Anheuser-Busch InBev SA/NV (BUD) Q1 2012 Earnings Report, Transcript and Summary

Graham David Staley - Vice President of Investor Relations Carlos Alves de Brito - Chief Executive Officer and Member of Executive Board of Management Felipe Dutra - Chief Financial Officer and Member of Executive Board of Management

Melissa Earlam - UBS Investment Bank, Research Division Ian Shackleton - Nomura Securities Co. Ltd., Research Division Trevor Stirling - Sanford C. Bernstein & Co., LLC., Research Division Anthony J. Bucalo - Grupo Santander, Research Division Lauren Torres - HSBC, Research Division Gerard Rijk - ING Groep N.V., Research Division Andrew Holland - Societe Generale Cross Asset Research Kris Kippers - Petercam, Research Division Alice Beebe Longley - The Buckingham Research Group Incorporated Mitch Collett - Goldman Sachs Group Inc., Research Division Simon Hales - Barclays Capital, Research Division Jonathan P. Fell - Deutsche Bank AG, Research Division Philip Mark Morrisey - Berenberg Bank, Research Division Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division Andrea Pistacchi - Citigroup Inc, Research Division Olivier Delahousse - Natixis S.A., Research Division Brett Cooper - Consumer Edge Research, LLC Thomas Russo

Welcome to the Anheuser-Busch InBev First Quarter 2012 Earnings Conference Call and Webcast. Hosting the call today from AB InBev is Mr. Carlos Brito, Chief Executive Officer. To access the slides accompanying today’s call, please visit AB InBev’s website now at www.ab-inbev.com and click on the Investors tab. Today’s webcast will be available for on-demand replay later today. [Operator Instructions] 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 the management’s current views and assumptions, and involve known and unknown risks and uncertainties. It is possible that the company’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 the firm’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 April 13, 2012. 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. Graham Staley, VP Global Investor Relations. Sir, you may begin.

Thank you, Jackie. Good morning and good afternoon, everyone, and thank you for joining our first quarter 2012 conference call and webcast today. I'm joined here by our CEO, Carlos Brito, and our CFO, Felipe Dutra, who in a few moments will be making their comments on the results published this morning. This will then be followed by a Q&A session as usual. [Operator Instructions] And with that, I will now hand over to Brito to discuss the results.

