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Operator: Welcome to AB InBev’s Second Quarter 2024 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. Michel Doukeris, Chief Executive Officer, and Mr. Fernando Tennenbaum, Chief Financial Officer. To access the slides accompanying today’s call, please visit AB InBev’s website at www.ab-inbev.com and click on the Investors tab and the Reports and Results Centers page. Today’s webcast will be available for on-demand playback later today. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [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 management’s current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For discussion of some of the risks and important factors that could affect AB InBev’s future results, see Risk Factors in the company’s latest annual report on Form 20-F filed with the Securities and Exchange Commission on the 11th of March 2024. AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information.

It is now my pleasure to turn the floor over to Mr. Michel Doukeris. Sir, you may begin.

Michel Doukeris : Thank you and welcome everyone to our second quarter 2024 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our second quarter operating highlights and provide you with an update on the progress we have made in executing our strategic priorities. After that, we’ll be happy to answer your questions. Let’s start with our operating performance and the key highlights for the quarter. We are encouraged by the continued global momentum of our business and our performance in the first half of the year. Our megabrands continue to lead our growth this quarter and drove market share gains in the majority of our markets in the first half of the year. This marketplace continues to expand, delivering $530 million in gross merchandising value of non-ABI products, a 55% increase versus last year.

By increasing our total addressable market, this marketplace is driving incremental profitable revenue streams for our business and we are just getting started on the potential opportunities for growth. EBITDA increased by 10.2% with margin expansion in all five operating regions. As we continue to optimize our business, underlying dollar EPS grew by 25%. We remain focused on the execution of our strategy, leveraging our unique opportunities this summer to activate the category. Turning to Slide six, you can see that total revenue grew by 2.7% this quarter, with revenue per hectoliter increasing by 3.6%. Volume growth in our Middle Americas, South America, Europe and Africa regions was primarily offset by performance in Argentina and China, resulting in an overall volume decline of 0.8%.

Underlying EPS was $0.09, a 25% increase versus last year. Net leveraged improved year-over-year to 3.42 times. As we noted at our full year ’23 results for 2024, the definition of organic growth in Argentina has been amended to cap the price growth to a maximum of 26.8% year-over-year. Our global momentum continued this quarter with revenue growth in more than 65% of our markets. Bottom line increases in four of our five operating regions and margin expansion in all five regions. Our scale and diverse geographic footprint has been driving consistent results and has us well placed to deliver superior long-term value creation. Now, I’ll take a few minutes to walk you through the operational highlights for the quarter from our key regions, starting with North America.

In the U.S., the beer industry remained resilient, gaining share of total alcohol by value in the off-premise. Our beer market share was flattish as we cycled a challenge comparable in April, while we gained volume share of the industry in May and June. Our improved market share trend, ongoing premiumization and productivity initiatives drove EBITDA growth of 17.5% with a margin improvement of approximately 500 bps. The rebalancing of our portfolio for growth continued with 45% of our revenues now coming from our above core beer and beyond beer portfolio. Now, moving to Middle Americas. In Mexico, we outperformed the industry with our volumes growing by mid-single digits driven by the continued strong performance of our core portfolio. We grew revenue by mid-single digits and EBITDA by double digits with margin expansion.

In Colombia, our business delivered double digit top and bottom line growth with margin expansion. Volumes grew by low single digits to reach a new record high for the quarter with our portfolio continuing to gain share of total alcohol. Our premium and super premium brands led our performance delivering high 20s volume growth. In South America, our business in Brazil delivered high single digit top line and double digit bottom line growth with margin expansion of 469 basis points. Volumes increased by 4.1% to reach a new record high for the second quarter. Our performance was led by our premium and super premium brands which delivered volume growth in the low teens. Now, let’s talk about EMEA. In Europe, we grew bottom line by high single digits with further margin recovery.

Volumes grew by low single digits outperforming the industry according to our estimates. Our portfolio continues to premiumize with our premium and super premium portfolio now making up approximately 57% of our revenue. In South Africa, we again delivered record high second quarter volumes, double digit top and bottom line growth with margin expansion. Volumes increased by mid-single digits continue to outperform the industry in both beer and total alcohol. Our performance was driven by our above core beer brands which grew volumes by double digits led by Corona and Stellar Artois. In APAC, in China, our performance was impacted by a soft industry which cycled channel reopening in the second quarter of last year and adverse weather in key regions of our footprint.

