Anheuser-Busch InBev SA/NV Q4 FY2023 Earnings Call

Welcome to Anheuser-Busch InBev's Full Year and Fourth Quarter 2023 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. 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. Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, see risk factors in the company's latest annual report on Form 20-F filed with the Securities and Exchange Commission on the 17th of March 2023. AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukeris. Sir, you may begin.

Thank you, Jessie, and welcome, everyone, to our full year 2023 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our full year and fourth quarter operating highlights and provide you with an update on the progress we have made in executing our strategic priorities. After that, we'll be happy to answer your questions. Let's start with our operating performance. Our global momentum continued in 2023. Revenue reached approximately USD 59.4 billion, an all-time high for our company. Although our full growth potential was constrained by the performance of our U.S. business, our revenue grew by 7.8%. Net revenue per hectoliter increased by 9.9% as a result of pricing actions, ongoing premiumization, and other revenue management initiatives. Total volumes declined by 1.7% as growth in Middle Americas, Africa, and Asia Pacific was primarily offset by performance in the U.S. in a soft industry in Europe. EBITDA increased by 7%, in line with our medium-term growth ambition and 2023 outlook, reaching nearly USD 20 billion. Underlying EPS was $3.05, a $0.02 per share increase versus last year. As a result of our strong cash flow generation, we reached a net debt-to-EBITDA ratio of 3.38x. Following our deleveraging progress, we have additional flexibility in our capital allocation choices. The Board has proposed a full year dividend of EUR 0.82 per share, a 9% increase versus 2022. In addition, we have now completed almost 90% of our USD 1 billion share buyback program. In the fourth quarter, we delivered top line growth of 6.2% with our net revenue per hectoliter increasing by 9.3%. Total volume declined by 2.6%, and EBITDA increased by 6.2%. We delivered broad-based growth this year with both top and bottom line increases in 4 of our 5 operating regions and with net revenue growth in more than 85% of our markets. Our scale and diverse footprint with leading positions in the largest profit and growth pools has us well-placed to deliver superior long-term value creation. Now I will take a few minutes to walk you through the operational highlights for the quarter from our key regions, starting with North America. In the U.S., the beer industry remained resilient with volumes improving sequentially throughout the year and with beer gaining share of total alcohol by value in the off-premise. Our revenues declined by 9.5% this year with STW volumes down by 12.7%, primarily due to the volume decline of Bud Light. Our market share continued to improve gradually from May through the most recent weeks in February. In 2023, our market share was 38.3%. 2023 was a challenging year for our business in the U.S. I would like to take a moment to reflect on how we adapted, the choices we made, and how we are taking the learnings and moving forward. Our teams showed remarkable resilience and agility, and I'm proud of the many actions we took to support our people, our wholesaler partners, and our brands. We stepped up to support our frontline employees and provided financial assistance to our wholesaler partners. We increased the media investment behind our brands and expanded our long-standing partnership with Folds of Honor, including bringing the NFL and Bud Light together to also support first responders. We continue to invest in our mega brands and mega platforms, such as sports and music that all consumers love including the NFL, NBA, Lollapalooza, as well as new investments with the VMAs, UFC, Copa America, and Team USA for the Olympic and Paralympic Games. We continue to support the communities in which we operate. We purchase annually more than $700 million in quality ingredients from U.S. farmers. We produced packets and delivered clean drinking water when disasters struck, more than 93 million cans to date. We create jobs. Together with our wholesaler partners, we employ 65,000 hard-working people across the U.S. 99% of what we sell in the U.S., we make in the U.S. And we built on our more than $1 billion total investment in responsible drinking programs in partnership with our wholesalers. We do this because that's who we are. As we move forward, we continue to focus on what we do best, brewing great beer for everyone, actively engaging with our consumers, supporting our partners, and impacting the communities we serve. Now moving to our largest region, Middle Americas. In Mexico, we delivered high single-digit top and bottom line growth with margin expansion. Our above-core