Well, thanks, Graham. Good morning, everyone. Today, AB InBev reported a solid start to 2012. Our #1 priority is to drive top line growth by investing behind our Focus Brands, premiumizing [ph] our portfolio and driving execution in the field, while maintaining strict financial discipline. The results of the first quarter reflect the success of this strategy. Volumes of our Focus Brands grew by 3.5%, with our 3 global brands growing ahead of this rate at 4.8%. Revenue grew by 6.2% with net revenue per hectoliter growth of 5% on a constant geographic basis. EBITDA grew by 7.4% and EBITDA margin expanded by 43 basis points to 38.1%, both on an organic basis. Finally, our earnings per share grew by 43.8% to $1.05 on a normalized basis. Profitability remains very healthy, with the year-over-year EBITDA margin expansion reported this morning extending our track record of incremental improvements since the end of 2008. Volumes of our 3 global brands, Budweiser, Stella Artois and Beck's, grew collectively 4.8% in the quarter. Global Budweiser delivered volume growth of 7.3% on top of the 3.1% delivered in 2011 and 1.7% in 2010. Brand health remained stable in the U.S. and we saw strong performances in most of our key markets around the world. Those include double-digit volume growth in China, Russia and the U.K. where we are sponsoring the FA Cup for the first time. As in previous years, the FA Cup, which this year will take place -- actually, Cup Final, which this year will take place on May 5, is expected to attract a huge global audience. Hundreds of millions of people will watch the game, either live or recorded. This is another great example of how we are able to use our footprint to leverage a property across multiple geographies. Budweiser is also performing well in Canada with positive share trends on the back of a strong hockey program. In Brazil, the brand continues to exceed expectations after a slouch in August last year, and we're launching Bud in the Ukraine as we speak. In summary, global Budweiser is in great shape. Stella Artois volumes grew by 1.3% with growth of more than 23% in the U.S. and more than 70, 7-0 percent in Brazil. We also saw volume growth of 5.5% in Argentina and almost 12% in Canada, where brand health is at a record high. Volumes are down in the U.K. although Stella Artois Cidre continues to grow, adding to the health of the brand family. Beck's volumes declined in the quarter, with good growth in the brand's home market of Germany being offset by softness in the U.S. and the U.K. Rollouts of our renovations and innovations continues in all of our key markets. The largest innovation in the quarter was Bud Light Platinum in the U.S. And I will talk more about this later. But as you can see, we're very active in other markets ranging from the continued rollout of Antarctica Sub-Zero in Brazil, to the launch of Hoegaarden 0,0 Rosée in Belgium. Our pipeline of renovations and innovations is very healthy, and we will keep it that way. Turning now to our key markets and firstly, the U.S. We estimate that the industry's selling-day adjusted sales-to-retailers, STRs, grew by 1.3% in the quarter, benefiting from favorable weather, especially in the central and eastern parts of the country, coupled with early signs of improvement in employment levels and innovation in the beer category. Our selling-day adjusted STRs grew by 1%, with market share trends improving in the quarter resulting in a marginal decline of 14 basis points, our best share performance since 2009. The main drivers of this result were our strong commercial plan to start the year, solid NFL and Super Bowl initiatives in partnership with our wholesaler network and the rollout of the new and exciting innovations led by Bud Light Platinum. Bud Light Platinum STRs reached more than 0.5 billion hectoliters in just 2 months. And according to our estimates, it helped drive 64 basis points of total share growth for the Bud Light brand family. Beer net revenue per hectoliter grew by 4.3%, including 151 basis points of brand mix contribution, driven by Bud Light Platinum, the growth of our high-end portfolio and consumer trade-up from value brands. Given the success of Bud Light Platinum, I thought it would be helpful to share with you some of the consumer insights we have gained in the first few weeks since launch. Awareness for the brand has grown very quickly, achieving over 70% among our core target group of 21- to 34-year-olds. Trial and repeat purchase has also been positive. Initial research shows that 42% of triers have made a repeat purchase. And of these, over 50% have bought Bud Light Platinum 2 or more times. Of course, these are early days for the brand, but the results are encouraging and ahead of our expectations. IRI data for the 4 weeks through April 1 shows that the brand has achieved a 1.4% share with more than 90% distribution in food, drug, mass merch and convenience channels, with all of our 4 regions -- all of our regions exceeding their targets. This is a great example of our business philosophy of choosing a few big things and doing them very well. Bud Light Platinum also demonstrates the strength of our distribution network. But what's even more impressive is that this performance has been achieved with a single primary pack, the signature cobalt blue 12-ounce bottle, and only 2 secondary packs, the 6-pack and the 12-pack. As I mentioned, Bud Light Platinum has helped to drive 64 basis points of share growth for the Bud Light brand family. Bud Light Lime-a-Rita, which is currently being rolled out to wholesalers, will further add to the strength and appeal of the Bud Light brand family. As you can see, the focus in the first quarter was on NFL, Super Bowl and Bud Light Platinum. However, activation for Budweiser is now in full swing. New Budweiser Major League Baseball packaging is already in the market. And we'll follow up the successes of 2011 with an enhanced Red, White and Blue program. As part of our programming, we'll also be donating up to $2.5 million to Folds of Honors, an organization that provides scholarships to the children of injured or fallen U.S. servicemen and women. We'll also have limited edition packaging in the market later in the summer in support of the U.S. Olympic team. Ultra had another strong quarter, with volumes up 7.2% and share growing by 10 basis points. The brand remains in good health, and our new line extensions, Ultra 19th Hole and Ultra Light Cider will help to build consideration and expand usage occasions. Our high-end brands in the U.S. continue to outperform the industry, led by Stella Artois, which grew 22% in the first quarter, with total market share improving by more than 10 basis points. Shock Top also had another excellent quarter with volume growth of 81%. In addition, Leffe grew by almost 40% and Goose Island by over 20%. As a result of these performances, our total high-end brand volumes grew by almost 19%, driving share growth of the total market of more than 20 basis points. Our share of the high-end category grew more than 150 basis points. Growth in the high end is an important driver of our revenue per hectoliter performance. Clearly, renovation and innovation is a key driver for our U.S. business, and we have plenty of new offerings either in the market or to be launched in the coming weeks. It's a very exciting lineup. Turning now to Brazil. Despite cooler and rainier weather than normal in January, and helped by positive impacts from the increase in minimum wage, industry volumes grew by 3% in the quarter. We outperformed the market with our beer volumes growing by 4%, resulting in a market share of 69% for the quarter. This represents a gain of 70, 7-0 basis points versus the same period last year. We continue to invest in the quarter in order to enhance consumer preference for our brands, but we also decided to adjust our promotional calendar and invest more heavily behind Carnival this year. Carnival is a unique platform, and we connected with our consumers not only through our official sponsorships in cities such as Recife, Rio and Salvador, but also through a nationwide promotional campaign which gave consumers an opportunity to experience this major event live with their friends. Our first quarter performance was also helped by the continued rollout of our liquid innovations, Skol 360 and Antarctica Sub-Zero, as well as our 300 ml returnable glass bottle package innovation. In terms of regional performance, brand growth in the North and Northeast continues at a rate well ahead of the national average. Finally, as anticipated, beer net revenue per hectoliter grew by 2.1% in the quarter, due to a difficult comparable with the same period last year and a larger-than-normal impact from state VAT increases. Budweiser is making an increasing contribution to our growth in premium. The brand is consolidating its position in major cities and was rolled out to the Northeast region during the quarter. Budweiser has only been in the market for 7 months, but based on current performance, we expect it will become the leading international brand in the country. Moving finally to China. The industry was impacted by poor weather conditions in the quarter, but we outperformed the market and grew share. Our volumes grew by 3.2% with our Focus Brands at Budweiser, Harbin and Sedrin growing nearly 3x faster. The 3 brands accounted for 75% of our total volume in the quarter. The results from Budweiser and Harbin were particularly strong. The growth of Budweiser, the leading brand in premium in China, was a major factor in the revenue per hectoliter growth of more than 9% in the quarter. Before I hand over to Felipe, I would like to draw your attention to a change in the Executive Board of Management, the EBM, which was referenced in our press release today. Miguel Patricio, currently Zone President, Asia Pacific, will become Chief Marketing Officer effective 1st July 2012, replacing Chris Burggraeve, who will leave the company at the end of this year. Miguel is currently Zone President of Asia Pacific, a position he has held since the beginning of 2008 and has a wealth of marketing, sales and general management experience. Prior to joining us, Miguel held several senior marketing positions across Americas at Philip Morris, Coca-Cola Company and Johnson & Johnson. Taking over for Miguel as Zone President, Asia Pacific, and joining the EBM effective January 2013, is Michel Doukeris. Michel started his career with our company in 1996 and has been AB InBev China's President since January 2010. I'll now hand over to Felipe to cover the highlights in the other 3 zones and the below EBIT results. Felipe?