As a result, revenue declined by 15.2% this quarter. While the industry has had a challenging start to the year, we continue to invest behind our strategy, focused on premiumization, geographic expansion and digital transformation. We remain confident that we are well positioned to capture the future growth opportunities, given the consumer demand for our premium and super premium brands and our unwavering commitment to invest for the long term. Now let’s discuss our strategic pillars. Let’s start with pillar one of our strategy, lead and grow the category. We continue to invest in our megabrands, mega platforms and brand building capabilities. In the first half of the year, we invested approximately $3.5 billion in sales and marketing and have averaged more than $7 billion on an annualized basis over the last five years.

Our marketing effectiveness and creativity were recognized by being named the most effective marketer in the world and being the most awarded beverage company at Cannes. These consistent investments in our brands are reinforcing the strength of our portfolio. According to Kantar BrandZ, we own eight of the top 10 most valuable beer brands in the world, with Corona the number one and Budweiser the number two. I would like to express my appreciation to our consumers, thank our partners and congratulate our teams for these remarkable achievements. This focused portfolio of megabrands, which are the top three to five brands in each market, make up the majority of our volume to-date and are expected to drive our growth going forward. While the overall performance of our above core portfolio was constrained by performance in China, our megabrands continue to lead our growth this quarter, increasing net revenue by 3.3% led by Corona, which grew revenue by 5.6% outside of Mexico.

Through the consistent execution of our replicable growth drivers and our five category expansion levers, we are leading and growing the category by offering superior corporate positions, developing new consumption occasions and expanding our premium and beyond beer portfolios. Now let’s turn to our second strategic pillar, digitize and monetize our ecosystem. These continue to expand usage and reach, capturing approximately $11.7 billion in gross merchandising value, a 20% increase year-over-year and reaching 3.8 million monthly active users. Customer satisfaction improved with our net promoter score improving to plus 64. This marketplace continues to accelerate, generating 8.3 million orders of non-ABI products and delivering $530 million in GMV this quarter, an increase of 55% versus last year.

Now let’s talk about our direct relationship with our consumers. Through our digital direct-to-consumer platforms, we generated approximately 19 million unique orders and 10% revenue growth this quarter. That’s 19 million data points to generate deep consumer insights, develop new consumption occasions and drive incremental revenue for our business. With that, I would like to hand it over to Fernando, to discuss the third pillar of our strategy, optimize our business. Fernando, over to you.

Fernando Tennenbaum : Thank you, Michel. Good morning, good afternoon everyone. First, let me share how we have progressed on some of our 2025 sustainability goals in the first half of 2024. In climate action, we reduced Scopes 1 and 2 emissions per hectoliter of production by 4% year-over-year. In water stewardship, our water use efficiency ratio improved to 2.5 hectoliters per hectoliter versus 2.54 in the first half of 2023, progressing towards our ambition to reach 2.5 on an annualized basis by 2025. Moving to our financial performance, our EBITDA margin improved by 236 basis points this quarter, with margin expansion in all five of our operating regions. Our leadership advantages, discipline revenue management, continued premiumization and efficient operating model create an opportunity for further margin expansion over time.

As we continue to focus on optimizing our business, in the first six months of this year, we improved our free cash flow versus the first half of last year by $1.4 billion through driving revenue growth and margin expansion, reducing our net finance costs to the leveraging, optimizing our net working capital through more efficient inventory management, and improving the efficiency of our CapEx through discipline resource allocation. With improved free cash flow generation, we made progress on our deleveraging journey through both net debt reduction and dollar EBITDA growth. Our net debt to EBITDA ratio reached 3.42 times, an improvement from 3.7 times year-over-year, even with an increased dividend and completion of our $1 billion share buyback program.

As you can see on the next page, in the first half of the year, we continue to actively manage our bond portfolio. Our debt maturity remained well distributed, with no relevant medium-term refinancing needs. To-date, we have approximately $3 billion worth of bonds maturing through 2026, a weighted average maturity of 14 years and no financial covenants. 99% of our bonds have a fixed rate, insulated from interest rate volatility and inflation. And now, let me take you through the drivers of our underlying EPS this quarter. We delivered EPS of $0.90 per share, a 25% increase versus last year. Nominal EBITDA growth accounted for a $0.21 per share increase. Gross debt reduction, combined with proactive cash flow management, resulted in lower net interest expenses, which contributed a $0.03 per share increase.

With that, I would like to hand it back to Michel for some final comments before we start our Q&A session. Michel?

Michel Doukeris : Thanks, Fernando. Before opening for Q&A, I would like to take a moment to recap on the quarter and look ahead at the unique opportunities that our megabrands have to activate the category in the second half. We continue to make progress in executing across each of our three strategic pillars. Driven by the continued momentum of our megabrands, we delivered revenue growth in 65% of our markets. We progressed our digital transformation, generating approximately $11.7 billion of GMV through BEES, with $530 million in GMV of third-party products through BEES marketplace. EBITDA grew by 10.2%, with 236 basis points of margin expansion. As we continue to optimize our business, underlying EPS increased by 25% in the second quarter, and free cash flow improved by $1.4 billion versus the first half of 2023.