portfolio continued to outperform, led by the strong performance of Modelo Especial. In Colombia, our business delivered record high volumes with double-digit top line and high single-digit bottom line growth, driven by the consistent execution of our strategy. The beer category continues to grow, gaining 70 basis points share of total alcohol this year. Our core portfolio led our performance with a particularly strong performance from Poker, which grew volumes by high-single digits. In South America, our business in Brazil delivered high single-digit top line and double-digit bottom line growth with margin expansion of 462 basis points. Our performance this year was led by our premium and super-premium brands, which delivered volume growth in the mid-20s and gained share of the premium segment. Now let's talk about EMEA. In Europe, we grew the top line by high-single digits and bottom line by low-single digits. Our portfolio continues to premiumize with our premium and super-premium brands delivering high single-digit revenue growth, led by Corona, Leffe, and Stella Artois. In South Africa, we delivered record high volumes with double-digit top line and high single-digit bottom line growth. Our portfolio continued to gain share of both beer and total alcohol, led by our global brands, which grew volumes by more than 30%. And finally, in APAC, in China, our business delivered double-digit top and bottom line growth, with margin expansion of 125 basis points. Our premium and super-premium brands continued to outperform, growing revenue by double digits and driving overall market share gains. Now let's move on to our strategic pillars. Let's start with pillar 1 of our strategy, lead and grow the category. The beer category is big, profitable, and growing. In 2023, according to our monitor, the beer and beyond beer category continued to gain share of total alcohol by volume globally, gaining 260 basis points over the last 5 years. And looking ahead, beer is projected to continue this strength. Led by the strong performance of our global mega brands, our revenues continue to grow this year, reaching a new all-time high for a company of $59.4 billion. We continue to invest in our category expansion levers and mega brands, building meaningful connections with our consumers. In 2023, we invested $7.2 billion in sales and marketing and have averaged more than $7 billion over the last 5 years. These consistent investments, combined with increased effectiveness and creativity, are driving the brand power of our portfolio. Our total volumes remained resilient delivering near all-time highs. And with our revenue management choices driving continued strong net revenue per hectoliter growth. Through the consistent execution of our replicable growth drivers and our 5 category expansion levers, we are leading and growing the category by offering superior core propositions, developing new consumption occasions, and expanding our premium and beyond beer portfolio. Our global brands continue to scale and are driving premiumization across our markets. In 2023, the combined revenues of Corona, Budweiser, Stella Artois, and Michelob Ultra grew by 18.2% outside of the brand's home markets. Scalable innovations continue to support category expansion across each of the 5 levers, contributing approximately $6 billion in net revenue in 2023. From expanding our non-alcohol beer portfolio, to innovating with pure and double malt offerings, to growing our Beyond Beer portfolio by scaling Brutal Fruit and Flying Fish across Africa; innovation is a key focus of leading and growing the category. Now let's turn to our second strategic pillar, digitize and monetize our ecosystem. BEES continues to accelerate usage and reach, capturing approximately USD 40 billion in gross merchandising value this year, a 27% increase year-over-year and reaching 3.7 million monthly active users. Customer satisfaction continued to improve with our weighted average Net Promoter Score improving to plus 60, up 10 points since last year. In 15 of 26 markets where business lives, our customers are also able to purchase third-party products through this marketplace. Customer adoption is increasing. And today, 67% of BEES customers are also BEES Marketplace buyers. In 2023, BEES Marketplace generated approximately USD 1.5 billion in GMV. Now let's talk about how we are strengthening our direct relationship with our consumers. Our DTC mega brand, Ze Delivery, TaDa, and PerfectDraft are now available in 21 markets, generating approximately 69 million orders and over USD 550 million in revenue this year. We are developing deep consumer insights and new consumption occasions, such as Corona Sunset Hours, Brahma Soccer Wednesdays, and increasing in-home consumption of returnable glass bottle packs by expanding availability and simplifying logistics. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business. Fernando, over to you.