Thank you, Brito, and good morning, good afternoon, everyone. Let me start with Western Europe. Own beer volumes in the zone declined by 2.5%. Our volumes in Germany grew over by 0.4% on the back of a stable industry and positive share trends, led by Beck's, Hasseröder and Franziskaner. Volumes in Belgium were marginally down but share grew, driven by Jupiler. The U.K. faced challenging market conditions, with volumes down 9.7% in the quarter. Budweiser delivered a strong result, growing by double digits and supported by our new FA Cup sponsorship. Stella Artois Cidre continues to grow share of the premium cider category. Zone EBITDA was slightly down, with margin expansion driven by solid fixed cost management. Moving now to Central and Eastern Europe. Russia is a difficult market at the present time with our volumes declining 8.5% in the quarter. We remain focused on premiumization of our portfolio, growing market share by value and strong execution in the off-trade. Bud continues to perform very well in Russia, growing by 37% in the quarter. In Ukraine, the industry was faced with very cold weather. As a result of our volumes declined by 11.5% and in line with the market. Bud is currently being rolled out in Ukraine, as Brito mentioned earlier, and the zone EBITDA and EBITDA margin both improved in the quarter. Finally, Latin America South. We had another strong quarter. Zone beer volumes were up 2.8% with growth in Argentina of 4.7%, driven by a good industry and strong marketing campaigns. Our Focus Brands in Argentina of Quilmes and Stella Artois both delivered solid performances, growing volumes by 4.5% and 5.5%, respectively. Zone EBITDA grew by 22.3% with a slightly contraction in margin due to higher cost of sales and investment behind our brands. I would now like to look briefly at below EBIT results before we open up for Q&A. Our net finance cost of $380 million represents a favorable variance of $378 million versus the same period of last year. This improvement includes a net interest reduction of $209 million due to reduced net debt levels and lower coupon, now at 5%, following the debt refinancing and repayments which occurred in 2011. Also reported within this line are other financial results, which include gains from derivatives related to the hedging of our share-based payment programs. Our normalized effective tax rate improved from 22.2% to 17%, due to shifts in profit mix between countries with lower marginal tax rates, as well as incremental tax benefits in Brazil. Our previous guidance for the normalized effective tax rate in 2012 was a range of 21% to 23%, and we now expect the outcome for 2012 to be in the range of 19% to 21% for the full year, while our long-run guidance remains unchanged. Normalized profit attributable to equity holders of AB InBev grew 44.7% in nominal terms to over $1.6 billion in the quarter, reflecting a strong operating performance and lower net finance cost and income taxes. As a consequence, earnings per share grew by 43.8% to $1.05 on a nominal basis. So in summary, in the first quarter of 2012, we delivered a solid top line performance with good volumes growth in our Focus and Global Brands. Beer industry volumes in both the U.S. and Brazil improved. We had a well-executed launch of Bud Light Platinum in the U.S., which proved to be the most successful new brand launch in the alcohol industry in the recent years, coupled with the rollout of other exciting innovations for U.S. consumers. Overall cost management remained strong in the face of difficult commodity headwinds. The result was that we were able to deliver good EBITDA and EBITDA margin growth and solid EPS growth. With that, I'd like to hand back to Jackie to start the Q&A session. Please, Jackie.

[Operator Instructions] Our first question is coming from Melissa Earlam with UBS.

I had a question on your comment regarding the U.S. and the fact that distribution costs in part stepped up because of your increase in wholly owned distribution. Last time you commented on this, in early March, you said that 8% of your U.S. volumes went through wholly owned distribution. Can you give us an update on that percentage? And to what extent has that benefited revenue per hectoliter in any way in North America?