Looking ahead to the rest of the year, we are uniquely positioned to activate the category. The combination of our megabrands with key global platforms that consumers love and that bring people together is a powerful opportunity to lead and grow the category. From the Olympics to NFL and UFC, we will be focused on doing what we do best, connecting with our consumers, and bringing to life our purpose of creating a future with more cheers. We have a resiliency strategy, which like beer, works for all occasions. The beer category is large and growing, and our unique global leadership advantage, implementation of our replicable growth toolkits, and our superior profitability position us well to take advantage of the opportunities ahead of us and to generate value for our stakeholders.

With that, I’ll hand it back to the operator for the Q&A.

Operator: Our first question is coming from Edward Mundy with Jefferies. Please proceed with your question.

Edward Mundy : Afternoon, Michel. Afternoon, Fernando. I’ve got one question, one follow-up. The first is for Fernando, it’s very encouraging to see the sequential margin improvement coming through this quarter. Does this give you confidence that margin recovery is not just a 2024 one-off phenomenon but something that can sustainably come over the next coming years? And if this is the case, do you think the drivers are more at the gross margin level or at the SG&A level? That’s the first question. The follow-up, perhaps for Michel, you showed us in Mexico the importance of BEES in improving execution and consistency of delivery. I’d love to understand if you didn’t have BEES, what are the two or three things from an execution standpoint on the core beer business that you wouldn’t be able to do? What would you really miss if you didn’t have BEES?

Fernando Tennenbaum: Hello, Ed. Fernando here. Thanks for your question. So you pointed very well that in Q2, our margin improved by 236 basis points and improved in five out of our five operating regions. And if you remember, already in Q1, we have a margin expanding. Our margin expanded by like 90 basis points, but it was in four of our five operating regions. So definitely in Q2, an improvement on that. We don’t provide any specific outlook or guidance on margins, but we’ve been saying over and over again that the EBITDA margin contraction that we’ve seen over the last several years was driven by variable cost escalations, and it’s mostly explained by transactional effects and commodity prices, the very high commodity prices that went way above CPI in most of our markets.

And we said also several times that none of these headwinds are structural, and the fundamental drivers of our industry leading margins, they remain intact. We have our iconic megabrands, we have a unique global footprint, we have meaningful leadership positions, we have a very efficient operating model, and we have a financial discipline and ownership culture. We continue to control what we can control, but maybe to add something to your question, if you look historically, you see that our SG&A, if anything, is being flattish improving as a percentage of net revenues, and all the margin contraction we’ve been seeing over the last few years was at the gross profit level. We continue to work, we continue to work in SG&A as well, but probably if you look going forward, you should be looking at more changes in the gross profit level than kind of from the SG&A, which is similar to historical behavior.

Michel?

Michel Doukeris : Hi Ed, good afternoon. Maybe just taking the first question opportunity instead of good morning, good afternoon to everybody, say cheers to everybody, because today is International Beer Day, so depending on your time zone, please remember to drink one at the end of the day, so cheers. And addressing your question on this, of course I prefer to talk much more about what we are doing, since we have this, but it’s an intriguing question on things that perhaps would not happen if we would not have this operating system today. So this is a product that our customers use, but for us it’s a kind of operating system. And maybe very quickly, I think that one, we are today much better at communicating with our points of sales and measuring and EPS, like the satisfaction with our service, because we can do this online every week and the customer directly inputs their satisfaction on the system, we consolidate this at global level.

Today 3.8 million customers are connected on this and we know very well how satisfied they are with our service. So direct communication and a very good feedback loop, so they can give feedback for us all the time. I also think that the second important development is our ability to personalize sales proposals that are both, like they are individual sales propositions for our customers one-to-one, but they also benefit from the massive amount of data that we have, so we can group customers by geography, by size, by their profile, their proximity to sports events, the regions where they are and personalize the sales proposal for us. You know that today 75% of the orders are orders generated by machine learning, so neither us nor the customer is creating the order, the customer is just accepting the sales proposal that he receives in a very efficient way, very productive way.

And maybe the last, just to give three, I think that we’ve been optimizing our promotional activities at a very large scale with the ability to be all-to-all-to-see, so we go online, offline to consumer when we gather the data of our direct-to-consumer platforms, these, our brands, and we activate the campaigns in an integrated way to the box, to the consumers, and using approachment [ph] or ring fencing areas in which we can get a much more efficient way to spend our dollars and either create more sales or having a better revenue management, like three shots very quickly, communication with the box, personalization of the sales proposal, and optimization of our campaigns. Thank you for the question.

