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Presentation

Anheuser-Busch InBev SA/NV beats earnings expectations. Reported EPS is $0.81, expectations were $0.77.

Operator: Welcome to AB InBev’s First Quarter 2025 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 Reports and Reports 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 a discussion of some of the risks and important factors that could affect AB InBev’s future results, see risk factors in the company’s latest annual report on Form 20-F filed with the Securities and Exchange Commission on the March 12, 2025. 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. Thank you. You may begin.

Michel Doukeris: Thank you, and welcome, everyone, to our first quarter 2025 earnings call. It is a great pleasure to be speaking with you all today. Today, Fernando and I will take you through our operating highlights and provide you with an update on the progress we have made in executing our strategic priorities this quarter. After that, we’ll be happy to answer your questions. Let’s start with the key highlights. The global momentum of our business continued with the consistent execution of our strategy, delivering another quarter of reliable growth. EBITDA grew by 7.9% at the top end of our outlook range with continued margin expansion. In the U.S., our portfolio is building momentum and has reached an inflection point, and we are increasing investments in our brands to feel this momentum.

Our no-alcohol beer portfolio continued to outperform globally, increasing revenues by 34%. Beers marketplace continue to scale, increasing GMV by 53% versus last year to reach $645 million. And the ongoing optimization of our business drove a 7% increase in underlying U.S. dollar EPS, with 20% growth in constant currency terms. Turning to our operating performance. Our overall volume performance was impacted by calendar related factors, such as cycling the leap year and the later timing of Easter, resulting in a volume decline of 2.2%. We estimate these technical calendar shipments accounted for a majority of our volume decline this quarter. Despite these technical factors impacting volume, our revenue increased by 1.5% as the strength of our brands portfolio and ongoing premiumization drove a revenue per hectoliter increase of 3.7%.

Our diversified geographic footprint enables us to deliver consistent results and has us well placed to drive long-term value creation. Revenue increased in approximately 50% of our markets and double-digit bottom line growth in the Middle Americas, South America, Africa and Europe drove overall EBITDA at the top end of our outlook. 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, our portfolio is building momentum and has reached an inflection point, and we are increasing investments in our brands to fuel growth. We gained volume market share of both the beer industry and spirits based ready-to-drink category. In beer, Michelob Ultra and Busch Light were the top two volume share gainers in the industry for the second quarter in a row.

And in spirits based RTDs, our portfolio grew volumes by strong double-digits led by Cutwater and Nutrl. While our portfolio continued to gain share, adverse weather in the later time of Easter impacted the overall industry performance in the first quarter. I thought it would be helpful to bring some data to the conversation so that we can look at it together. According to Circana, off-premise sales to consumer volumes declined by 4.7% and dollar sales by 2.9% versus the historical range of around 1% to 2% in volumes and flattish dollar sales. When we disaggregate the industry growth on a week-by-week basis, our analysis indicates that the majority of the underperformance this quarter was driven by adverse weather in the later time of Easter.

When we look to April, we are encouraged that the industry has improved with better weather and the Easter shift contributing to volumes aligning more closely with the historical trends. The summer season is an important period for the beer industry, and we look forward to building on the momentum of our portfolio and activating the category through our mega platforms. Now moving to Middle Americas. In Mexico, the underlying industry momentum continued with our business delivering mid-single digit revenue growth and double-digit EBITDA growth. Volumes declined by low-single digits in line with the industry, which was impacted by calendar related factors. In Colombia, record high volumes and margin expansion drove double-digit EBITDA growth.

In South America, our business in Brazil delivered record-high volumes for both beer and non-beer. Total volumes increased by 1.4%, with continued margin expansion, driving double-digit bottom line growth. In Europe, continued premiumization of our portfolio and further margin recovery drove double-digit EBITDA growth. Our premium and super premium brands contributed 60% of our revenue this quarter with performance led by Corona and Stella Artois. In South Africa, the underlying momentum of our business continued gaining share of both beer and beyond beer. Revenue and EBITDA grew by low-single digits with our performance driven by our premium and super premium brands, which grew volumes by low teens. In China, the industry improved sequentially.

