you foresee additional margin compression in 2024? My second question is directed more towards Fernando. The underlying EPS has increased by 5%, and the dividend has gone up by 50%. Is this entirely related to our position on the deleveraging curve?

Let me take the first one here, and Fernando will take the second. We always talk about margin in two real statements. The first one is that we love our margin. We really like the fact that we have high margins because this brings us a lot of flexibility to invest as well as to navigate when situations are tougher. And the second one is that our margins exist for structural reasons, the power of our brands that we have, premium brands that command higher margins, the strength of positions that we have in key markets, and the way that we operate our business very efficiently. Yes, I acknowledge what you said about margins since ‘19. I think that we all saw a huge dislocation in terms of costs because of supply disruptions and inflation, which worsened with the situation last year in Europe and commodities going even higher. We’ve been balancing our ability to price correctly while having the industry penetration and category growth prioritized. As we look at 2023, with the visibility we have today, the cost escalation is significant but smaller than in 2022. On a percentage basis, it’s definitely smaller. We continue to bring our prices up, so what we did in quarter four was a very important wave of prices and revenue management that will yield good benefits this year. I think that things will accommodate with time. I like to say we are focused on continuing to drive our powerful brands, charging the premium price they deserve and being efficient in the way we act in the Company. Therefore, we expect our margins to come back.

And hi Trevor, on your second question on dividends, on EPS and capital structure, I always like to take one step back and look at our business. We have a very good business that generates a large amount of cash flow on a sustainable basis. So, it’s a good business that consistently generates cash. Having said that, once we have excess cash for the business and to quote a number, the free cash flow for 2022 was $8.5 billion. We need to decide on the best way to allocate this. That’s what we call dynamic capital allocation. We know that deleveraging creates value, and we know that 90% of the value of deleveraging happens when you get towards 3 times. While we were at a higher leverage, we focused our efforts on deleveraging, with less attention to other capital uses. Now, we are at 3.5 times. We continue to use most of our resources towards deleveraging. You see how much our gross debt was reduced in the year 2022, but we are also increasing dividends. It’s a sizable percentage increase. In absolute figures, we are still driving most of our resources towards deleveraging. The idea going forward is to assess the combination that maximizes value-creation that should be the main driver of our decision-making.

Our next question comes from Pinar Ergun with Morgan Stanley.

The first one is on marketing. We’re hearing from a range of consumer companies how they’re looking to increase their marketing spend in 2023. How do you think about that? And then, the second one is when you look at ‘23, which regions do you feel most bullish about in terms of volume development? Thank you.

Hi Pinar, thank you for the questions, Michel here. On the first one, you know that we don’t give guidance by line, and we showed during the webcast here that we continue to invest close to $7 billion across all years since 2019. From 2019 to 2022, we saw a growth of roughly $400 million in organic terms. Our plans are to continue to invest in these brands; they deserve good investments because they drive the growth we want for the Company today. More importantly, we focus on increasing investments with effectiveness. Our creative quality is better than ever, recognized by Cannes and Effie. We not only expanded the dollars invested but also optimized these dollars with higher ROIs as evidenced by our campaigns during the FIFA World Cup. On the second question, the market that we are most excited about at the moment is China. Last year was incredibly disrupted by a series of lockdowns, impacting social opportunities for our products. However, observing the market now, restaurants are busy and nightlife is thriving. Chinese consumers are returning rapidly, and we believe 2023 will reach full potential, especially with our strong premium presence.

Our next question comes from Rob Ottenstein with Evercore ISI.

Thank you very much, and congratulations on the significant progress in reducing debt and the increase in your dividend. Can you provide more details on the major price increases you implemented in the fourth quarter across key markets? Any additional insights would be appreciated, especially regarding how well these price increases are holding up and whether competitors are adjusting accordingly. Typically, you tend to lead in these situations, so that's an important aspect to consider. I also have a follow-up question for Fernando.