Thank you, Michel. Good morning, good afternoon, everyone. We aim to maximize value by focusing on 3 areas: optimizing resource allocation, robust risk management, and an efficient capital structure. First, let me share how we have progressed on our 2025 sustainability goals. All data points are with reference to our 2017 baseline. In Climate Action, we reduced Scopes 1 and 2, absolute emissions, by 44%. In Water Stewardship, we improved our water efficiency by 18%. In Smart Agriculture, we are working with nearly 24,000 farmers in our direct sourcing programs to research, technology, and hands-on support to help upskill, connect and financially empower them. And we made progress in our Circular Packaging goal with 77.5% of our products now in packaging that is returnable or made from majority recycled content. In recognition of our leadership in corporate transparency and performance on climate change and water security, we were awarded a AA score by CDP. As we continue to optimize our business, investing in organic growth is our #1 priority, and we have no shortage of investment opportunities. In addition to investing $7.2 billion in sales and marketing, we invested $4.5 billion in net CapEx in our facilities and capabilities. Over the last 5 years, we have invested almost $59 billion to execute our strategy and drive organic growth. While input costs remain elevated, our everyday financial discipline and revenue management choices enabled us to manage margin pressure this year. Although our margins are still below 2019 levels, the decline has been driven by unprecedented commodity and transactional FX headwinds, and it is not structural. These headwinds impacted different regions at different times, and Middle America and South America are already good examples of EBITDA margin improvement in 2023. Our fundamental strength, disciplined pricing, continued premiumization, and efficient operating model create an opportunity for margin expansion over time. In 2023, we continued to deliver strong free cash flow generating approximately $8.8 billion, a $300 million increase from 2022. With respect to capital allocation, we are focused on maximizing long-term value creation by dynamically balancing our priorities. We continue to invest in organic growth to support our strategy. The excess cash generated by our business is then dynamically allocated across deleveraging, selective M&A, and return of capital to shareholders. As you can see on the next slide, 2x 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 3x. In 2023, gross debt reduced to $78.1 billion, resulting in further progress on our deleveraging with our net debt-to-EBITDA ratio reaching 3.38x. Our debt maturity profile remains well distributed with approximately $2.5 billion in bond maturities in 2024 and no relevant medium-term refinancing needs. We have $6.5 billion worth of bonds maturing through 2026. Our bond portfolio has an average pretax coupon of around 4% and a weighted average maturity of 14 years. In addition, our debt portfolio does not have any financial covenants, and it is comprised of a variety of currencies, diversifying our FX risk. 98% of our bonds have a fixed rate, insulated from interest rate volatility and inflation. We continue to dynamically balance our capital allocation priorities to maximize value creation. In 2023, we invested $11.6 billion in sales and marketing and CapEx to execute our strategy and drive organic growth. We purchased $3 billion of bonds and reached a net leverage of 3.38x. Before the leveraging progress, we have additional flexibility in our capital allocation choices. The Board has proposed a dividend of EUR 0.82 per share, a 9% increase versus 2022. And we have now completed almost 90% of our $1 billion share buyback program. And now let me take you through the drivers of our underlying EPS this year. We delivered EPS of $3.05 per share, a $0.02 per share increase versus last year. Nominal EBITDA growth accounted for a $0.05 per share increase. We continue to optimize our business, reducing net interest and income tax expenses, which mostly offset headwinds in other line items. As we look ahead to 2024, we expect EBITDA to grow between 4% and 8% on an organic basis, in line with our medium-term outlook. Given the continued hyperinflationary environment in Argentina, for 2024, we are amending the definition of organic growth to cap the price growth in Argentina to a maximum of 2% per month. As we continue to invest to execute our strategy and optimize resource allocation, we expect net CapEx to be between $4 billion and $4.5 billion in 2024. And we expect our normalized effective tax rate to be between 27% and 29%. With that, I would like to hand it back to Michel for some final comments before we start our Q&A session. Michel?