However, we underperformed primarily driven by softness in our key regions and the on-trade channel. We remain confident in our strategy, and we are focused on strengthening our execution by increasing discipline and excellence in our route-to-market, increasing investments in our mega brands, accelerating our expansion in the in-home channel and scaling up key innovations such as Harbin Zero Sugar. Now let’s look at the key highlights of our three strategic pillars. Starting with leading and growing the category. We have evolved our portfolio management approach to focus our investments in our mega brands to drive efficient, profitable growth. We have around 50 mega brands globally. Typically five per market, and these brands continue to lead our growth with net revenue increasing by 4.4%.

Our global mega brand, Corona, continue to drive premiumization across our markets, growing revenue by 11.2% outside of Mexico. 2025 marks the 100th year anniversary, since Corona’s launch. And we just kicked off the celebration with an event on Copacabana Beach with over 2 million fans in attendance. We are looking forward to execute a strong lineup of activations around the world throughout the entire year in recognition of the heritage, premiumness and quality of the brand. This quarter, Corona volumes grew by double-digits in over 30 markets globally. In its home market of Mexico, Corona is the #1 brand and volumes grew by mid-single digits. The brand power and consumer preference for Corona has earned the right for a premium price point.

Corona sells on average a 20% premium to the nearest competitor. And to crown its 100-year anniversary, Corona was again named the most valuable beer brand in the world in 2025. Through the consistent execution of our category expansion levers, we are increasing category participation across our markets by offering superior core brands, innovating in balanced choices to provide consumers with no and low alcohol, low carb, zero sugar and gluten-free options and expanding our premium and beyond beer portfolios. As a result, on a rolling 12-month basis, participation of legal drinking age consumers with our portfolio increased by 60 basis points across our key markets, the equivalent of adding 6 million new consumers to our ecosystem. In non-alcohol beer, our portfolio momentum continued to accelerate with volumes growing by 34%, led by the triple-digit growth of Corona Cero.

While no alcohol beer is current, a relatively small portion of our global volume, we are leaders in more than 50% of our key non-alcohol markets. And estimate we gaining share in 75% of them. With 65% of the volume coming from new consumers and new occasions, we believe non-alcohol beer is a key opportunity to develop the category and drive incremental volume growth. Let’s now turn to our second strategic pillar, digitize and monetize our ecosystem. In the first quarter, BEES captured $11.6 billion in GMV, a 10% increase versus last year with 32 million orders transacted through the platform. This marketplace continues to scale, with GMV increasing by 63% versus last year to reach $645 million. In DTC, our digital platforms are enabling a one-to-one connection with our consumers and the development of new consumption occasions.

Our digital platforms generated 19.2 million orders with revenue increasing by 12% to reach $117 million. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business.

Fernando Tennenbaum: Thank you, Michel. Good morning, good afternoon, everyone. I’ll take a few minutes to discuss the progress we have made in optimizing our businesses. Our EBITDA margins improved by 218 basis points this quarter with expansion in four of our five operating regions. We know that each year will be different, but we are confident the combination of our leadership advantages, disciplined revenue management, continued premiumization and efficient operating model create an opportunity for further margin expansion over time. Moving on to EPS. We delivered underlying EPS of $0.81 per share, a 7.1% increase in U.S. dollars and a 20.2% increase in constant currency versus last year. Organic EBITDA growth accounted for a $0.16 per share increase with translation effects and $0.09 per share headwind.

Lower net interest expense and the optimization of other below EBITDA items, such as cost of hedging and FX losses, drove the balance of our EPS growth. Let me take a moment to talk about our operations. Our business is local. We procure, produce, distribute and sell locally. In fact, more than 98% of the volumes we sell are locally produced. If you look specifically at the U.S., as an example, we have 18 breweries, over 700 American farmers and over 7,000 local suppliers, with 99% of our volumes locally produced. As a result, we have limited direct exposure to tariffs. Our results in the first quarter, the resilience of the beer category, the strength of our mega brands and the continued momentum of our businesses, all reinforce our confidence in our ability to deliver on our 2025 outlook of 4% to 8% EBITDA growth.

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

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 opportunities our brands have to activate the category this year. We are encouraged by our first quarter results, and we delivered EBITDA growth at the top end of our outlook. Underlying EPS increased by high-single-digits in U.S. dollars and by 20% in constant currency, driven by organic growth and the ongoing optimization of our business. And as Fernando just mentioned, our first quarter results position us well to deliver on our outlook for the year. Looking ahead to the summer and the rest of the year, we are uniquely positioned to activate the category. The combination of our mega brands with the key global platforms that consumers love and that bring people together is a powerful opportunity to lead and grow the category.

