Ambev S.A. (ABEV) Q1 2021 Earnings Report, Transcript and Summary

Good morning, and thank you for waiting. I would like to welcome everyone to Ambev's First Quarter 2021 Results Conference Call. Today with us, we have Mr. Jean Jereissati, CEO for Ambev; and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website ri.ambev.com.br as well as through the webcast link of this call. [Operator Instructions]. Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of 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 first quarter 2021 results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Ambev's normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the earnings release. Now I'll turn the conference over to Mr. Jean Jereissati, CEO for Ambev. Mr. Jereissati, you may begin your conference.

Thank you very much for joining our call. In February, I mentioned that 2021 would be a challenging year and COVID-19 pandemic was still very real. After that, we saw a steep deterioration of the sanitary conditions in Brazil, coupled with increased mobility restrictions, which impacted our people, customers, suppliers and consumers. At the same time, we were better prepared this time around. As a result, we delivered a great start of the year. We grew EBITDA by 23.8%, driven by double-digit volume and double-digit net revenue per hectoliter growth in Brazil, CAC and LAS. Consolidated volumes were 5.4% above Q1 '19, and we were able to get back to flattish EBITDA versus Q1 2019. This was another quarter we saw clear signs that our commercial strategy is working and that momentum continues. I was very happy to see the strong performance of our international operations. And Brazil continues to show that we are in the right path. We delivered volume growth in 8 of our 10 markets and market share gains in 7 of these markets. We saw a solid net revenue per hectoliter growth in the quarter, driven by a more flexible and efficient revenue management initiatives, including occasion-based promotional activities. We continued to strengthen our portfolio as we launched innovations across our markets. To name a few, Golden Extra in Panama, Bud Light Seltzer in Canada and Michelob Ultra in the premium segment in Brazil. LAS delivered strong volume growth in the Core Plus and Premium segments with a great performance of Corona. In Argentina, we had an outstanding volume performance and improved net revenue per hectoliter, delivering top line growth of 67%. CAC restrictions were partially lifted during the quarter that, combined with the good performance of our above core portfolio and effective revenue management initiatives, delivered a top line growth of 28%, led by Dominican Republic and Guatemala. Canada gained market share and grew volumes despite a tough comp in Q1 2020. Growth was led by hard seltzers and the above core beer portfolio with Michelob Ultra and Corona. Brazil Beer volumes grew 16% despite carnival cancellation in February and tougher mobility restrictions imposed in March. According to our estimates, we gained market share while growing volumes in all segments. With a special highlight to our global brands that had a solid high-teens growth and Brahma Duplo Malte that continued its growth momentum. Green health of the portfolio improved once again in all segments this quarter, and our digital initiatives continued to expand. Ze delivery fulfilled 14 million orders in this quarter, reaching an all-time high in March. Net revenue per hectoliter growth was strong again. This growth was mainly driven by effective revenue management initiatives. This also had positive impact as it helped to standardize and increase efficiency across our portfolio. Today, I would like to further focus on BEES, our super app for our customers. We believe that BEES has been important to deliver a strong commercial performance as it digitizes our route to market, enables our customers to place an order in 3 clicks at any time of the day and offers assortment selections to POCs using algorithms. On top of that, BEES offer other services, such as financial services, scheduled delivery, rewards programs and other products via marketplace, providing a full e-commerce experience to our customers. Since our decision last year to launch BEES in Brazil, we managed to roll it out to all our DDCs and wholesalers. As a result, we now reach more than 65% of our active customers in Brazil via BEES, accounting for over 550,000 customers. And we generated more than BRL 6.5 billion in GMV. Given this promising early results and to further boost the platform, in March, we announced that menu.com, a start-up marketplace for bars and restaurants that had been accelerated by Z-Tech for the past 2 years, will be integrated into BEES ecosystem. Today in Brazil, we offer more than 100 SKUs from approximately 31 partners in 380 cities already, reaching more than 5% of our net revenue in some of these locations. Our platform's scale will open many new opportunities for us to grow together with our customers and our partners. Our platform's scale will open many new opportunities for us to grow together with our customers and our partners. Our digital platforms will be fully connected throughout our operation, integrating with and leveraging on our existing supply chain, logistics and sales capabilities. As our digital transformation evolves, we will enhance each step in our supply chain and become more flexible, efficient and integrated with our partners, customers and consumers, improving our NPS throughout the ecosystem. As for the rest of 2021, our outlook remains unchanged, and we continue to expect a challenging year. COVID-19 is real and around us. And cost pressures will continue mainly in Brazil, not only thanks to FX but also to commodities prices. With that said, I remain very confident in our people, our capabilities and plans for 2021. Overall volumes at Ambev continued its performance in April, and net revenue per hectoliter performance will remain a focus, especially in Brazil, given the inflationary scenario we are living. We expect our top line performance should continue to drive our recovery, growing ahead of bottom line as we work to get back in the full year to the normalized consolidated EBITDA of pre pandemic levels. Thank you very much. Thank you for your time and attention. And I will hand this over to Lucas.