Thanks, Fernando. Before opening for Q&A, I would like to take a moment to recap on 2023 and look ahead at the exciting opportunities that our brands have to activate the category in 2024. While our full growth potential was constrained in this year, we continue to make progress in executing across each of our 3 strategic pillars. We invested behind our 5 category expansion levers, and the beer and beyond beer category continued to gain share of total alcohol globally. Driven by the strength of our mega brands, we delivered all-time high revenue with growth in approximately 85% of our markets. We progressed our digital transformation, generating approximately USD 40 billion of GMV through BEES, with 67% of BEES customers now also BEES Marketplace buyers. EBITDA grew by 7%, in line with our medium-term growth ambition and outlook for 2023. We delivered continued strong free cash flow generation of USD 8.8 billion. We progressed on our deleveraging path and have increased flexibility in our capital allocation choices. As we look ahead to 2024, we are uniquely positioned to activate the category. The combination of our mega brands with the key global platforms that consumers love and that bring people together is a powerful opportunity to lead and grow the category. From the NBA, to Copa America, to the Olympics, NFL, the UFC, and the VMAs; we will be focused on doing what we do best. Our brands will show up in a big way, connect with consumers and bringing to life our purpose of creating a future with more cheers. We remain focused on the opportunities ahead of us. The beer category is large and growing, and our unique global leadership advantage, implementation of our replicable growth toolkits, and our superior profitability position us well to generate value for our stakeholders. With that, I'll hand it back to Jessie for the Q&A.

Our first question is coming from Mitch Collett with Deutsche Bank.

I've got one question and one follow-up, please. You've maintained your organic EBITDA growth guidance of 4% to 8%, but since you are excluding Argentina, that suggests a 200 to 300-basis-point increase in the growth rate for the rest of the group. Can you provide some insight into what is driving that increased confidence in both the near term and the medium term? My unrelated follow-up is: can you explain why you expect CapEx to be lower in fiscal '24 compared to '23 and '22? Is this level sustainable long-term? How should we view the distribution between production, logistics, commercial, and other CapEx going forward?

Mitch, Fernando here. So let me start answering and then I'll ask Michel to give you some color. So once we think about the outlook, as always, on a high level, it's good to bring some context to it. So in our CMD, we provide the medium-term growth outlook, the moment that we are evolving our strategy and transitioning from inorganic to organic growth. And with this transition, we would be required to invest to even grow the beer category, invest for the events of digital transformation and all of that, while dynamically allocating resources to grow and optimize our business while we're still deleveraging. So with this dynamic operating environment and the evolution of our strategy, we thought it would be important to provide clarity on our medium-term ambition while allowing us the flexibility to invest to drive long-term value creation. With all this background, our 4% to 8% growth outlook for 2024 is both consistent with our medium-term outlook and more ambitious given that we are capping Argentina growth. We aim to continue to deliver this more ambitious 4% to 8%, but in an optimized way, with $500 million, give or take, less CapEx. That's the difference of the outlook from last year to this year. And this lower CapEx is the pillar 3 of our strategy in action when we look to optimize our business and sustain the same growth ratios, but in a more efficient way. I'm going to turn to Michel, so he can give some color on why we think this is the appropriate outlook.