From the NBA to celebrating 100 years of Corona around the world, to the FIFA Club World Cup, to the buildup of the Winter Olympics and music platforms like Tomorrowland and Lollapalooza. We will be focused on connecting with consumers and bringing to life our purpose of creating a future with more cheers. With that, I’ll hand it back to the operator for the Q&A.

Operator: Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions]. Our first question today is coming from Rob Ottenstein from Evercore ISI. Your line is now live.

Robert Ottenstein: Great. Thank you very much and congratulations on a strong quarter. So I was wondering if, Michel, if you could discuss your U.S. Strategy and maybe put it in the context of the overall company. So kind of first, it looks like you’ve gained share now for the second or third quarter in a row. What’s driving that? And does that look sustainable? Second, can you give us any color on your productivity programs that you’ve put in place? And will they build over the year so that you can get to more flat EBITDA? And then kind of tying it all together, you noted in the press release that you continue to increase investment in the U.S., why does that make sense in what looks like a mature and declining market, given the other opportunities that you have around the world to invest? Thank you very much.

Michel Doukeris: Hi, Robert. Good morning and thanks for the question. It’s an interesting one that is couple of components that I will try to cover all of them. I think that first, the U.S. is one of our key markets. It represents over 20% of the business that we have and we always talk about this as a mature market, very big profitable, very big headroom for growth for us as our portfolio reach an inflection point. And I think that this covers the part of the market share gain. We talked about this on quarter four last year and we saw this momentum building. And as a matter of fact, if you look to the latest weeks, the momentum continues to build as our balanced choices portfolio with Michelob Ultra, Michelob Ultra Zero and Busch Light as the number two brand continues to gain momentum and the innovation pipeline that we’ve been launching to this summer will further support that.

And in the RTD, the choices we made behind neutral and cut water, they continue to build momentum and accelerate with strong double-digits. In terms of productivity, this is always on for us. So we don’t — we made the decision of not coming and launching new productivity initiatives, but we are working very steady on improving productivity quarter after quarter. And this is kicking into our results decision, you can see that we continue to improve. And in terms of investments, I think that is very logical. One, as the portfolio is at this inflection point, we are feeling the growth. And as I said before, there is a lot of headroom for growth for our portfolio. Second, we are in the business for the long-term, right. So three years ago, we said we would get into this multiyear investment growth in marketing that would feel the growth of our brands and that’s not a one year program, it’s a multiyear program.

And we have massive upside as these brands that are growing continue to gain scale and more reach and penetration with consumers. So it only makes sense to continue to support the growing part of the portfolio and the sustaining part of the portfolio. Momentum is good for our team now in the U.S. Summer, we will have a lot of activation. So from FIFA, Club’s World Cup to the finals of the NBA that are on fire now, to them the innovation that we have in the pipeline and then that’s going to connect with NFL and later in the year with Olympics. So it’s a very good lineup for the year in the U.S. We are encouraged by the results we’ve seen share. Industry in April, as I shared here in the call, much more normal and we know that summer is going to be intense and good for the industry because last year was subdued.

Thanks for the question.

Operator: Thank you. Next question today is coming from Sanjeet Aujla from UBS. Your line is now live.

Sanjeet Aujla: Hey, Michel, Fernando, a couple for me, please. Firstly, on China, it seems like the beer industry is sequentially less negative. You’re clearly still underperforming, but can you give us a sense of where your channel mix is today? You’ve had a reset presumably in the on trade channel. Is the off trade now a bigger part of your mix or is the on trade still bigger? And then just taking a step back, clearly, you had some big macro challenges in a couple of markets over the last four months. But how are you thinking about your ability to get back to positive volume growth going into Q2 and the second half of the year at the group level? Thank you.

Michel Doukeris: Hey, Sanjeet, good morning. Thanks for the question. First on China, I think that you are right. The industry has been improving sequentially. And I think that the more we go towards summer back end of the year, the more we see normalized industry. Channel wise remains a weaker on trade with a good off trade and of course the more you cycle the on trade, the more is going to be a less negative impact and then the more you cycle it, the more the strength of this off trade we will add to the industry overall. We’re still facing a less positive impact on the footprint that we have because the Center West part of the market in China is still performing better than the Eastern part. But of course, this will also cycle as we go through the summer.