Edward Mundy: Very good, thank you.

Operator: Thank you. Our next question is coming from Rob Ottenstein with Evercore ISI. Please proceed with your question.

Rob Ottenstein : Great. So, Michel, Fernando, cheers. Nice quarter. Wondering if you could go into a bit more detail on the U.S. business, maybe starting with how the U.S. beer market developed throughout the year, through Q2 into July maybe, then as that’s all happening, what progress you’ve made in rebalancing your portfolio, any goals along those lines for the second half of the year, and then, lastly, as you’re doing all this, how have you adjusted your cost base and your investment priorities? Thank you.

Michel Doukeris: Hi, Robert. Michelle here. Thanks for the question. Good morning. Thank you for waking up very early there to be with us. So, I think that the industry, to start with the first part of your question in the U.S., remains very resilient. In the quarter two, we saw, despite of the overall weather impact in alcoholic beverages and beverages in total, beer performed well ahead of the competitors in terms of wine and spirits, so gaining share of growth in the off-trade, in the data that we saw on Cercana, but as you see the other companies releasing results as well, it’s clear that beer is a little bit ahead of the other propositions. When we think about rebalancing our portfolio is where we continue to invest to the long term, so very clear direction, and we saw that our portfolio above core continues to grow, so it takes like close to 2% more revenues, around 45.5% this quarter, and we continue to grow brands such as Michelob ULTRA, Kona, Stella, but also our beyond beer propositions, such as Nutrl and Cutwater.

When you combine the two, we are now 1.5% of the spirits industry, but we delivered close to 20% of all the growth that happened in the spirits in the half one of the year, according to the data in Cercana. And I think that we are, we’ve shared in the quarter’s table, and you have the public data, so April was still below last year, but growing positive in May and June. We got Michelob ULTRA, we got Busch Light, both close to all-time high share on the three months and closing the quarter amongst the top three brands in growth and both reaching all-time high share in market share. And we continue to invest on these mega platforms in which we can get very large execution together with our wholesalers. That was true when we think about Copa America that happened more at the beginning of the quarter and now with the Team USA and Michelob ULTRA in the U.S., very strong execution which we expect to see results continue to build for the brand.

As you then go from the end of the quarter that was tough June in terms of weather to July, you start seeing some improvements. The first weeks of July were much better and I think that you have of course the impact of the fourth of July but also you see that the weather changed very quickly in July in the U.S. and we’ve been seeing good sales, good STRs coming out of that and good turnover in the box so sales to consumer also doing well. In terms of productivity, this is a never-ending game, so we are happy so far with what we’ve been doing but much more to be done there. Thanks for the question.

Operator: Thank you. Our next question is coming from the line of Sanjeet Aujla with UBS. Please proceed with your question.

Sanjeet Aujla : Hi Michel, Fernando, a couple from me please. Firstly, on China, can you just give us a sense of how you’re thinking about the outlook there particularly going into Q3? I think you start to lap some of the industry weakness so I’d love to gauge your confidence levels on getting back to volume growth in China in the back half of the year and then just picking up again on the U.S. productivity measures you referenced there, there’s still much more to be done Michel. Is a sort of 9% SG&A decline we saw in Q2 a good way to think about the back half of the year there? Thank you.

Michel Doukeris: Hi Sanjeet, thanks for the question. I think that on China first, we have discussed this when we were together last time and if you look at last year was really like a tale of two stories in China. The first half of the year a lot of excitement about the reopening, one would say almost like the euphoria that we saw in many countries after COVID and the first half of the year was strong and the second half of the year was less exciting, let’s say in a word, more concerning in terms of the overall economy and consumer sentiment. So you’re right when you say that it looks like easier comps in the half two. I think that what we saw this year, first half was a kind of a continuation of the second half of last year with a more normal CNY [ph] at the beginning of February but then some drop and many categories not only beer feeling this economic pressure after CNY.

I think that the second half of this year will follow a little bit this logic which is easier comps. I don’t think that much better outcomes but easier comps definitely and I think that we will need to have more data and see more on the second half of the year to know when volumes in the industry will start to turn in China and then have a more normal comp, let’s say for next year. While on our side, focusing on what we control, we continue to invest to the long term. Our brands are very healthy, consumer demand for premium, super premium brands remain a strong driver for the long term and we are committed to continue to operate and invest with the eyes on the long term in China. Talking about the U.S. productivity, when I talk about productivity, I talk in general.