Thank you, Jean. Hello, everyone. This time last year, our financial performance was marked by declining net revenue, declining EBITDA, declining normalized profit and declining operational cash flow generation. What's worse, we were still in the early days of the COVID-19 pandemic. What a difference a year makes. In Q1 2021, net revenue grew nearly 28%. EBITDA grew almost 24%, normalized profit grew close to 125%, and operational cash flow grew close to 84%. Brazil Beer performance was strong, and the growth of our international operations was even stronger. Just to put things into perspective, all these indicators are either at or above 2019 levels in nominal terms. And in terms of outlook, even though COVID-19 is still around, I believe it's fair to say that things are not as gloomy as before, quite the contrary, we expect recovery to continue as vaccinations pickup. So I'm proud to see that not only have we navigated the crisis well so far but more importantly, that the commercial momentum we started to build in Q3 2020 has continued to translate into consistent improvement in our financial results quarter after quarter. We have 2 big priorities on the finance side: number one, continue to protect liquidity given the still volatile environment; and number two, improve our return on invested capital. The team has done a great job since last year in terms of protecting our liquidity position, which remains solid in each of our markets, while still investing about BRL 1.3 billion in CapEx in the quarter. Most of this investment was directed towards increasing our brewing and packaging capacity, particularly in Brazil to support our innovation pipeline. And the second biggest bucket of investment was in technology such as our ERP integration designed to, among other things, support our B2B and B2C platforms. And in terms of ROIC, there's a lot of work going into improving resource allocation as well as improvements in working capital, but there is no doubt that 1 of our biggest challenges remains the recovery of our profitability. FX headwinds will remain as our biggest hurdle throughout the year, particularly in Q2, whereas 1 way package mix and commodity pressures should also be a factor. In addition, cash SG&A was higher in Q1, mainly due to provisions for variable compensation, given the stronger-than-expected start to the year. Since 2020 was a 0 bonus year, should our performance remain on track, provisions for variable compensation should continue to impact our year-over-year SG&A performance going forward. On the other hand, the stronger-than-expected top line performance should help offset higher SG&A for the remainder of the year. And we will keep focusing on our productivity initiatives and typical financial discipline regarding costs and expenses management. Yes, we will continue to work hard on improving our profitability, but we will not lose sight of the long term. The sense of urgency is there, but we have to be disciplined and stick to our commercial plan, which, after all, has been working. For us, the name of the game still is continuous and consistent improvement of our results. We have been on this improvement journey since the second half of 2020 and Q1 was another important step. So there's definitely more to come. Finally, a quick word on ESG. In June, we plan to host a webinar to focus specifically on how we have been working to embed ESG into our company model. I hope to see you all there. Thank you. And now let's move to Q&A.

Now we will begin the Q&A session.[Operator Instructions]. Our first question comes from Marcel Moraes with Santander.

Congrats on the impressive results for the first quarter. My question relates to market share trends per segment. So you mentioned you gain -- especially in Brazil, where you gained share in all segments. Can you give us a little bit of color on the super premium and the premium plus core value segments? What's going on over there?

Okay. Thank you for the question. So yes, we feel that our portfolio is much more prepared. We went through a big renovation, launching of new brands, resource allocation, betting on brands that really could drive the future. And our performance of global brands, specifically, they were quite -- double digits. So it was close to the 20s and this is what we believe it is the -- above the performance of the premium segment, overall performance. So that's why we mentioned that. We have been investing for a while in Budweiser and in Stella Artois. And more and more, we are seeing Beck's with a very strong performance, and we are seeing Corona doing very well too and Colorado. So these are our top 5 brands that we are really investing for the future, and they are really doing well. Specifically, Beck's is going triple digits growth. Corona is going on the 50s, Colorado doing very well on the in-home occasion too, still suffering a little bit in bars, but doing very well on the, from the off street. And on top of that, we -- on top of market share, something that we are looking a lot now is really equity of our brand that we really have to push equity ahead of market share, push to make the pool and to build brand equity. And brand equity of premium brands are really moving much faster than the market share and than our plan. So that's an important KPI for us that we are very confident.

Jean, what about the core segment? any color on that?