And we have a lot to do in China ourselves because we continue to believe that our business can perform better than what is performing now despite of negative footprint impact. And we are increasing the execution, focused with more discipline on our roll to market and overall execution. We increased investments behind our mega brands, especially Budweiser and Harbin, and preference power is moving in the right direction, SPRs on these brands moving in the right direction, but more to do. We are accelerating the expansion in the off-trade, massive opportunity there. And as we focus more on our execution on the off-premise, we’re going to get better results. And then, of course, innovation in China, Harbin Zero Sugar is scaling up very fast, and I think we’re going to have a great summer with Harbin and with this innovation.

When you think macro, look at the quarter one volume performance. If you take the leap year out, this is north of 1%. If you think about Easter shift, this can be anywhere from 0.3 to 0.5. So the underlying volume momentum looks good. And as we head into quarter two and the rest of the year, I think that we will see volume performance improving meaningfully.

Sanjeet Aujla: Great, thank you.

Michel Doukeris: Thank you. Thanks for the questions.

Operator: Thank you. Your next question today is coming from Simon Hales from Citi. Your line is now live.

Simon Hales: Thank you. Hi, Michel, hi Fernando. So a couple for me as well then, please. Michel, obviously, one of your big competitors today has just lowered the full-year guidance after a tough quarter. I appreciate your performance was certainly very different in Q1, and there’s probably a number of specific factors that are impacting their business for the full year. But I wonder how you’re viewing just the broader consumer environment now as we look forward into sort of the rest of 2025, given the increased macro uncertainty we’ve seen over the last sort of couple of months. How are you thinking on that as perhaps evolved since you last updated us with the Q4 in February? And then maybe just following on from that and specifically going back to the U.S., I wonder if you could just talk a little bit more about the momentum you’ve seen around some of your new launches like Michelob Ultra Zero in Q1?

How we should think about that as we head into the more important summer months? And any other key innovations you’re excited about for the U.S. business, specifically in Q2 and Q3?

Michel Doukeris: Hi, Simon. Good morning. Thanks for the question. I got like a couple of questions within this one, and I will take them one by one here, and maybe Fernando wants to comment as well on the outlook. But overall, we didn’t change our outlook. Our outlook remains the same. And I think that we are encouraged by the quarter one delivery. So 4% to 8% is our outlook for the year with what we know now. Macro, and when you think about consumer, which is the portion on your question that I can address in more details. I think that we are actively monitoring the consumer environment. And I always like to make this differentiation between consumer sentiment and consumer behavior. While a lot was already said about the consumer sentiment, and we kind of see the same across the globe, it’s almost like the same sentiment that you have in elections here, it goes a little bit down because there is a lot of news coming each and every day, consumer is more cautious.

For us, it’s very important to see and to monitor consumer behavior as well. And on the consumer behavior part, what we see is that beer is more resilient than some other categories. And of course, it’s an everyday affordable category. We’ve been activating the category in the key moments and what we see is participation holding on very well. And as I said, our participation, our brands grew and grew the equivalent of six million consumers within the last quarter. So beer remains, as a category, resilient and the underlying demand for our brands is very positive. We are growing participation. And part of that, I think you are right to complement the question like this is a good question on this sense, comes from innovation. So non-alcohol is being an important driver for us, with growth coming on the portfolio north of 30%.

Corona Cero globally, triple digits and Michelob Ultra Zero in the U.S. as the #1 innovation in the category this year. So we are north of 0.12, I think, in share in the last few weeks, which is great. We are the #1 player in the U.S. this year. Michelob Ultra Zero just started now media, because the first quarter was distribution. So we expect to see some acceleration now. Ultra Zero is now the #5 brand in Zero in the U.S. and we think that we soon will go up on this ranking. And the other innovation that the team is very excited and very excited to see in the U.S. is this in and out with Busch Light Apple. If you didn’t see yet on the Instagram, Twitter, so people are traveling through the country, queuing inside the stores, volume is slowing very quickly out of the shelves and Busch Light Apple will for sure be one thing that people talk about during the summer.