Thanks, Fernando, and thank you, Mitch. I think that Fernando gave you the answer on the key items on the outlook. But you had two follow-ups. I think that one is the confidence and the other one, what's being optimized and then, how we are optimizing CapEx? I think that in terms of confidence, this comes from the execution of our strategy and the momentum that we've been seeing globally and is accelerating across many, many markets. As we described during the presentation, we grew revenues in 85% of our markets. We've been seeing this acceleration across the board. We had the chance to share with you many replicable toolkits when we were together in Mexico. And as we set the bar high with this Argentina cap, we want to continue to deliver on the outlook because that was a midterm outlook. Every year will be different. As a matter of fact, even within this year, we will see quarters that will be different. Because on the quarter 1, we'll be still lapping a little bit of the U.S. Bud Light situation. And therefore, we should expect growth building up as we go from quarter 1 to quarter 2 to quarter 3. So there will be progress there. And in terms of CapEx, which is more on the expense and cost areas, we've been also building very interesting replicable toolkits and global toolkits. So think, for example, the breweries that we built and we build breweries across the globe. So we were able to do some work with our teams in the specification with the suppliers and with being able to grow our capacity at much lower cost now given the standardization of the way that we are buying components, building the brewers, expanding the capacity in a modular way. Think, for example, about the benefits that we always talk about that with BEES, which is 1 platform, 1 product that we use globally. So every time that we do an update, let's say, for Mexico, this gets rolled out now for all markets where we operate with BEES. And when you combine this standardization, 1 product with just 1 thing, for example, AI, we are able now to code and develop tools within this with efficiencies, for example, close to 20% in cost per hour coded because of the usage of AI. So a practical usage of AI is enabling us to do more, which is what we need to do with our investments, but spending a lower CapEx cost. And I believe that it is sustainable. If you look at this CapEx as a percentage of net revenue in the last 3 years, we've been improving the efficiency each and every year, not investing less but doing more with our investments. Thanks for the question.

Our next question is coming from Trevor Stirling with Bernstein.

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

Trevor, Fernando here. Let me take the first one. Of course, there are a lot of different puts and takes on the outlook. We are a global company. And one of the decisions that we made in the past, instead of giving specific items of the outlook, we gave kind of the outcome, which is the 4% to 8% to simplify the understanding. So I wouldn't go into the detail of what it takes to be on the 4% to 8%, I would just say that our outlook is 4% to 8%.

Thanks, Fernando. There are indeed universal factors at play, such as industry performance and consumer sentiment. However, our target remains a 4% to 8% growth, and we strive to achieve the best results possible. Regarding the U.S. market this quarter, you may recall the two historical pricing dates. The most common is in the first quarter, and during this inflationary period, there can be an additional price adjustment in October. In 2022, we adjusted prices in October for 2023, and we decided not to implement a second price increase last October. Therefore, we are now experiencing the effects of the prior year's price increase. As we discussed, there was a discrepancy in terms of sales to retail (STRs), sales to customers (STCs), and shipped to warehouse (STWs) in the fourth quarter. STCs improved, which was followed by better-than-expected STRs, but shipments lagged due to inventory adjustments and an inability to keep pace with the STR improvements, particularly in late December. This year, prices began to rise late last year but were primarily adjusted during the first quarter. Thus, the combination of STR, STW, the product mix, and the price shift to this quarter is why the pricing was lower in the fourth quarter last year. We anticipate a more normal pricing mix and promotional activities for 2024, similar to what we have done in previous years.

Our next question is coming from the line of Olivier Nicolai with Goldman Sachs.

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

Olivier, thanks for the question. Michel here. I'll take the first one on the guidance. I think that Fernando always goes back to this point of the 4% to 8% that encompasses everything that we are doing globally. And throughout this whole situation, we have never given any forecast or guidance on the pace of Bud Light. I think that what we can talk about. We can talk about what we are seeing and happening as we go week by week, month by month. If you look at May last year versus February this year, we recovered basically 120 bps of the market share that we lost. As discussed in the last call, we've been seeing this 10 to 20 bps recovery every 3 to 4 weeks. I think that we are making progress. It's not at the fast pace that we were expecting or that we've been working for. But nevertheless, progress is in place. And when you think about the shelf spaces, we discussed this in the fall. There was very little adjustment in the fall, close to 5%, 10% of the retailers, and I gave a simple reference for everybody to understand the number. We had an adjustment of 1 shelf space for the average 20 that we have in the stores. When we see now this spring, there are a lot of activities on the spring today, more than 55% of the retailers already put the announcements in place. The result is very similar, it's 1.5 fronts to every 20 that we have in the stores. What we lost is on Bud Light, and we've recovered across the portfolio with Michelob Ultra, Busch Light, Cutwater, Nutrl, Corona, Stella, all gaining share of shelf. And when we think, which is I think is another very important point to share with you, this big calendar of activations for mega platforms that we have throughout the year, that goes from NBA, NFL, Olympics and Copa America, so very heavy investments. This also comes into consideration for planning and joint business plans with our retailers. So we expect to have a massive execution with extra displays and programming with the retailers that should more than compensate the 1.5 for every 20 front shelves that we are missing or losing during this adjustment now, during spring. Plans are good. The team is focused on the execution. Our mega brands are very well positioned for the year given they have some of the most relevant mega platforms for interacting with consumers and activating the category together with our wholesalers and retailer partners. I will now hand over to Fernando to cover the second point.