Yes. So the core segment since the beginning of the pandemic, I have been -- that was information that I brought to you all that the core has been very resilient. And we've been really reorganizing our portfolio, creating the Core Plus segment, really launching pack innovation and different packs on the core segment. And after years of volume decline, our core segment was really marked by resilience with Brahma, Skol, and [Antarctica] families growing by high single digits. So this is the combination of the RGB 300 mL bottles that we are really focusing during the pandemic as the pack that moms and pops and bars can do the delivery, can do the takeaway. So it's an important part that's really accelerating the core brands. And on top of that, the normal price strategy that we have been following. So core brands really bounced back. On top of that, the Core Plus segment, there is Brahma Duplo Malte, that's Bohemian, they are really on fire.

The next question comes from Carlos Laboy with HSBC

Yes. Congratulations on really strong results. I'm wondering, what have you learned about Brahma Duplo Malte through this period? And how do you drive that brand going forward? What consumer insights have you gleaned as you sit back and reflect on everything you've learned here for what's next there?

Okay. So thank you for the question, Laboy. Brahma Duplo Malte, we stated that was really the brand that -- the product that we took 1 year to develop. It was really, really tested with all the consumer sites. So we had that mindset of really get superiority on all the analysis that we were doing comparing with the core and really get inspired by another categories like, for example, whiskey that has the double malt, the single malt and everything. It was amazing how the Brazilian consumer got -- sticked with the concept of Duplo Malte or 2 malts that they combined. And we were able really to develop a liquid that it really calls attention on the mouth and on the eyes because it's really creamy and has a mouth, a great mouth taste. And all this process has been like for 1 year, we've been doing that. And then we decide really to, first, to bet on the flagship brand. So we are really talking about Brahma, that had Chopp Brahma, Brahma Duplo Malte and Brahma under the family umbrella. So we are really -- Brahma is the brand and Brahma Duplo Malte is the flagship product. And we went bold on that. So we really got -- in terms of resource allocation. So we picked the passion point, the Brazilian passion point that's more relevant for Brazil today. We have 2, football and country music. We connected Brahma Duplo Malte with these, both important passion point that we had. And we have been able to work as a family. And the good news is that Brahma is peaking back and is growing together with Brahma Duplo Malte that at some point in time we would think about some type of [indiscernible]. But the whole assembly is really moving up and we are very excited about it.

The next question comes from Rob Ottenstein with Evercore.

Robert Ottenstein with Evercore. And congratulations to -- for a great start of the year. A couple of sort of follow-up housekeeping items. Number one, it looks to us, Lucas, that you didn't reiterate the guidance on the COGS being up 20%, is that correct? Or am I missing something? So that's number one. Two, just a follow-up on the Brahma Duplo Malte, and that is I believe that got launched last year, biggest innovation you've had. Where are the comps toughest for you on that launch? So just kind of 2 housekeeping items there. And then kind of the bigger picture question, is -- how do you see the Beyond Beer market and business developing for you? It was a big theme for Brito on the ABI call today. Obviously, a lot of interesting stuff going on, on that side in Brazil. Love to get a little bit more detail on your thoughts on that as well.

Okay. So thank you for the question, Robert. So yes, about the cash costs, our guidance was in low 20s for Brazil Beer, for the full year. This -- so this quarter, we had higher than the full year, but it was already expected given the curve of the hedges that we have in Brazil. For Q2, we will continue to see cash COGS above the full year guidance for the same reason, but we are not making any changes to this guidance, okay? So this is one thing. The second thing, it is Brahma Duplo Malte. Let me give you a higher view on that. So what we are aiming is really to have a pipeline of innovation that really can transform my portfolio in the future, and it's already been transforming the company. So one KPI that I looked big time, it is what is the percentage of my net revenue that comes from products that did not exist 3 years ago. So it was -- this number was 5% in 2018. It went to 10% in 2019, and we reached 20% in 2021. And we are looking at this number for us to continue this trajectory with a strong view about where -- what are the spaces, what we want really to create. It's not just about any type of innovation. So we have a framework with 5 avenues that we want to launch and maintain this momentum of 20% of our net revenue coming from products that didn't exist 3 years ago. So we have -- so one more information. So the tough comps of Brahma Duplo Malte, the peak, it was really the Q3, where it was really the moment that we are freight loading and putting everything on the market. And -- but what we see is that this number of innovation, overall, it should not change. This 20% that I want to go move it forward. So we have a pipeline that they are coming. So Brahma Duplo Malte still has some geographical rollout in some new packaging -- packages, new occasions for us to work on that. And there is one important product on the Core Plus side that we have been piloting, and we are very excited, and it's really coming to the rollout phase right now, that is one international brand. Having said that, Beyond Beer, it's really something that we are into it we are very excited about our Beats brand in the partnership with [ Fundita ]. We just launched it. We launched GT under Beats, and then we launched Beats Zodiac. And there is a family of brands that they are very accretive, very incremental, doing very well. And we have 3 or 4 pilots happening right now for us to learn and decide where to launch. So we are testing our sales. We are in the pilot phase. We are testing Mike's Hard Lemonade. There is something that is a little bit with this [Juic'd] and natural points. And we are testing the [FEMSA] cocktails in cans. So there are -- in Beyond Beer, we have like 4 avenues that we are on full speed on Beats, and we are on the pilot phases on the other 3.