So watch for that because it’s going to be big.

Fernando Tennenbaum: And Simon, Fernando here. If I could add, you asked on the outlook. So on the outlook, I think Michel covered very well the top line. On our costs, two comments here. The first one is that you have hedges in place. So we have very good visibility in our cost of goods sold. And it’s always a one year delay. So you know that last year, we had kind of the devaluation of emerging markets happening towards the second half of the year, which means that first quarter is probably the easiest comp. And then later on, you will start adding some pressure onto that. But then again, it’s expected. There is no news here. On the translation side is the opposite effect, more pressure in the first half and then in the second quarter, probably heavier comps, because the devaluation happened in the second half of last year, mostly Mexican pesos and Brazilian real.

And then always important to highlight that we talked about it during the initial remarks, but it’s always important to remark that even our very local nature of the business, very little impact, if any from tariffs. So that kind of combining the top line with all this kind of cost comments leave us to kind of maintaining the same outlook we had since the beginning of the year. Thank you.

Simon Hales: That’s great. Thank you very much.

Operator: Thank you. Our next question today is coming from Edward Mundy from Jefferies. Your line is now live.

Edward Mundy: Good morning, Michel. Good morning, Fernando. So two questions, please. Just in your wording around the priority to lead and grow the category. There’s a bit of a nuance in your wording from occasions development to balanced choices in one of your bullets. Could you perhaps provide a bit of context into this nuance? And does this sort of reflect any change in your strategy, perhaps a bit more focused, a bit more resourced behind some of these new growth streams? And then second of all, just a question around perhaps to Fernando, about driving leverage through the P&L. There’s been a pretty decent drop through from EBITDA to dollar EPS, despite the FX headwind in the first quarter, below depreciation, lower financial charges. Could you perhaps talk about the sustainability of this overall shape due to the P&L?

Fernando Tennenbaum: Okay, Ed. Let me start, Fernando here, from your question. I feel that we’ve been talking about it, but some of these things, there is a little bit of a delayed effect. We’ve been working on optimizing our business, one of the KPIs that you can see is CapEx and CapEx is coming down. But the first CapEx is coming down, and you see that happening on cash flow, and there is a little bit of a delayed effect when you see that coming through depreciation. So that’s one of the components of the leverage throughout the P&L. And the second one which is kind of a function of our efforts on deleveraging. As you deleverage, you have less debt. As you have less debt, you have less interest. And if you have less interest, that flows through the EPS as well.

So to maybe add to your question. As some of these benefits of lower CapEx, it still needs to come to depreciation. And as we continue to make progress on our leverage, as we continue to generate more cash flow, you should see this kind of operational leverage happening going forward. Now we’ll turn to Michel for the — your first question.

Michel Doukeris: Hey, Ed. Michel here. Thanks for the question and good catch. So we are not less focused on the occasions, but we did this fine-tuning because as we interact with consumers and as our innovation pipeline comes to play on the actions that we have put in place in the market, we have been seeing a massive interaction on these balanced choices that we have, which today are a big business for us, over $5 billion, and occasions for consumers. Let me just cover this a little bit more. So non-alcohol is one that we’ve been talking and it’s becoming very obvious because 60% are either new consumers coming into the category or the same current beer consumer having beer in more occasions, because now the non-alcohol opens up this opportunity to them.

But this goes beyond only the non-alcohol because we see these barriers for consumers to interact with beer. And when we solve for these barriers, they actually prefer our balanced choices rather than other alcoholic beverage. And this, in some markets, is gluten-free, in some markets is zero sugar, for some consumers is the low alcohol organic proposition, and one very broad barrier that we broke for a while already is the carbs and calories that’s why Michelob Ultra go so well in the U.S. So this balanced choices that we have is over $5 billion today, is growing high-single digits net revenue, is being very positive for innovation everywhere, and we are betting a lot as one of our main platforms to continue to grow the category as we remove barriers for consumers and we meet them on this healthier lifestyle, balanced choices, ideas that they have as they make their decisions every day.

So from non-alcohol to low alcohol to low sugar, no gluten, low carbs, low calories. It’s very fertile. We are very advanced. It’s already a very big business for us. And we are investing big here to grow more occasions and to grow the category and our brands with consumers on the needs that they are attacking and tackling, and we are providing them a portfolio that is important for them on the needs that they have for their consumption occasions. Thank you.