Olivier addressed the question about core working capital, noting that this year presents some unique challenges. In the U.S., the company is experiencing negative working capital, and a reduction in volume has further impacted this. The extra days of credit extended to wholesalers have amplified the situation, but this support will diminish throughout the summer. Some of these effects are expected to reverse. Additionally, there was a decrease in payables, driven by efforts to optimize service levels, which led to lower inventory levels. The company also improved resource allocation, resulting in reduced capital expenditures, with most reductions occurring in the second half of the year, contributing to the drop in payables. Consequently, most benefits in cash flow will be realized in 2024. On the deleveraging front, the company achieved consistent profitable growth with strong free cash flow generation totaling $8.8 billion. Gross debt decreased by $1.8 billion, and the net debt to EBITDA ratio reached 3.38 times. However, there were challenges to this ratio in 2023 compared to 2022, even after repurchasing $3 billion of debt, due to certain negative factors. A strong euro had both positive and negative effects, accounting for about 0.04x to 0.05x. The unique accounting treatment in Argentina also contributed approximately another 0.05x impact, as IFRS differs significantly from U.S. GAAP. The performance of the U.S. business also had some effect this year. Despite these challenges, confidence remains in the progress being made, with the business generating substantial cash flow to support both deleveraging and other capital allocation priorities, which ties in with the question about buybacks and dividends. The company announced a 9% increase in the annual dividend to $0.82 and plans to consider various capital allocation strategies throughout the year as conditions warrant.

Our next question is coming from Sarah Simon with Morgan Stanley.

It was a question regarding marketing expenditure. You adjusted the timing of your marketing spending last year, shifting it out of the winter and focusing more on the summer months. Can you discuss how marketing will be phased this year in light of your significant sports sponsorships and other related activities?

Sarah, Michel here. I think that every year is slightly different. But for sure, if you look back to last year compared to the year before, there was a big shift due to FIFA, which moves usually during the summer, but that one was very special because it was more close to the end of the year, let's say, winter for the northern hemisphere, was summer for the Southern hemisphere. And I think that the key point here on sales and marketing for us is this unique opportunity that we have to activate with our mega brands, these mega platforms that bring people together. This is an outstanding opportunity to lead and grow the category. We have this year, fortunately, an incredible amount of activities throughout the year. Let's just talk about January and February. So we had Super Bowl. We had Carnival in Brazil. We had Chinese New Year, Lunar New Year in Asia, and we were very heavy in activating all these opportunities. Now we face from quarter 1 to quarter 2, and there is an expression already being used by a lot of people with this summer of sports because we have Copa America in the U.S. that's very important for the whole North and South America. We have the Euros in Europe, then we'll follow this with the big tennis slams in Europe, Wimbledon and Roland-Garros that now are Stella Artois official sponsors, and you wrap the summer with the Olympics, which is going to make this an incredible summer for beer. And then we march towards the end of the year coming back again with an incredible season for the NFL, following what was this year. We have throughout the whole year, the activation of UFC. So I think it's going to be very balanced throughout the year, and we should not expect big differences as we saw in 2023, because FIFA was off-season and was there in 2022. So the impact of last year was more because of FIFA. This year, we have an incredible amount of opportunities for activation.