Hey Robert. Good morning. Thanks for the question. I think that you already know that we don’t disclose much of this price breakdown by market with details. But the best way to answer this is by considering our policy of pricing with inflation. Inflation was slightly different in each market but growing everywhere. We had beer total, not just AB InBev, lagging behind inflation throughout most of the year, but catching up towards the end of the year. The positive carryover from these price increases will be beneficial for 2023, while 8% during 2022 was above 11% in quarter four. Majority of the markets are holding well. Beer is a resilient category. We monitor this closely, balancing our prices and brand penetration, assessing the category response market by market. It’s too early to provide more specifics, but I hope my answer was helpful. We will discuss more details in our quarter one to quarter two results as further information becomes available.

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

Hi Rob, thanks. It’s a good question and an insightful one. The focus of our dynamic capital allocation is to create value in every moment. At different times, we weigh the benefits of each option. While we assess buybacks, our model will include valuing ABI shares and our own. We will always seek alternatives that maximize value at any moment while considering deleveraging, dividends, and M&A projects. I can’t provide guidance but assure you we will assess each in due time.

The next question comes from the line of Olivier Nicolai with Goldman Sachs.

I have two questions. First, regarding the U.S. market, ABI is losing market share in beer, while the beer category is declining against spirits, a trend that has persisted for some time. What do you believe the beer industry is lacking in terms of innovation, marketing, or pricing compared to spirits to reverse this trend? My second question is for Fernando. You've indicated an increase in accretion expense this year. Given the other financial results have risen by 50% to $1 billion, what can we anticipate for 2023? Thank you.

Olivier, Michel here. The first question is a tough one to answer. There is a lot happening at the same time. If you look, the best part of my answer is that over the last few weeks, beer is responding much better. The biggest loser is wine, while spirits continue to perform well, the majority of the growth is in ready-to-drinks. In ready-to-drinks, we lead the pack and are much better positioned to grow based on the network we have. The availability created for consumers in states is a crucial reason for spirits performing better in the U.S. Furthermore, others point to spirits prices in the U.S. being more affordable compared to any other markets globally. It’s good to see, particularly in the last weeks, beer is performing better historically, gaining share and value. Innovation and product quality are key to aligning with long-term consumer trends, yet there is still work to be done.

Olivier, on your second question regarding other financial results. As you mentioned, accretion expenses have clearer guidance, as that’s more predictable. On the rest of the results, carry costs of hedges fluctuate based on interest rate differentials and can vary throughout the year. Thus, it’s challenging to provide a solid forecast. However, if you assess our major exposures outlined in our financial statements, you can make an educated guess about potential impacts.

Our final question will come from the line of Laurence Whyatt with Barclays.

Firstly, we saw a Winter World Cup in much of the Northern Hemisphere, but of course, it was the Summer World Cup for much of the Southern Hemisphere. We didn’t hear too much about any benefit from that over the last few months and the last quarter. Are there any geographies that took a real benefit? Do you see anything in Brazil or South America or Africa from that World Cup benefit? And then, secondly, we’ve seen a decline in a number of your input costs, and I understand you hedged generally on a 12-month basis. If you were to look at the current spot rates of those input costs, would they be below the current hedge rate for your 2023 COGS, i.e., would you expect 2024 input costs to be below the current level of 2023 hedges?

Hey Laurence, it’s Michel here. I’ll take the first one and leave the second to Fernando. You may not hear much because Brazil lost. However, FIFA presented a great opportunity to activate our brands once again. Different geographies had varied results. Argentina had extended celebrations while others did not receive the same impact, but we believe the brand benefits were substantial. Budweiser had a remarkable run with strong brand equity across the globe from the campaigns executed. Interest in the sport is at an all-time high, building excitement for the next event in Canada, U.S., and Mexico. Our brands activated effectively, gaining 500 million consumers. There was a significant volume of Budweiser in quarter four. The exception was China due to the lockdowns, an essential market for Budweiser. Outside of China, results were very positive, especially where we activated campaigns heavily.

And Laurence, regarding input costs, it's premature to comment as we generally hedge 12 months out. We are beginning to consider 2024 as the year progresses, but we will have more relevant information as we proceed, which will be more useful for our assessments.

Thank you, Jesse. And thank you, everyone, for participating and for the questions. I hope you are all doing well, and we wish you a great 2023. We will get back to talk to you as we close quarter one. Thank you. Have a good one.

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