Edward Mundy: Great. Thank you.

Operator: Thank you. Your next question today is coming from Sarah Simon from Morgan Stanley. Your line is now live.

Sarah Simon: Yes, thanks for taking my questions. I’ve got two. First one was on Mexico. A lot of consumer companies have been talking about Mexico being worse. You haven’t really flagged that up other than the calendar effect. I wonder if you could talk about how you’re seeing the market there? And the second question was a rather boy one for Fernando. Can you just help us with scope because I was expecting sort of positive contribution in Europe from San Miguel in terms of volume, but we had a negative. And obviously, that goes through the segment. So just if you could help on that, please. Thanks.

Fernando Tennenbaum: Okay. So Sarah, let me take the first one, and then Mexico, take the second one. On the scope, there are a few things here, somewhat kind of between financial line and EBITDA, some to do with the hedges, and I think Shaun can go into more detail with you. But to an essence, San Miguel, it has just started, it’s more a little bit of a phasing, you should expect some difference on other quarters. But these are kind of — the main one is this financial one, which is the carry cost on some commodities and then on some gal phasing.

Michel Doukeris: On the industry in Mexico and consumer sentiment, I think that I will start with the point I raised on the previous question, which is there is consumer sentiment and consumer behavior. So the behavior purchase penetration, everything looks very normal in Mexico. Consumers are interacting well with the category and the underlying trends remain very positive. Of course, in the quarter one, when you look at the Mexico volumes in the industry, there was the last one trading day and there was Easter, which is very relevant for the Mexican market. The same weather pattern that we saw hitting the U.S. was somehow extended to Mexico. So there was some impact on weather as well. But if you discount for that, the underlying trend was very good.

And as a matter of fact, I think that we will see this shift on Easter from quarter one to quarter two, adding some good momentum to Mexico. So I think that we continue to monitor consumer environment, category moving well, underlying demand for our brands, very strong in Mexico. And at this point, there is not much more that we are concerned with Mexico. So we continue to activate the brands, work hard each and every day towards the business that we have there.

Sarah Simon: Right. Thanks a lot.

Michel Doukeris: Thank you.

Operator: Thank you. Next question today is coming from Chris Pitcher from Redburn Atlantic. Your line is now live.

Chris Pitcher: Good afternoon. Thank you. A couple of questions for me. One follow-up. On China, you’re talking about the importance to focus on the off-trade and build premium there. I mean that’s a very different proposition to building Budweiser, et cetera, in the night club channel. Have you got the resources on the ground? I mean, clearly, you can borrow experiences from other markets. I just wanted to understand how easy it is to transfer volume into that channel? And then secondly, we don’t often talk about the underlying business in Argentina, but it certainly sounds like things are starting to improve. And potentially, it could — if inflation keeps falling, you could start to have a better backdrop there. I mean how healthy is the Argentinian business? You’ve done a good job to protect dollar profitability given everything. Is that a market we should be getting more encouraged about in the coming quarters, years? Thanks.

Michel Doukeris: Hey, Chris, good morning. Thanks for the question. So first on China. In China, we will continue to have a very good business in the on-trade. Our brands are very strong. And the on-trade will rebound with time as consumer confidence gets recovered. So that business is a good business. We continue to support and will rebound over time. The growth in the off-trade is something that we actually see in all markets as the markets mature. Consumers tend to have more occasions, more in-home occasions. And the off-trade growth I think that in China, it’s just that as many other things, is happening very fast. And the #1 asset that we need to have to have the off-trade consumption and volume is really strong brands.

And when you think about Corona, Budweiser, Blue Girl, Harbin Ice, they are all very strong brands. But there is, of course, some tweaks on the sales force, on the road to market and this is where the team is working now. So we need now to see how the year will play, second quarter, third quarter, to see where our volumes will start to rebound and the rate of success and speed in which we can capture this opportunity on the off-trade. But the most important asset, strong brands we have in China. In Argentina, that’s a good point. We talked about that last year a lot. It was a very abnormal disruption for the industry in Argentina that was unrelated to the category itself, but much more based on the macros. Macro is improving in Argentina, and as a consequence, sequentially, the industry is getting better.