Melissa, Brito here. What we can say is that with the Oregon and Oklahoma, the acquisitions, our WOD or our company-owned distributors, participation is growing. I don't have a number here to give it to you, but it's ahead of 8% for sure. And that increases -- likewise, when we acquire in Brazil, it's same thing, increases our cost of distribution. But also increases the net revenue per hectoliter. Our distribution costs in the U.S. were also affected by other things, mainly by Platinum. Platinum was much more successful than our initial plans, and because it's only produced in a few breweries, 3 out of 12, that, of course, has a huge implication in terms of getting product across the country. So, and of course, higher fuel costs, which we all know was higher at the pump. So when you take all these 3 things, that pretty much explain the increase in distribution cost for North America.

And just as a follow-up, can you quantify to what the impact of increasing WOD had on the 4.3% revenue per hectoliter?

No. We're not, at this point, giving that split. Sorry, Melissa.

Your next question comes from the line of Ian Shackleton with Nomura.

I was after a bit more color around Q1 in the U.S. because from what we can see, you obviously had some very strong shipments in January and February. And yet by the end of March, we got STWs and STRs moving into line. Was there pressure from wholesalers for them to stock down a bit? And equally, I suppose, I'm slightly surprised that you're still guiding to weaker shipments in Q2, given the fact that STWs and STRs are in line in Q1 now.

Ian, it's Brito here. I mean, the shipment patterns in the U.S. were in line, as I said, in Q1. We are guiding since last quarter for softer ones in Q2. And that's because in the past, we used to put a lot of emphasis in Q2, and that put a lot of pressure in our transportation costs. So since last year, we've been phasing [ph], every year, a bit differently the way we do on a quarterly basis and use the inventory in the system to counter that, so we can avoid having peaks of demand in terms of trucking capacity, when other companies are having similar demands for the summer ramp-up. So that's why we have this different shipment patterns. Since last year, we've been trying to manage that as opposed to just go with the peak in the second quarter.

But if you think about Q2, are you now suggesting that there will be further destockings throughout the industry with STWs weaker than STR? That seems to be the message I'm taking away today.

No. What happened, if you look at our -- of course, you didn't look at that -- but if you look internally at our inventory throughout our system, at the end of March, it's pretty much what we had last year. It's slightly above. But you're right, the January and February, it was, in a relevant way, above. But then March, we started balancing that. And by the end of March, we can say that it's pretty much in line with the inventory we had at the end of the first quarter last year. So this year and last year are pretty much in line.

If I'm allowed to just follow up quickly. Bud Light Platinum, how much of the growth there has been cannibalization of the existing Bud franchise, do you think?

Well, too early to quantify it. But early signs show that, of course, there is some cannibalization within our brands because we have an important presence in this market. So to be expected, although at a higher margin, so that's important. There's also volume being sourced from other beer brands. And I think more, importantly, from outside of beer categories, so all 3 are true.

Your next question comes from the line of Trevor Stirling with Sanford Bernstein. Trevor Stirling - Sanford C. Bernstein & Co., LLC., Research Division: First question is concerning, this may sound arcane, but the other operating income in Latin America North, we saw a big increase in that line in Q4 of last year. And this year was close to flat -- this quarter was close to flat. But I understand last time around was due to tax incentives in Brazil. Perhaps you can give us a little bit of color on why there was such a change in the monthly growth.

Well, last quarter, Trevor, this is Felipe, we reported a gains that were a link or 2 more than the one quarter as we were waiting for the startup of the plan in order to record that as per IFRS. So fourth quarter, and we mentioned that during the fourth quarter conference call, don't take that number as a new level and multiply times 4 for going forward. But nevertheless, that is what happened in the fourth quarter last year. The first quarter of this year over -- year-over-year, there is an increase of about $25 million for the company consolidated, which is coming primarily from APAC, which is also linked to fixed incentives as a result of our investments there. Trevor Stirling - Sanford C. Bernstein & Co., LLC., Research Division: A second follow-up question, again, related to Brazil. Brazil had just over 2% revenue per hectoliter this quarter. You've guided to broadly in line for the full year. Could you tell us what's likely to happen in the next quarters? Does that imply that you need -- or you will be taking further price increases relatively soon to catch up or that there was something in the fourth quarter, that tough comp is the hindrance and actually the underlying level of pricing sufficient to carry you through the year?

Well, it's Brito here, Trevor. What we guided is that for the year, net revenues per hectoliter will be in line with inflation. What we had in the first quarter was that the VAT, the value-added tax at the state level, this year, it was taken by the states on average earlier than last year. So it was a tough comp in that respect.

Your next question comes from the line of Anthony Bucalo with Santander.

There's been a lot talk about your expansion in the North and Northeast Brazil, but not a lot of detail, I guess. And would there be any chance you could give us some color on what's going on there in terms of distribution gains, brand strategies, market share and what the sort of the general goals of your business there are right now?

Well, Anthony, Tony, the growth in that region as we call it, an inner region, Northeast and North part of Brazil, is growing as, in the last 2 years, ahead of the country average. We now have a new brewery there, which of course, is giving us a break in terms of our logistic cost and making it viable for us to have more returnable presentations in that market. We continue to be very committed at any investment in that region because it has been a region, that not only for our industry, but also for other industries in Brazil, has made for bigger growth as compared to the other countries. So again, new footprint there enabling more of a package mix, regions growing ahead of the country, and we continue to see potential, further potential there.