And then just to add something here on our international operations, Robert. Beyond Beer is already a reality in Canada, for instance, and the quarter showed very good results yet again from our Beyond Beer portfolio, not only thanks to Nutrl, right, which we partnered with last year and showed consistent growth throughout last year. But in the quarter, we launched in Canada, Bud Light Seltzer. Early days, but off to a very good start as well. So I think that's one additional benefit that we have to be able to learn from the Canadian operations and roll out these learnings to other Ambev markets.

To give a little bit more information, Robert. So you know that we acquired a winery in Argentina last year to build and have the capabilities of play with grapes, with winery. So it's a business that in Argentina now is growing 16%, 16, 1-6, compared with what we bought. And now we are really building the capability of putting wines in cans and really testing this across the board in South America.

The next question comes from Thiago Duarte with BTG Pactual.

I have 2 questions on the revenue per hectoliter in Beer Brazil and then a third question on brand portfolio. So the first question is, can you talk a little bit more about how you manage the decision on the discounts in the Brazilian beer division? Since the third quarter last year, we've seen discounts coming down considerably. It's certainly been an important push to revenue per hectoliter growth. So I'm just wondering how you -- what were the conditions that allow you to more aggressively cut back those discounts during the pandemic when it comes to channel, package and the competition changes that the pandemic brought to the business? So I think it would be interesting to hear. The second question is if we -- as we look into the revenue per hectoliter growth in Brazil Beer, 12.6% year-over-year. Can you help us break it down in terms of some of the impacts that you had on a year-over-year basis? I'm specifically looking to hear in terms of the impact of the Carnival or the lack of Carnival this year and the digital initiatives such as Ze Delivery and BEES would be nice as well. And the third question, Jean, you mentioned in your opening remarks that the brand health of the portfolio has improved across the whole portfolio. So if you can elaborate a little bit more on what sort of metrics you're looking at when you make that statement, and how your brand preferences stack up against market share in each segment, that would be interesting, too.

Okay. So let me -- give me one minute for me to kind of put this on the paper for me to, I lost track of the points.

The second one is breakdown by driver. Net revenue per hectoliter beer. And the third one is brand portfolio, elaborate power versus shift by segment.

So if I miss some of the questions, we go over it, okay? So yes. So for a while, I've been mentioning previous quarters that over the long run, overall prices should grow in line with inflation. And there we are talking big time here on shelf prices. And then plus and minus, you have efficiencies on discounts. You have brand and channel mix, and then we have the impact of our portfolio strategy, mainly through innovation, okay? So these are things that we break down prices like that. And we have been much more flexible, nimble, agile in terms of revenue management to react to market conditions. So we are in the middle of a pandemic still. So channels are really changing different, what's growing, so transformation going on that you have to support. And so we really went deep on revenue management. And specifically, this piece of discount I think some things happen. First of all, BEES is helping us big time, okay? So granular, we have a big chunk of our volumes already through BEES. You have like better algorithms. We have better price trees because everything is really digitized and centralized. So it's really -- creates a framework, a easy framework for us to really understand the listing and the discounts and everything. So this is 1 thing. Second thing, we are more linear because of that, okay? So we are kind of more less concentrated and preparing for everybody to have some access to the return in terms of discount. So we are trying to get this a little bit with more standards, and we were able to make it. So we really moved this vision of a lot of discounts to trade in to a much more discounts connected with sellout and connected with occasions, okay? So we are really with a strategy where, for example, Brahma Duplo Malte, so the promotions should be correlated with Barb Q and it should be the discount in this specific occasion in all -- for all the products. So we are really narrowing the brand building and expanding occasions and giving discounts on that direction. That is helping us to be much more effective, okay? So these 3 things, I would say that they were the drivers for us to really upgrade our discount management and our discount efficiencies, okay? So talking about brands, talking about the brand. So the metric that we are really looking into it is really power. So it's a combination. So it's a prox of -- it's more than preference because it's a combination of -- it's a proxy for the market share of the future, okay? And we have a big portfolio and we decided to kind of really elect inside this portfolio, which are the brands that we are really concentrate efforts for the long-term for them really to become, to become leaders. And we are with the strategy of really concentrating and bet on some brands and we have been able -- we need to drive the brands that we believe that they will win in the future big time. So it's -- we are very excited that Brahma Duplo Malte is doing very well. It's bringing Brahma together. We are excited that Skol kind of stabilized at some point. I mentioned this in terms of volumes. We understand it in terms of on the brand side too. And then we have the premium business, as I mentioned before. So the combination of the 5 brands that I have, they are really moving ahead of my market share. So really Beck's is doing very well, Colorado is doing very well, Corona. So when we put these things, all these things together -- so with a total portfolio of ABI is gaining in this metric that we are looking there is power with the focus brands really gaining even more. And in the brands that were suffering the past they are kind of stabilizing. So this is the type of equation on the equity that we are seeing in the market.