And I think that we’ll see further improvement through the year. The business itself, very good cash flow brands, very strong. Market share remains positive. And I think that now is a matter of giving time to the macroeconomics to improve, consumer purchase power to return, and we will see gradually an improvement on volume. And as you said, because margins are in the right place, profitability is in the right place, brands remain strong, we will see this flowing through the P&L for sure. Thanks for the question.

Operator: Thank you. Your next question today is coming from Trevor Stirling from Bernstein. Your line is now live.

Trevor Stirling: Hi, Michel, Fernando. Just one from my side, please. And probably a bigger picture one. There’s been a big huge debate going in the USA, about the extent to which younger people drink less alcohol, participate less in the category and what that has implications for category growth. But if you think about your big emerging markets, about Mexico, about Brazil, about Colombia, do you see any similar trends emerging there may be amongst more elite users perhaps more being more influenced by the U.S.? Or is it business as usual?

Michel Doukeris: Trevor, thank you for the question. And as you know, in our business, there is never a day when business is just business as usual. So it’s fast, good consumer goods. We work very hard to earn the business every day. And we discussed in some different occasions, these COVID generation. And the fact that many, many of the behaviors that are naturally evolving when you are 21, 22, 23 years old for this generation was a little bit later, right? So from the college that you had to be one year or two years out of your home or from the dorms to participating in sports events, music events, gatherings with friends. And I think that when we look at that, it’s somehow the same everywhere, but it’s recovering and moving everywhere as well because behaviors, they normalize a lot as we look at the 24, 25 cohorts.

And then there are idiosyncratic issues that are different in each and every market. So in some markets, very fast penetration of non-alcohol beer. In some other markets, you see economic disruptions like we just spoke about in China or in Argentina. But overall, participation is okay across the globe, it’s smaller on these younger cohorts, but normalizing as you go from 21 to 24 to 27. We see on the other side the same thing. So participation is stronger on the older cohorts because people are just like living longer, going out more often, spending more money. So there is puts and takes on the participation, but there is a big normalization on the core of the category from 24 to 35 looks very normal. And we, of course, we are monitoring this very carefully.

We are working on our balanced choices portfolio because it resonates very well with consumers from zero sugar to gluten-free, to low carb to non-alcohol. So we are offering a proposition that caters for every different taste in the moment. Thank you.

Trevor Stirling: Thanks.

Operator: Thanks. The next question is coming from Gen Cross from BNP Paribas. Your line is now live.

Gen Cross: Hi, Michel, hi Fernando, thanks for the questions. Just a couple on costs from me. So SG&A looks like it declined by roughly mid-single digit organically in both South America and Middle America regions in Q1. Obviously, you’ve got organic revenue growth in both of those regions. So I was just wondering if there’s any color you could share in how you’ve managed to achieve a decent reduction in your SG&A expenses in those two regions? And the second one is kind of going back to actually an earlier question on finance costs, which saw quite meaningful reduction year-on-year. And recurring net finance costs being below about — below the $1 billion mark in the past couple of quarters now. And as you’ve commented on, Fernando, debt levels continue to come down. Do you expect to stay below the $1 billion mark per quarter going forward? Thank you.

Fernando Tennenbaum: Hi, again. So on the first piece of the question, SG&A, it’s the ongoing optimization. I think we have this kind of ongoing effort, as Michel mentioned, it’s not that we announced that we’re going to do an effort or this or that. But on a recurring basis, we always look at our cost base and see how we can further optimize. So this is kind of part of our day-to-day. On the second question on finance costs, it’s a function of same kind of rational ongoing optimization. And as you kind of reduce your leverage, you can start having kind of this benefit of lower interest expense kind of — you just keep getting momentum on that. So we’ll continue to work on that. We don’t provide any guidance kind of on — what is our next quarter finance expense is.

We just provide the guidance on some of our accruals. But definitely, we mentioned that on the fourth quarter last year on the full year, the step change on the free cash flow helps, It helps because you have less debt and helps because you have more cash, which also an interest on it. But definitely, the two topics that you mentioned is part of the pillar three of our strategy to optimize our business.

Gen Cross: Thank you.

Operator: Thank you. Your next question is coming from Olivier Nicolai from Goldman Sachs. Your line is now live.