Of course there is always more to do and we have this DNA of optimization, continuous improvement in our operations and in the U.S. because of the disruption last year. Of course we are doing many things at the same time, this year more normal, so we are focused on continuing to get the productivity in place and optimize our business without many more guidance for the long term because we don’t give any specific guidance by market in terms of overheads or SG&A.

Sanjeet Aujla: Thank you.

Operator: Thank you. Our next question is coming from the line of Olivier Nicolai with Goldman Sachs. Please proceed with your question.

Olivier Nicolai : Good afternoon Michel, Fernando. Two questions please. I mean actually one question first on marketing. You showed in the slide that marketing spend is roughly $7.2 billion. It’s been constant for the last five years but obviously down as a percentage of sales. Now you did flag the effectiveness of your marketing and we can see that in terms of your market share gain in many regions but as you push premium more going forward, should we expect marketing spend as a percentage of sales to essentially to grow ahead of net sales? So to go back up to the previous years which was more around 14%. And then just a follow-up on the previous questions about margins. How concerned should we be about the weakening of the Brazilian real and the Mexican peso and the potential negative transactional effects which could impact your payment next year? And is there a way for you to mitigate that? Thank you. Cheers.

Michel Doukeris: Cheers. Thank you Olivier. I’ll take the first one maybe Fernando take the second. I think that in terms of marketing we discussed this a couple of times before and we’ve been consistently investing around $7 billion in sales and marketing activities and we of course don’t lack resources and its high priority on our capital allocation invest for the long term and invest for organic growth. I always say that many metrics that we use to check the business for example sales and marketing as percentage of net revenue they are good metrics. They cannot dictate what we do and how we allocate resources. So we are happy one with the amount of resources we have, two we don’t lack resources, three we’ve been using this in a very effective way as you described growing revenues in 65% of our markets, market share gains in the majority of the markets and creativity boosting the quality of the investments but also as I many times talked about before the usage of digital both BEES for TaDa and Ze Delivery they are helping us to increase the effectiveness of our marketing.

When we combine this with the ability to have our megabrands so a portfolio that we’ve been very selective in invest behind because of their scale and how effective this portfolio is with the mega platforms that we have globally. Just think about Copa America that was activated throughout Americas in most of our key markets and now Olympics globally activated in 42 countries. This gives us leverage and scale that makes our investment more effective. So happy with the amount of investment, no lack of resources and always working to be more effective and more productive by using our megabrands, using our technology platforms and using our mega platforms as a way to get more scale on our activations. I’ll hand it over to Fernando to talk more about the margins now.

Thank you for the question.

Fernando Tennenbaum: Hello Olivier, thanks for your question. We don’t tend to provide any specific outlook on costs. What we can say is that over the last few years it’s been quite volatile. We had several years which cost was effect and commodities was a big headwind. Probably for 2024 it’s more of a tailwind and we talked about it. When you look at 2025 we are still in the process of putting the hedges in places. But you know that kind of the recent devaluation took place in June. So it’s going to have different impacts. We are still building the positions. It’s too early to say. But if you look at markets today, I think it looks more like an ordinary year rather than a kind of massive swings like we had in the past. But again, too early to say. I think we need to wait a little bit more and see how things evolve.

Olivier Nicolai: Thank you very much.

Operator: Thank you. Our next question is coming from the line of Andrea Pistacchi with Bank of America. Please proceed with your question.

Andrea Pistacchi: Yes. Hi, Michel. Fernando, thanks for the question. Two, please, including the follow up. So the first one is about how you’re thinking about the outlook. You’re confirming your 4% to 8% EBITDA guidance. You’ve delivered very close to 8% in the first half. The comparison base will be easier in the second half. And there’s clearly good momentum in large parts of the business. So what do you see as the main areas of uncertainty or risks in the business that would hold you back from a continued good performance in the second half? And then the follow up is on, we haven’t talked about Brazil yet, the environment there. There’s been a lot of discussion about Petropolis coming back, the pricing environment. Yet you’ve had another very solid quarter on volume.

Your pricing improved too. So can you maybe give some perspective on what you’re seeing in Brazil via the health of the consumer, whether you’re actually seeing a more competitive pricing environment or not, and how you’re responding, adapting to that Thank you.

Fernando Tennenbaum: Hi, Andrea. Fernando here. Let me take the first question on outlook. It’s always helpful to remember the context to which we provided our outlook. When we had our Investor Day in 2021, it was important for us as we’re moving from an inorganic strategy to an organic strategy, it was important to provide some kind of certainty that we’ll be able to grow organically on a consistent basis at 4% to 8%. And this would create value despite the kind of investments that you have to do to lead and grow the beer category, to advance our digital transformation. So it was an important kind of direction so we can provide investors and analysts. We don’t like to be updating and adjusting this number on a quarter by quarter.