And then, Thiago, and this is valid across segments and also, if you look at the film since last year and not only the quarter performance, right? I mean, brand building takes time, right, requires consistency. And 1 of the things that we're seeing is really this gradual, right, improvement in our brand power across segments for the portfolio ever since last year.

Perfect. That's very helpful. And Jean, just 1 part of 1 of my questions. Is it fair to say that Carnival should have had an impact in terms of how you translate revenue per hectoliter on a year-over-year basis?

So if I had Carnival, I would have a net revenue debt to equity that was smaller than that? So that's the question?

Yes.

Let me see, I think if I had Carnival, I would have a mix of packaging that it was worse than what I have today because it's more concentrated on weekends. So I don't see an impact on the pricing side. If I had Carnival, I would have something around 1 million hectoliters of cans selling in the market. I think that's how we should approach Carnival.

Yes, that's a good exercise.

That's about price and more about packaging mix.

The next question comes from Marcella Recchia with Credit Suisse.

I have two questions. First, it's about pricing. Listening Brito at ABI conference call earlier, he mentioned about price increase for Brazil beer in June. So my first question is, if you could elaborate a bit on your pricing tensions and the magnitude over the coming quarters, in light of recent commodity cost pressure, but also in light of the commodity cost outlook next year. That will be my first question before -- I will wait before moving to the second one.

So Brito mentioned that, Marcella, and as we have been mentioned in previous quarter. Look, over the long run, overall prices should grow in line with inflation. And I'm talking pretty much about shelf prices. And then on top of that, you have the discount and then you have plus and minus brand and channel. But there is this reference of shelves that on the long-term, should grow with inflation. And you know that we have been very flexible, nimble and agile in a way to react to market conditions, where we can go and move back or it can stick. So we are really taking every opportunity that we can, but it's really something that is very fluid. And so having said that, I would say that we cannot comment on pricing moving forward. I would just comment that this scenario that we are living in Brazil is a more inflationary scenario that we have to understand that got worse than we had in the past. And looking here, look, I'm really looking to the consumer. I'm not looking for my -- specifically for my costs. My cost, I already -- my COGS, cash COGS, I gave the guidance already. I'm talking really about the basket of the consumer and the inflation that we have over there and how we are -- we get better prepared for them, okay? So I cannot comment much further than that, just that we are in an inflationary scenario that end of the year, inflation was smaller than it was right now. And we have to find a way to adjust to it.

Got it. And my second question is about the SG&A. You mentioned on the outlook for this year and also in the call, that you expect higher SG&A because of the bonus provision, right? So just to understand if you can comment something about the outlook of this increase for this line this year, if you -- what can we expect on that?

Yes. Marcella, this is Lucas. Thanks for the question. So for SG&A, in Q1, the biggest impact was indeed the provision for bonus, okay, based on our stronger-than-expected performance to start the year. Should we remain on track or ahead of our expectations from a budget perspective, we will continue to accrue bonus provisions throughout the remainder of the year. So that -- it's reasonable to expect some additional, right, higher SG&A as a result, okay? The second biggest impact that we are seeing so far this year is regarding distribution expenses, and that's mostly a function of volume growth, right? So as volumes grow, our variable logistics cost also tends to grow. The good news there is that there is a benefit in the top line and the net -- it's a net positive at the end of the day, okay? So the higher SG&A in the distribution side is compensated, is offset by the improvement in net revenues. And finally, the third bucket is sales and marketing. In Q1, there was lower sales and marketing versus last year, but this was mostly due to phasing, particularly in Brazil as a result of, of the restrictions that came back in March. So we obviously had to adjust our sales and marketing spend, given that restrictions were in place. So going forward, as we recover, as cities reopen and the on-trade recovers, we are going to adjust our sales and marketing spend accordingly, okay?