Yes, if I remember correctly, per cap consumption was about 2/3 of the overall national consumption. Is that moving closer to the national average at this point?

I don't have the numbers here in front of me, but there is still a gap for sure in the per capita consumption. And that gap will remain there. We're closing it as the income of the population there goes up. But I mean, there's still a spread and that's what we're trying to take advantage. The people there have more money than they used to have and they are looking for more consumption of product. So we are in the sweet spot there in terms of offering what they're looking for.

Your next question comes from the line of Lauren Torres with HSBC.

Going back to the U.S. and seeing growth in sales to wholesales and sales to retailers. Brito, I was curious if you could talk a little bit about, just directionally, how the consumer's behaving? Obviously, you're benefiting from easy comps and product launches, but you had some positive comments about how the consumer's coming back a bit. I was curious either from a trade or brand perspective, if you could talk about where you're seeing that strength.

I mean, you do see in the economy is a bit better than it was before. But again, let's be frank here, I mean, the main thing for industry in the first quarter was really the weather. The weather was unseasonably warm for winter. And that, of course, benefited our industry and some others that are seasonal. So that was the first thing. Then the second thing, as I said, the economy, the consumer's feeling a bit better. You can see that in the on-premise. On-premise is up. And also the innovation. I mean, Bud Light Platinum was really a big relevant thing in the quarter, and it will continue to be for this year.

And I guess as a follow-up on the U.S. on the pricing side. You've taken the stance of following through with more pricing. And I was just curious, at this point, how do you feel with respect to your pricing initiatives, more room for pricing growth in the U.S.?

Well, I wouldn't give a guidance on pricing. But what I can say is that pricing is firm, and we feel good about it, as we felt in the last 3 years.

Your next question comes from the line of Gerard Rijk with ING.

A question on Latin America and North, about a little bit -- it seems to be a bit inconsistent, maybe you can explain. It's the growth in own distribution also in Latin America North Brazil, which should lead to higher net sales prices. We can see it back in higher distribution expenses. It seems to be a little bit not consistent. I understand, of course, the fact that you are a bit more, have been promotional maybe at Carnival, as you stated, but maybe you can explain that. And I understand also the VAT. Nevertheless, it seems to be a bit more pricing pressure. Or is it related to selling more low-priced beers in the North and Northeast?

Well, Gerard, as you know, there are lots of things that can impact our plan, and you mentioned a couple. But remember that last year, we said that this year, 2012, we will be looking for a better balance between volume and net revenues per hectoliter growth. And that's exactly what you saw in the first quarter. On the other hand, we also said that net revenues per hectoliter for the year would be in line with inflation and that the first quarter should not be taken as a reference for the rest of the year in terms of net revenue. So we settled that. And the other thing we said is that VAT came earlier this year in many important states, as compared to last year. So again, providing a tough comp. There is also some package and regional mix. But again, we're not giving at this point the whole breakdown. But you're right, all those things played a role, as well as increased direct distribution. So this is pretty much the -- I wouldn't take this quarter, but I would take the guidance for the year.

And how does Schincariol behave under the new owner, Kirin? Is there discipline in its -- in the way it's pricing? And how's your competitor...

We don't comment on competitors' pricing. What we can say is that, what we said back then, when they came to Brazil, is that we welcome, for sure, a new competitor, or a international company. That will come, bring new news, invest in brands and help us up-trade consumers. We think that's all great. We don't know exactly if that's what they're going to do in Brazil, but if we look at other markets where they operate, that's what -- it seems to be their profile. And we think that's great for the market, in general, and for the development of the premium segment and consumer trade-up in Brazil.

Your next question comes from the line of Andrew Holland with Societe Generale.

Can we just delve into the margin in Latin America North? As I look at the InBev results, beer Brazil was marginally up in margin. Overall, the region was slightly down as you reported. And I'm just wondering whether you could explain the difference there and what's behind that. And also as we look out to the rest of the year, and perhaps more importantly, as we look out towards the rest of the year, where would you expect the margin to go in Brazil? It was obviously depressed in the first quarter by the Carnival spending. Is that a timing issue? Or should we expect a lesser margin growth for the full year?

Well, if you look at beer Brazil, I mean, the margin was slightly up. Soft drinks was the one that margin was down in a more relevant way. But if you look at InBev more detailed press release that went out today, you'll see that EBITDA margins on the beer business Brazil went up from 51.8% to 52%, so 10 bps organic growth. So and again, in terms of our guidance, what we said is that -- revenue per hectoliter in Brazil should be in line for the full year with inflation, and that we'd have a more balanced approach between volume and price in Brazil than previous years. You remember last year, our volume was pretty much flat for the year. And net revenues were in the high-single digits. And this year, we wanted to have a better balance. And if should look at volumes in the first quarter, it was 4% up on beer in a market that went 3% up. So good news that the market is up, because last year it was not 3%, it was below that. And good news that we're up 4%, so gaining share, 70 basis points. So and again, I don't think you should look at one quarter, but more the guidance we gave in terms of volume and margin balance in Brazil and revenue per hectoliter in line with inflation for the full year.