Our next question is coming from Rob Ottenstein with Evercore ISI.

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

Robert, thanks for the questions. So, as I said before, prices in the U.S. went back to this normal schedule, which is quarter 1, and they vary state by state, brand by brand. So I won't give you any details here on what's happening. But so far, as I said, 2 windows October, quarter 1, March, February, usually, most of the movements over the years, they happen on this quarter 1, and we are just moving and executing on our plans. In terms of supply chain and cost in the U.S., we've been saying that 2/3 are volume-related, 1/3 is choices we made that span across many different items. As Fernando said, support to our wholesalers, higher investments in our brands and job security. Out of the 2/3, that's volume. As I said before, we clawed back 120 bps of this share, and we continue to see this movement every 3 to 4 weeks between 0.10 and 0.20 recovery. We will continue to optimize, as we always do, our activities to extract the best possible productivity. This is part of the company culture, is part of who we are, being always with an eye on the market, consumers, and one in how we do better the activities that we have within our own walls. So we continue to work in everything that we can, always to be more productive and to have better productivity.

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

I have a couple of questions. First, I would like to follow up on the U.S. shipment movements. I'm trying to understand the impacts of the fourth quarter regarding stock in trade, especially in relation to the discussions with the union. Can you provide some insight into the amount of contingency stock available? Additionally, could you elaborate on the tax guidance given the various factors at play this year? I would like to understand if this now represents a structural range for your tax and if there are any lingering tax losses that could help offset it.

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

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

The next question is coming from the line of Sanjeet Aujla with UBS.

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

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

Our final question will come from the line of Brett Cooper with Consumer Edge.

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

Thank you for the question. I find this a very interesting topic for us to talk about. I'll try to take this high level because, as you said, every market is slightly different. The way that we approach this is participation, occasions, and servings. Premium, has the potential and has been working for us as beyond beer does as well across all three levers. We've been seeing higher participation and new consumers getting into the category through premium. Interestingly, we shared today this data on the overall share of throat. When you look at premium brands versus premium presentations in the other categories, premium beer is also growing faster than the premium offers in hard liquor and wine. Premium, as you penetrate new consumers or the current consumers, you see some overlap of occasions, but you also see some very unique occasions for premium beers. A great example we have is France, where Leffe created a different occasion for beer, a unique occasion that is now a massive brand, focused on one occasion. As this occasion developed and the brand grew, it has now penetrated even more occasions. Premium attracts more consumers, interestingly enough, to attract more women and more young consumers. This is why the role of our global brands is very important, from Corona to Budweiser, with the positions that we have, allowing each brand to address different need states. Occasions are more spread throughout the week, which is very interesting as well. You have more at-home occasions with premium. For example, the role that Corona Cero or Stella Cero are now playing, they are expanding beer to even more occasions. We see in many places, now Corona Cero being consumed during the day, lunchtime, during the weekend, after sports, and more consumers, more occasions. In very specific markets, we also tap into servings; you can go for multi-packs and convenience packs, in different markets, which also helps us to tap into larger occasions. Brazil is a great example of that; China is a great example of that. This is across all three levers, bringing more consumers, retaining more consumers, in more occasions, and also improving how many times people get in touch with our products. In terms of loyalty, this is also an interesting question because consumers always have like a repertoire of brands. That’s exactly why we have 4 global brands to respond to this premiumization trend. Each of these brands appeals for a different need state, meaning different occasions when people go for energy, relaxation, or just enjoy a meal with friends. Once they connect well with one of these brands for one of these different need states, the loyalty is high. Even though consumers, they consume across different occasions, and they have different need states. That's why our portfolio is a big advantage, one of the global advantages that we have to play this game. This is why we continue to invest behind our mega brands, which grew 22% last year, a very strong driver of our overall growth. Thank you.

Thank you. This was the final question. If your question has not been answered, please feel free to contact the Investor Relations team. I will now turn the floor back over to Michel Doukeris for closing remarks.

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

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