The next question comes from Lucas Ferreira with JPMorgan.

Congrats on the strong results. I have 2 questions. Sorry if they are kind of too technical around your forward-looking statements. The first one, you guys mentioned that you already kind of envisioned turning to the pre pandemic EBITDA, right? So assuming the 2019 number, for instance, but I assume that your profitability will still be back up. My question is, is there anything structural that you see in the industry in the recession, the cost structure of the industry that -- in the company that would impair you to come back to the pre-pandemic profitability. So in 2019 guidance, EBITDA margin of roughly 42%. So is there anything that you guys think that would be impairing you to return to this level? And if for some reason, considering the pricing power, considering the reopen that you're seeing right now, you kind of already envisioned that this could be seen at some point -- at some point in time in the foreseeable future. So that's my first question. The second question is around the same topic. And looking at the second half of the year, if you guys are reiterating the guidance for the cost per hectoliter, I would assume that your kind of COGS curve is more skewed to the first half of the year, considering you COGS per hectoliter is up at 25% this quarter. So in terms of, let's say, margin comps, are you seeing an easier second half than first half?

Yes. So let me tackle this 1 and then Lucas can help me. So we are in the middle of a pandemic, okay? So this is -- I think this is, this is what we should talk about. Since the beginning of last year, when we saw the scenario of bar shutting down, bar closed, mobility restrictions at some extent, sometimes more, sometimes less. So all these things happening, we brought -- so we went to this vision of transforming the company towards the future. Accelerate the things that we have been cooking during the pandemic, but really accelerate towards the future. And I've been mentioning that -- so I want to really recover top line on fee. And I really wanted to recover volumes for the big volumes that we had in 2014 that we lost 10 million hectoliters from that point on. And we are being very consistent on that since looking for new occasions, the consumers. I'm now having 100,000 more customers that I had before. We were very happy to develop this relax-at-home occasion with our brands. That's something really the future now is something. That's more developed and mature markets. So we were really with this mindset of let's get back in fee for the top line that we had at some point in time and really less follow the consumer, okay? So what I mentioned today, it is that. So we are confident on that. We are very proud about the things that we achieved on the top line side. We see momentum. I think it's time for us to go back and say, look, so if the -- for the recovery of the bottom line. So where -- when would we make it? And what I mentioned it is time for us to look of the bottom line that we had before the pandemic and magic. So I really don't see nothing structural that will not make us in this journey continue to converge the top line growth with the bottom line growth. But in terms of the perspective of the pandemic and with this journey, we really decided to do 1 first -- 1 big thing first and then the other. The next step will really be to talk about margin expansions. The good news is that really, if you look at how we are -- 1 big part that we are suffering with this margin contraction is really the currencies. And if you look at -- we are, in 50% of my costs, they are in dollars with FX related. And in the currency that I have in 2021, I mentioned that before, it's 530 I'm hedged this year. This connects with that guidance that I gave of low 20s in cash COGS. So it's 529 to be more specific, the FX that I have today, if you look at the market today. So this is exactly the FX that we have today. So looks like this problem that I'm having today is kind of stabilized on this level of 529 that is already in my base. So I don't see on the FX side, exactly, nothing more structural than that. We could decide to hedge everything on that. And then I would not have a problem with that, but nothing that I'm going to do. And then we have the commodities that really picked up in the short term, but we really have to understand how these things are going to evolve moving forward. The other piece is that really, as I mentioned, we understand this inflationary scenario. We have been nimble and agile for us really to get all the opportunities that we have, and really guarantee the momentum of our top line moving forward.

Sorry to insist on the second point, that you see the second half margin comp side here, considering your new level of prices and considering the COGS guidance kind of more skewed to the first half?

Yes. So Lucas, as I mentioned in my opening remarks, in terms of cash COGS per hectoliter for Brazil beer, right, which is the guidance, we anticipate that the pressure will be greater, right, in Q2, okay, followed by kind of less pressure in the second half of the year, okay? If you take a step back and look at the rest of the P&L, right, just if we go back to our performance during 2020 right? I think it's -- you can see that recovery driven by the top line was very strong in the second half of 2020, which means that we have a tough comp in terms of top line going into the second half of the year. Okay? And as I mentioned before, SG&A, we do expect it to be higher, primarily due to the higher provision for variable compensation.

The next question comes from Isabella Simonato with Bank of America.