Yes, no, it was the margin I was more interested in, and in particular, perhaps the impact of your new brewery in the north of the country, whether we should be expecting margin growth as a result of the opening...

Well, we don't give you the guidance. But again, if you go to Page 8 and 9 in the InBev press release, you'll see what happened to beer. Again, margin increase of 10 bps and soft drink with a margin decrease of 300 bps. So again, 2 different businesses, but beer is up.

Your next question comes from the line of Kris Kipers with Petercam.

I had a question on your Global Brands. We see that all brands are doing well, Budweiser and Stella. However, Beck's is doing a bit of peeling in the first quarter, minus 4%. And also if you look at your '11, with a increase of only 0.8%, it was a bit disappointing versus its other Global Brands or Focus Brands. So could you shed some light on that, what's happening? Of course, Germany was okay, but what's happening in the rest of the world? Is it temporal? Or is it an issue with cannibalization with other brands of ABI?

Well, Kris, we never hid the fact that in terms of our 3 global brands, our 2 top priorities is global Budweiser, our flagship brand, and Stella Artois for its unique positioning. So Beck's, of course, it's a great opportunity, but we do focus on the first 2. Beck's had, as you saw, very good performance in Germany, its home market. More of a softer performance in the U.S. and the U.K. In the U.K., again, our support is all for -- or mostly for Stella and Bud. In the, U.S., we even have some supply issues. But again, it's also not at the top of the Focus Brands. So the Focus Brands on the international side is really Bud and Stella.

Okay. And just as a follow-up, coming back to the pricing in Brazil, could you perhaps end the discussion and shed some light on what the impact of price would have been, excluding the VAT impact in Q1? That will be perhaps interesting.

Yes. No, we're not going to go there because, again, we're not providing a breakdown. All we can say is that this year, some important states came up with their VAT increases a bit earlier than they normally do, especially compared to last year. And that, of course, was not in our scenario and impacted the net of our price in the first quarter.

Your next question comes from the line of Alice Longley with Buckingham Research.

I have a couple of follow-up questions about the U.S. The volume was up 1%. Can you give us some feel for how much weather helped? And maybe the launch, the initial launch, helped more than it will later in the year. So in other words, if we took those 2 out, would the sustainable volume number be 0 or minus 1 or something like that?

Well, again, Alice, sorry, but we're not giving this breakdown. What we said is that the weather was a major factor for the industry, and therefore affected our volume in a positive way. Bud Light Platinum as you can see, I mean, 1.4% market share in 2 months and just with one primary pack. That's also pretty relevant for our volume growth. And it's also fair to say that the economy is improving. So all 3 factors, weather, innovation, economy, impacted our performance and the industry performance for this first quarter.

And a follow-up would be, as others have noted, STW and STRs were in line in the first quarter, which is a little bit of a surprise. But you're still saying that STWs will be weaker than STRs in the second quarter. And then will that be made up for later in the year? So will those 2 variables be in line for the year? Or are you going to be taking inventory out of the system for the whole year?

No. I mean, again, no guidance there. But what you can see from historical patterns is that STWs and STRs, on a yearly basis, they're pretty much the same.

And that will continue.

The delta is pretty much the same.

And then the last part of this is the revenue per hectoliter in the first quarter in the U.S. was stronger than I expected. Is that number a sustainable level, somewhere around 5% for the year?

Again, out of that, 151 basis points came from brand mix, Bud Light Platinum, consumer trading up from value. And that's something that we see as a consistent with our strategy of investing in a high-end portfolio. You saw in our release that we gained share in the high-end. Bud Light Platinum is also a core plus proposition, so higher margin than the Bud Light main brand. So all that is good in terms of net revenue, plus the growth in direct distribution. So that helped the net revenue in this quarter.

Your next question comes from the line of Mitch Collett with Goldman Sachs.

I just wondered if you could give us a feel for how material the impact of the earlier timing of Easter was and also the extra day this quarter? And I guess, specifically, whether the impact from those positive effects was different by region?

Well, I mean, the Easter impact was not really that relevant because, I mean, most of the activity will be captured in April anyway, even with the different timing. And the one day extra, it's a reality. But for the U.S., for example, in some markets we have SDA, sale day -- same-day adjusted sales numbers, as we've always had. But you're right, there was one more day in the quarter.

Your next question comes from the line of Simon Hales with Barclays.

On distribution expenses in Lat Am North, I wonder if you could just sort of talk a little bit more what drove up those expenses by a short 17%. I understand, obviously, you moved to increase direct distribution. But were there some double running costs in there as you were transitioning to distribution directly from the new brewery in the North? I'm just wondering how we should think about that line developing in the next 2 or 3 quarters.

Felipe here. Well, basically, there is a point you mentioned in terms of increasing direct distribution. But there is also higher transportation costs that are impacting this quarter more materially than the previous one.

And you would be expecting those to sort of sustain those high levels, would you, Felipe, in the next couple of quarters, given it's gasoline-led?