I think this is more of a medium term outlook. Every quarter is going to be different. Some quarters are going to be easier. Some quarters are going to be more challenging. We can say that we are confident in the ability of the business to deliver this 4% to 8% long term, but don’t expect us to be kind of adjusting the outlook every quarter or to be commenting on what we need to take on the top of the quarter, on the bottom of the quarter. I don’t think this is productive.

Michel Doukeris: Andrea, Michel here. I’ll take the second question on Brazil. Every time that I talk about Brazil, I always try to bring a little bit of the perspective. So if you allow me to step back for a second, Brazil is forever a very competitive market. And this market competition has been going on for many, many years. And when you think with this perspective of time, I see today the industry in Brazil is structurally better. So there is more competition on the premium core plus side of the industry with players going on the right place in terms of investment on their brands. I think that, of course, when you are after consumers, it’s all about your value proposition to consumers and your ability to sustain this value proposition over time.

The structure of the market being better, you look at our portfolio today in Brazil, it’s very strong, is as good as never before, where we have this powerful combination of physical brands. So very good brands from Brahma, Spaten, Stellar Artois, Budweiser, Corona in the super premium, but also the digital brands with BEES and Ze Delivery, which has a massive coverage and penetration in Brazil and allows us to have very good consumer insights and being very quickly in adjusting the way we go with our go to market and route to consumer in Brazil. And at the end of the day, when you look at this portfolio we have today in Brazil, we are less exposed to the value segment, where I think that your question is about, and you see more activity, even though if you look at the relative price by segment and across the segments, there is no meaningful change in the last months and quarters in Brazil.

So the relative price by segment and within the segments remains somehow the same, more competition on the bottom end, where we have less exposure. And while we have a very strong momentum gaining share on the premium, super premium and growing our business with the strong value proposition we have for consumers in the overall market.

Andrea Pistacchi: Thank you. Very clear on both.

Operator: Thank you. Our next question is coming from the line of Chris Pitcher with Redburn. Please proceed with your question.

Chris Pitcher: Thank you very much, everyone. A question on South Africa, where in the beer market you appear to have had a very strong quarter. Can you talk about how much you’ve invested in your commercial execution there in terms of salespeople and marketing, particularly at the premium end, where the portfolio really seems to be working? Thanks so much.

Fernando Tennenbaum: Hi, Chris. Thanks for the question. And maybe if we just take this a little bit up on the answer first. We have a great portfolio in South Africa, and we continue to see a very strong consumer demand for our brand being on the mainstream, on the premium segment and on the beyond beer segment. So we are growing across all segments. And we’ve been investing, of course, across the whole portfolio to make sure that, again, this value proposition for the consumers is being delivered across the different brands that we have from Carling, Black Label, to Stella Artois, to Corona, to Brutal Fruit, to Flying Fish. And consumers are responding because those are great brands, great liquids, and the execution that our team is putting in place on the trade is being also justifying the momentum that we have behind the business there.

And we will continue to invest for the long term. It’s a great market, a lot of opportunities to premiumize and gain share in the premium, to elevate and gain share in the beyond beer space, which is happening in the last few quarters. So we continue to invest for the long term there. Thank you.

Operator: Thank you. Our next question is coming from the line of Lawrence Wyatt with Barclays. Please proceed with your question.

Laurence Whyatt : Cheers to Michel and Fernando. Thanks very much for the question. I guess a long-term one in two parts for me. The U.S. consumer has seen quite a lot of per capita consumption, the growth of alcohol over the past few decades. But that’s sort of come unstuck over the past few years, sort of since the middle of the pandemic. We’ve seen a decline in total beverage alcohol consumption per capita in the U.S. I’m just wondering if you think there’s any structural reasons behind why that might peak or is there any reason why we shouldn’t go back to that sort of gradual growth of TBA consumption per capita in the U.S. And I guess kind of linked to that, do you have any strong reasons as to why American consumers drink less alcohol per capita than some of their Western European counterparts, given the cultural similarities between the various countries in Western Europe and the U.S.? Thank you.

Michel Doukeris: Hi, Lawrence. Michel here. Cheers. I think that in the U.S. we saw during the pandemic a growth in the alcohol per capita and a lot through the pandemic because of different occasions at home. I think that the industry in the U.S. is growing value over the years. And if you go much longer in terms of the analysis than just like one year or two years, you see that there is different developments over time. There was a time in which beer was growing more, then growing less, then coming back to growth, then growing a little bit less, then accelerating again with the seltzers. So I think that the industry is moving in a good direction. And even if you look inside the U.S., as in many other countries or regions, you see that there are differences that are regional differences.