Can you elaborate on the soft drink outlook in Brazil? And also how do you expect cost pressure to come on that line of business this year? And if you could give us a little bit of more color about the quarters as you gave for beer, that would be very helpful. And also on the international part on last, top line performance has also been quite strong, but the measures in terms of restrictions and et cetera, have been more volatile, right? How you're seeing the beginning of Q2 and the evolution throughout the year?

Okay. Thank you for the question. Our net performance volume overall, it was an improvement in Q1 2021. So we have a 0.8% growth. It's really -- so we are still with a lot of restrictions, an important occasion on the soft drinks, it really is on the go. And so mobility really connects with NAB industry, and we are still limited on that. But even though we were able to get to slightly positive volumes. The brand is really what Antarctica is coming back, getting performance better than it had before. So it has been good. Energy drinks, they are doing good too, when we talk about the full portfolio. And all of these partially offset by the occasions. The mix, there is an important thing for the profitability of soft drinks through the smaller packs, the channels, the on-the-go in the end was -- it's better than we expected, but it's still not there. And we believe that will get better as the vaccination move forward and the restrictions go down. Okay. So this is NAB. When you talk about CAC, yes so --

LAS.

LAS. When we talk about LAS. So LAS was an important quarter for us. It was a great performance, I believe. So we had -- we felt the restrictions more in Brazil on March. We are feeling restrictions in Chile now, a little bit on Paraguay too. When we go to Argentina -- so talking overall about LAS. So it was a solid performance on Argentina, Chile, and Paraguay, mainly driven by corporates and premium segments, gaining market share in all of these countries, Argentina, Chile and Paraguay. Bolivia is a place where we feel still under pressure over there, Uruguay too, but Argentina, Chile and Paraguay with a very good performance. Yes, we saw some restrictions moving forward over there. But as you see, fluid, like the pandemic, it comes and it goes, so we are excited because LAS, we made -- we had some important changes over there. There is -- Chile is really being, we have a structural change and new combination of partnership with Coke over there. That's really bringing us some different capabilities and possibilities. So it's really something that we are very excited that we are able to gain market share on the own trade segment. That's something that we have been struggling in the past to do, so volumes very strong, very, very excited. Argentina too, we see the portfolio is really more -- it is stronger. And this year, we were able to be -- to the government and all the things we have been more flexible with more freedom for us to work on the revenue management side on discounts and on everything. So structurally, I believe that I'm really excited about LAS. In a pandemic yes, we saw some restrictions, but it's something that it comes and goes. It's fluid.

The next question comes from João Soares with Citibank.

I have 2 quick questions. The first one, you had a very interesting discussion on the discount. But it's interesting to see that you're using your online channels to enhance your intelligence, right? And I imagine that especially through the DTC you've been gaining a lot of intelligence on the consumer. So if there is anything, Jean, that you could share with us regarding consumer behavior trends, possibly capacity to absorb further price increases and how they connect to the recent trends that you've been seeing, like the fact that brands that suffered in the past are now stabilizing. So anything that connects with the consumer behavior that you can you can share with us would be very, very interesting. So that's my first point. And the second point, you talked a lot about -- you already talked about the commodity cost pressure. We are already, almost halfway through the year. Aluminum prices have been going up. So if you can talk about any initiatives ongoing, apart from the revenue management that you've been doing to maybe mitigate this potential cost pressure going to next year would be very interesting as well.