Well, we have a guidance, which is for the full year. And in the full year, we are looking for a mid-to-high, high single-digits number. This quarter it's implies a growth that is beyond that level, which should imply also our expectation for improvements during the rest of the year. But again, this, for the total ABI, we do not breakdown that result.

Brilliant. And can I just follow up with you, Felipe, on the whole issue of the tax charge. I was just wondering if you could just help me understand really what's driving it lower in 2012. I appreciate there's some geographic mix benefit, but I wouldn't have thought that's changed very much since you gave guidance on the tax rate back in March. Obviously, you're getting some of these one-off incremental tax benefits in Brazil. What are they? And why aren't they going to repeat as I look to 2013?

Well, the tax benefits in Brazil are linked to our investments. And as we continue to invest heavily in the country, you should see that more as a kind of multiyear impact. We had some shifts here and there for the first quarter. But anyway, first quarter was better than our expectation. Somehow, was more towards the optimistic scenario, which materialized, and that caused us to review the full year guidance, reducing to 19%, 21%, which is in sync with good results in the first quarter.

But from what you say, Felipe, we shouldn't really necessarily be expecting a return back to the longer-term tax rate in 2013 either, if you're still going to get some of those investment-related benefits next year.

Well, the longer term is longer term. We expect to gravitate towards that level over time. We do not expect a big bump that's -- therefore, your point is correct.

Your next question comes from the line of Jon Fell with Deutsche Bank.

I'm just going to -- well, ask another one on tax. So I'll follow on from Simon's. If I look at the tax rate that AmBev reported and then AB InBev, and try and work out what the tax rate of the non-AmBev part of your business is, then it looks like it dropped to an average of, say, 9% in the last 3 quarters versus approaching 30% the previous 2.5 years. And that can't be to do -- well, it'd be surprising it that was to do with Latin American tax breaks. So I'm just wondering if you can expand a bit more on the type of credits that are causing that reduction in tax rate? And can you give us any more help on what you would regard as the long term for the return to 25%, 27% territory? I see consensus for 2013 is still on about 24%. Are you comfortable with us having a number below long-term guidance for that year?

Well, we have a series of tax initiatives in many geographies, and I hope you appreciate the fact that we are not going to piecemeal our tax plan in a conference call. But in that event, you should focus more on the longer-term view, meaning the guidance for the full year and the fact that we are going to converge towards our long-range guidance over time. Specifically on 2013, it's still too early to say or provide guidance for that year, so I'm not going to comment on the 24% or whatever number. But I'm going to highlight, again, the point that, yes, if this year it should be between 19%, 21%, long term, 25%, 27%. We really do not see any reason why people should expect on an abrupt bump from 20% to 26% right away. So but again, too early to talk about 2013 yet or how long it's going to take for us to converge from the current level towards the long-range one.

Your next question comes from the line of Philip Morrisey with Berenberg Bank.

You highlighted that Budweiser in the quarter saw STRs decline 4.3%, but with brand health stable. And I wondered if you still felt that you were on track to stabilize the volume market share of that brand? And then secondly, I wondered if you might be able to update us, please, on the relationship with Modelo, how that's progressing? And in particular, whether you've yet started any discussions regarding the potential sharing of best practice between those 2 businesses?

Well, Philip, on Budweiser, the first quarter, as we said in our release, it was a lot based on Bud Light because of mainly 2 things. I mean, the whole NFL Super Bowl sponsorship, that drove the month of January. And then February and March, a lot based on Bud Light Platinum. So Budweiser now has a big spring-summer activation program. We mentioned, I mean, the Fold of Honors, the Major League Baseball special pack, the Red, White and Blue program that was so successful last year. So I mean, this next 2 quarters will be lots more in terms of support for the brand. So our long term continues to be brand stabilization. And as you know, in the last 2 years, we made great progress in that respect. And, but again, don't take one quarter, but what I'm telling you is that the next 2 quarters will have much more activity around Budweiser. And in terms of Modelo, we're very happy to be a part of that company, very successful business, built a great company, great brand. We respect them a lot. We have -- we're developing a relationship with them. We have our participation at the board, and we're very happy to be partners, so that's all I can say.

Your next question comes from the line of Caroline Levy with CLSA. Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division: Just wondering if you can talk about the price gains, price mix gains, in both Latin America South, which is up -- to be up almost 21%, and Central and Eastern Europe, up 12%, and just break those out a little bit. And how sustainable is that?

Well, Latin American South, you know that half of our business or a similar percentage comes from Argentina. And in that country, of course, profitability or inflation is very high. So that's something that you should account for when you look at the pricing in LAS. And Central, Eastern Europe, yes, we took a more aggressive stand price-wise in the last 6 months, especially, with some consequence in terms of volume. But we felt it was the right strategy for us in terms of premiumizing and also passing through taxes and cost pressures to consumer. Caroline S. Levy - Credit Agricole Securities (USA) Inc., Research Division: So nothing unsustainable there, that's a reasonable...

Well, again, we're not giving guidance in terms of specific regions on pricing. Sorry.

Your next question comes from the line of Andre Pistacchi with Citi.