So the U.S. is just too big for us to compare the average of the U.S. with some countries in Europe. We have some of these benchmarks, and you see some countries that are at the top of the benchmark, some countries that are more in the mid-range. I don’t have a very good answer, to be honest, on why some of these countries have much higher or less consumption. But the U.S. is quite developed. We see some good premiumization in the industry. We see beer in terms of dollars consistently growing. And now in the last quarters, we see beer gaining share of value. And we see that when you combine with the RTDs, there is a very good momentum there for the brewers in terms of capturing volume and dollars in the industry. But we might come back to you, one of these days, to have a deeper conversation around European countries, Asian countries, and the differences in terms of occasion and consumption.

That is a good question. Thank you.

Laurence Whyatt: Appreciate it. Thank you very much.

Operator: Thank you. Our next question is coming from the line of Mitch Collett with Deutsche Bank. Please proceed with your question.

Mitch Collett : Thank you. Hi, Michel. Hi, Fernando. Hi, Sean. I know you’ve already talked about some of these markets, but three of your bigger markets, Brazil, Colombia, and also South Africa, achieved record volumes for a Q2 this quarter. So I just wondered, is there a common reason why those three markets are achieving new highs? And then my unrelated follow-up is you had negative revenue per hectoliter in Europe, which I think you say in the release is due to a combination of negative geographic mix and the phasing of promotional activities. Can you talk about those two components and whether you expect that pressure on revenue per hectoliter to persist? Thank you.

Michel Doukeris: Hi, Mitch. Good afternoon. Thank you for the question. So starting first with Brazil, Colombia, South Africa, common knowledge or common places in terms of growth and record high volumes. So we discussed this before and we shared with you. I think we have a resilient strategy, which like beer is working well in many occasions. And as we continue to execute this strategy and having our replicable toolkits being executed and perfected in the market, we aim to lead but also grow the industry. And I think that these three markets that you just mentioned are a good representation of these toolkits working and working at scale. So when you think about the megabrands, the mega platforms, the digital products, they are all present in these markets and they’ve been executed very well by our teams.

And in the right conditions, I mean consumer confidence, consumer purchase power, economic environment, the execution of this strategy is leading to volume growth, very good revenue growth and profitability. So I think that the common line that connects all these markets, there are many other markets, because as I said, we grew revenues in 65% of our markets, is our strategy, which is solid and being executed with our toolkits across the globe by our teams. If I change gears now to Europe, I think that in Europe, we had a summer, beginning of summer, let’s say quarter two, that was different this year in many senses. But one, we had weather that was colder and wetter than normal. So on top of us having the summer of sports and concentrated like phasing promotional activities during the summer, we saw also that there was 2% more volume being sold in promotions, because the overall volume of the industry was weaker in the quarter.

So this impacted the net revenue. We’ve been growing a lot in some geographies where we have partnerships, think about Spain, Greece, we are going to market with partners, and they are growing faster than the overall European volume. And this brings a little bit of geographical mix to our net revenue. I think that as we go through the second quarter to the third quarter, we will continue to see this fast growth in these geographies, concentration of activities because we phased promotional activities to the summer of sports, and most likely a normalization towards the end of the year, because in terms of price and rate, we continue to move with inflation, was really geographical mix, weather impact on the sales volume outside of the promotional activities and phasing of promotional activities.

Thanks for the question.

Operator: Thank you. Our next question is coming from the line of Sarah Simon with Morgan Stanley. Please proceed with your question.

Sarah Simon : Yes, morning. I have two. One is RTDs, the spirits companies say it’s taking from beer. Do you think it’s taking from beer? Or is it taking from spirits? And then just on U.S. gross margin, it obviously expanded a lot in the first half, even though you still had on the second quarter, sorry, even though you still had the volume pressure. Can you just give us a couple of concrete examples of what you did that drove that? Thanks.

Michel Doukeris: Hi, good morning, Sarah. So on the first question, I prefer to avoid the they said we said, and I would stick with data. So when you look at data from Home Panel, from any of the sources, being Cercana, Kantar, any many different places globally, what the data says is 80%, eight zero, 80% of the volume of ready to drink sources from hard liquor and wine, and 20% from beer. So the ratio is four to one. And it’s not what I say is what data says. To give you maybe one example, that’s public data. If you look at the U.S., as I was saying before, we have two brands, Nutrl and Cutwater. These two brands today are 1.5% give or take share of value, share of dollars in the U.S. And these two brands combined represented 25% of the total growth for the spirits in the off trade in Cercana data.