Okay. So let's talk about consumer behavior and revenue management first. So consumer trends. So we are seeing this thing about the in-home consumption. And so it's really -- so how the whole pandemic was really about how to win in the in-home occasion and consumption. So that was the most important thing for us too. And I think we reacted very fast, and we had a lot of learnings on that. We know that the occasion in-home is more about relaxation. It's more about Mondays and Tuesdays and frequency much better than before that was very concentrated. And now people is more willing to like watching TV, live stream, relaxing. So this is important that for us to win, you have to connect brands in ROIC market and be profitable on this occasion. So we are working a lot on that. We know that consumers are convenience. It's convenience, it's everything isn't it. So consumers are really looking for convenience. So they are buying locally. So they are buying in moms and pops close to their home, in e-commerce, in the delivery. So they are -- moms and pops and bars they are transforming really to become small takeaway supermarkets of some things. So there is this thing that we are that's, for example, for you to know. So we are betting on the RGB 300 mL bottles as the pack that really can -- that's leading the takeaway occasion for all the bars and moms and pops that they are transforming. So if they cannot deliver it, they have to have a takeaway strategy. And this strategy is really working very fine because we designed so the pack is a good pack for us to do that. So the price point is designed for that. We are doing most of it -- of the places, 6 bottles for BRL 12, so it's a good price point for 6 units that people can take. The customers are really adopting because they need this takeaway because this pandemic is truly, they open and close, so they need something for people to take away. So this is something that is really working from our side. So Ze delivery, I don't have to mention again. We have been talking a lot about it. So it's really about convenience. It is something -- bet on that. We know that there are 2 occasions that we are developing to. There is this thing about signature beer. We have another strategy that is the [seprecada], where we have like signatures for the whole year. That's same price, that's number of beers every month in your home. So this is -- we have been investing in Brazil. This is exploding in Argentina. Is really something we've got traction there. So Ze Delivery is stronger here, [seprecada] is stronger in Argentina. So we have to find the value proposition, the prices for that. We are developing apps for pantry loading parties. That is not about the Ze Delivery, is about big party that you want a discount for big. So we are really working on these missions and occasions that are enabled by technology for us really to be ahead of the time on that. So all these learnings and all the technology that we have, we are betting big time to be ahead, to be ahead of the game. In talking about offset costs of commodities headwinds? Yes, that really -- [Technical Difficulty] Are we still here? Yes. So as anticipated, so this year was a year that we faced transactional FX headwinds, given the depreciation of real, 50% of our COGS is dollar rated. And now we are seeing these commodities that is something that is coming to the table. But the things that we are doing are very consistent. And it's really about this do not lose this momentum, the going growth continuity is really something that help us big time sweat the assets and have a better VLC logistic cost and have a better operational leverage when the volumes go up. So I'm really -- we are really excited about more towards the end of the year, about the vaccination. That is really something that we believe that RGB 600 mL bottles and the socialized out-of-home occasion is really something that will pick back. We are preparing for that. So we think some euphoria we're going to have around that. If we are -- we have a much broader base of clients. So the prices are well set that we are prepared for when this moment happen. So this innovation strategy that we have that is really like driving mix and prices through new products. So this Core Plus, the Premium portfolio, all these adjacencies. So Duarte asked here about the Carnival. In Carnival, I sell a lot of that products that we have there is a Beats that is so accretive for the company. So that product is really designed for parties in its kind of -- so this occasion, big parties, outside events is depressed. And we believe that if it doesn't come in Q4, it will come in Q1 of next year. So this innovation, vision of occasions and missions. Are helping and will help us big time. And we will not lower the guard. So financial discipline is still there around cost -- around costs, around expenses. So the CapEx is really about strategic investment. So we are really concentrating CapEx on the technology piece, on the footprint for us to really have the better service possible for customer and consumer. So this part here, there is a lot of learning because consumers are really paying for convenience. So they pay in the Ze Delivery. So there, our customers are beginning to pay for more days of delivery as a service. So we -- so understanding the missions in these demands, we are really being able to have some additional revenue on services too, okay? So that was pretty much it that I could mention on the commodities mitigation. Okay. So I think that was the last one, we have one more? That was the last one. I really want to thank, first of all, my team that is here working on Ambev, working for Ambev. So team is working very hard to have this quarter for 1 year inside the pandemic to achieve these results, to have this great start in a very challenging environment. I also want to thank you all the analysts, everyone who joined the call for the time and attention. And to wrap up, I'm really confident about the future for some reason. So we are on the path of a very good commercial momentum. I think this is -- has been confirmed quarter-by-quarter here with you all. Not only Brazil, but we are really picking up international operations like Argentina did very well. Chile, we are so excited about Chile. CAC, we are beginning to see that once the vaccination in U.S. is really moving forward. So this summer in CAC is already the hotels are already booked and everything. So we are really seeing this momentum. Not just in Brazil but international operations. Although transformation, that big bet on technology that we are doing takes time and the environment remains challenging. We can see contributions of our digital efforts. So BEES is like bringing a lot of possibilities for us. Ze Delivery is doing great. So we have another effort on that side. This portfolio is stronger. Our portfolio is much better than it was like 2 years ago. High-end brands are really gaining equity. Beck's is there. Corona is doing very well, Colorado, doing very well. Budweiser is a brand very important for us. That's growing too. So we see brand power. The Core Plus segment, it was something that we get it right, and we want to continue to bring new news on that with innovation pipeline. And 1 thing that we don't talk that much, but cash generation, it is really something that is really structurally solid at Ambev because we have been prepared for that. These channels somehow, they help us on this core working capital. So my cash generation is really solid when you look last 3 years and this year, and we remain committed to transform the company and invest ahead. So that's it. Thank you very much. Thank you all, and thank you, yes. Just get in touch with Lucas and the team, and then we can continue the conversation.

Ambev's First Quarter 2021 Results Conference call is concluded. You may disconnect your lines. Everyone, have a nice day.