I have a question delving a bit into the mix benefit that you had in the U.S. Clearly, 150 basis points in the quarter was substantially better than what you've had, than what you've achieved in the last couple of years. So I was wondering whether all this incremental mix is coming from -- if it's the Platinum effect or whether there's something else we should be aware of, maybe some Platinum pipeline effect? Therefore, how we should think of this going forward. And the second question is, this is sort of a follow-up, is just really an update on Brazil. If you have the latest or your thoughts on the situation with the federal excise tax there, please.

In terms of the 151 basis points coming from brand mix, it's not only Bud Light Platinum but also the high-end share growth within that segment that we experienced. And that's not new. I mean, we've been gaining share in the high end for the last, past 2 years, and with the Shock Top, Stella and other high-end brands of ours, like Goose and so on. Leffe, for example, we mentioned this time around as well, 40% growth, and 20% in Goose. So those 2 made up the 151 basis points. And that's something that -- we think we have momentum on both initiatives. Your second question was on taxes in Brazil. I mean, we're not going to speculate.

Federal taxes, yes.

Yes. Federal taxes, yes. We're not going to speculate on that, but -- and we'll wait to see what regulators will come up with in terms of taxes, if any. I mean, it's not every year, as you know. In the last 3 years we've had 1 year without the increase, then 2 years with increase, so it depends on the year.

One -- sorry, one just follow-up on the first question. Yes, the 150 in this quarter, I mean, you were averaging something around 20 to 50 basis points in previous quarters. So the incremental mix that you got in this quarter, will that all be or mostly attributable to Platinum?

I mean, Platinum had a very important participation. Again, we're not breaking down specific numbers on that 151, but you can infer that Platinum had a big influence on that.

Your next question comes from the line of Olivier Delahousse with Natixis.

I had -- just a question regarding...

Can you speak a bit louder, please, Olivier?

Sorry. I was wondering if you could provide some flavor on the potential impact for AB InBev of the StarBev disposal by the previous owners. I understand there were some kind of earnout agreement. And I was wondering if, at this stage, you already had a picture of what kind of impact you could get? Because I understand it could go up to something like USD $800 million.

We have some more earnout clauses. And at the moment, we cannot anticipate how relevant that might be, given the confidentiality around the clause, and the deal is still underway. And formally [ph], there is not much we can comment on it.

In that case, can you provide us with some kind of idea of the date at which this information would be available?

Well, it's not totally under our control. The deal is closing and we have to better understand the structure and see how that could impact our contract. So it's very hard for me to speculate on that, but as soon as practical, if able, we're going to add to our normal disclosure as we report quarterly results, assuming the potentially low materiality. And if different, so -- we will report otherwise in the form of a press release. But hard to speculate on a date.

Ladies and gentlemen, we have reached the allotted time for questions. Our final question comes from Brett Cooper with Consumer Edge Research.

Just a quick question on Brazil. Can you give your relative performance in the premium segment? And I guess what I was trying to understand is whether your share gains are greater in premium than they were for the overall.

The share gains in Brazil, you mean?

In the premium segment within Brazil. Was it greater than the 70 basis points that you did overall?

Well, we didn't give that number. But I mean, what happened is that with the growth of Budweiser and Stella, that were ahead of our overall growth, I mean the -- it was an important gain. But again, the premium segment in Brazil is very small compared to the other segments. So, I mean, the -- most of the share gains came really, in terms of nominal basis, from the 3 main brands of Brahma, Antarctica, Skol. But again, Stella and Bud helped as well. But of course, given the size of the import segment or the special segment, high-end segment, in a more -- in a small way.

Our final question comes from Thomas Russo with Gardner, Russo & Gardner.

In China, you mentioned that the volumes were up overall 3.2% and that your 3 premium had volumes up 3x that amount.

That's right.

And that they represented 75% of the market total. So if you play around with the numbers, it would suggest that the other brands, the 25% that aren't premium, may be have been down as much as 15% in the quarter. And it also would help explain considerably how your revenue per hectoliter grew so remarkably at 9% plus. What is going on in the other 25% that might account for that type of a derived decline if those numbers are correct?

No, you're right. I mean, good point, Thomas, and most of that comes from joint ventures that we don't control, but they are consolidating our own [ph] numbers. And so that's part of the problem. So those ventures are down volume-wise, and that explains the -- part of it.

And they might have quite considerably reduced revenue per hectoliter as well?

Yes. Because they don't sell premium brands. They sell more the core and core-and-below brands. The problem, Thomas, with those joint ventures is that they share control. We have less control and therefore, sometimes it's even harder to get them to accept to introduce Budweiser in their market, for example, Harbin Ice, which are doing very well because they want to continue to promote their own local brands. So, I mean, it's not a place where we have total alignment, let's put it this way, in terms of brand portfolio, and that takes its toll.

I'd now I like to turn the floor back over to Mr. Carlos Brito for any additional or closing remarks.

Okay. Well, thank you very much for your participation, your questions, and have a great day. We'll see you next quarter. All the best. Bye-bye.

Thank you. This does conclude today's teleconference and webcast. Please disconnect your lines at this time, and have a wonderful day.