These two brands now they are ranking amongst the top 25 top 30 brands in terms of total dollars sales. And the data in the U.S. 75% of the volume sold with Nutrl and Cutwater is sourced from spirits and wine. So I’ll leave it there. And again, I don’t want to be into they said, we said, I prefer to stick with data. And when you think about productivity, as I said before, we first said that on the EBITDA — and EBITDA margin last year, 30% was productivity, 70% was volume related. And of course, as we continue to work to stabilize the volume, the share is already stable. We continue to work as well as doing productivity. And this productivity comes in many different areas. But we have programs and benchmarks that we apply globally, in which we adjust our breweries, we adjust our back office, we make sure that everything is tight in terms of logistics and production.

So we can be as productive as we can. And with our scale in the U.S., we continue to optimize this productivity that reflects, of course, in margin and EBITDA growth. Thanks for the question.

Operator: Thank you. Our final question will come from the line of Trevor Stirling with Bernstein. Please proceed with your question.

Trevor Stirling : Hi, Michel and Fernando. So two questions for me, please. First for, Michel, looking at the U.S., you referenced the recovery of Bud Light, — sorry, Busch Light and Michelob ULTRA. But when I look at the data, it looks like Bud Light is not really responding yet to the increased investment. So maybe if you can give us any color on what you think is going on with Bud Light? And the second one, probably for Fernando, as you look forward to the second half, Fernando, what are the factors you think could mean you either move lower to the lower end of guidance in terms of EBITDA growth or the high end of guidance on EBITDA growth?

Michel Doukeris: Hi, Trevor. Good afternoon, Michel, taking the first part here. I think in terms of the U.S., we continue to make progress on our commercial strategy and focus on rebalancing our portfolio. And we saw this, this 45% revenue now in the quarter two above core. As you said, Michelob ULTRA, all time high market share. Very good growth, growth accelerated now during the quarter with the Copa America execution. Busch Light, very interesting proposition that is growing top three brand in terms of growth in the U.S. A lot of talk in the U.S. about your value proposition to consumers at this moment. And this is a good reminder to the strength of our portfolio. So we have brands and propositions across all segments to consumers.

If you think about value, we have 65% sharing value. Busch is the largest brand, multiple times bigger than the largest competitor in the segment and is growing and performing very well. In terms of Bud Light, what we see is stabilization, all brand indicators getting better. The brand is regaining consideration. Brand continues to have very high penetration. Brand has the largest distribution and we continue to invest in the properties and activations that all consumers love. So we’re going to see that most of the investment in the activities around Bud Light will be concentrated in the back end of the year with NFL. And when you think about the overall portfolio, we are gaining share in the months of May and June, which is a good signal of stabilization.

We are activating very strong now in the summer with the Team USA and we have a very good amount of activations towards the end of the year, which can lead us to a strong finish on the year. Thank you. I’ll hand over to Fernando so he can talk about your second question.

Fernando Tennenbaum: Hello Trevor. We normally don’t provide a quarter-by-quarter outlook, but as any quarters, we always have puts and takes. If you look at industry data or what is going on around the world, you can see that there is continued momentum across Africa and Latin America. We talked about it. There is some softness in some currencies that could be a translational headwind, but the markets continue to be in a good place. Consumers continue to be in a good place. So we see continued momentum, which is kind of the majority of our markets. Europe that we talked about, July, industry trends, they improved versus June, which was weather-impacted, but still weather is a key component when you compare versus 2023, so it’s still a little bit short of 2023, the industry overall.

In the U.S., Michel mentioned that the industry could improve dollar sales, but then again, we don’t have the full data for the month. It’s public data. You have available, everyone has available, we don’t have for the full month. And China, we mentioned that contours are easier, but macro remains challenging. So I think we need to see how it plays. Then again, long-term, stock is intact, short-term macro is somewhat challenging. And in Argentina, which is another market that is important, inflation is improving, but consumer is still challenging. Maybe the only thing worthwhile mentioning is that from a sales and marketing perspective, given the summer of sports, probably we are investing a little bit more phasing on Q3. Shouldn’t change the picture for the full year, but probably a little bit more heavier the weighting on Q3, given Olympics, Copa America and everything that is going on.

So I think that the only two things to highlight, kind of a more difference would be the summer of sports, and maybe on the translational side, a little bit of a headwind on some effects. But the trends that we’ve been seeing since the beginning of the year, they continue, like momentum in most of our markets, I could quote Africa and Latin America, and the similar dynamics everywhere else around the world.

Trevor Stirling: Super. Thank you Fernando, and thank you Michel.

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

Michel Doukeris: Thank you all for your time today and for your ongoing partnership and support of our business. Stay safe and well. Remember to drink your beer today and celebrate the Beer Day. Cheers everyone.

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