Olivier Nicolai: Hi, good morning. Michel, Fernando, just two questions, please. Just a follow-up on the U.S., first of all. You have a very detailed database in the U.S. by consumer, by post code. You flagged that April is effectively better, thanks to the weather and then the Easter timing. But do you see any consumer demographics or any specific states where you are seeing any sign of consumer weakness there, considering the overall lower consumer confidence since the beginning of the year? That’s the first question. Then secondly, you had a very strong margin improvement in Q1 that was driven by gross margin being up strongly. Could you give us perhaps a bit more details on the driver behind this increase and if you think that will continue at this pace for the rest of the year? Thank you.

Fernando Tennenbaum: Olivier, let me start by your second question on the margin improvement. I think the margin improvement and the gross margin improvement, as I said, the hedge kind of — we have very good visibility on our costs. And given the dynamics of FX and commodities last year, which has a delayed effect on us, first quarter is the one that will have more of a tailwind. As you navigate throughout the year, probably you’re going to have some more pressures on the cost of goods sold, starting already in Q2, but more pronounced in half two of the year. But having said that, we have our outlook, the 4% to 8%, kind of nothing changes here. We think kind of a while, you should have a little bit more pressure on the transactional cost of goods sold.

If you look from a translation standpoint, that should be quite the opposite, you should have harder comps in the first half of the year and easier comps in the second half of the year. And on your first question, Michel?

Michel Doukeris: Hi, Olivier, Michel here. So on the U.S., I think that we included this page on the webcast because we thought would be very helpful for us to look at this together. It’s public data from Circana that shows better industry in April. The industry in January was rather more normal and the weather patterns being cold weather and precipitation being the main factors for this tough industry that we saw during the quarter one, that was the main, explains majority of what we saw in terms of deviation from normal. If you think about consumer, what we see is participation, normal. Our brands are gaining participation on the U.S., which is very positive for us at the beginning of the year. And we have a portfolio that covers all price points.

So during the course of last year, there were several questions about inflation, where consumers were going and what we were seeing in other categories. And I emphasized this idea that we have Stella premium brands, Michelob Ultra, premium core plus, mainstream brands and a very strong value portfolio is not a surprise for us that Busch Light is the #2 brand now for two, three quarters in a row. So our portfolio is well positioned to cover the current environment because we offer and spend that goes from strong value brands to premium brands, and we cover nationwide all channels and regions. So I think that is weather impacting the quarter one. Let’s see now the quarter two. We are positioned with a good portfolio, and we see that this portfolio is gaining participation in the U.S. Thank you.

Olivier Nicolai: Thank you very much.

Operator: Thank you. Our final question today is coming from Mitch Collett from Deutsche Bank. Your line is now live.

Mitchell Collett: Hi, Michel, hi Fernando, just a quick question on Beyond Beer, which accelerated to, I think 16% growth this quarter from low single-digits in 2024. What drove that acceleration? And can you sustain it? And you’re clearly a beneficiary of the growth in the ready-to-drink cocktails in the U.S. I’m sure that’s a contributor. But where else are you excited about the opportunity in Beyond Beer? Thank you.

Michel Doukeris: Hi, Mitch. Thank you for the question. So I will start by stating something that three years ago when we discussed our strategy and the opportunities for growth as we aim to lead and grow the category. I mentioned this Beyond Beer space. And this interesting intersection between hot liquor, wine and beer that was very incremental for beer. So we know like two-thirds of the volume there adds to the beer category. The capabilities that we have because people want convenience, and they want small packs, cans, and we as brewers are well positioned for that. And we said that we would go after this opportunity and use this as a driver for our growth. And this is what we are doing, right? So on the strategy, a clear view on where to play.

And on the how to win, we discussed it many times. Brands because people want to buy brands here. They don’t want generic liquids. And they like brands that are new to the world. That’s why Nutrl does well, that’s why Cutwater does well or Flying Fish. And we had to reorganize our portfolio here because we had too many offers. So you’re familiar with this idea that we streamlined our portfolio globally by 30% in terms of SKUs. Now we have clearly five global brands on this space, Flying Fish, BEATS, Cutwater, Nutrl and Brutal Fruit. We are rolling these brands to more countries, but in each country where these brands were born and we operate, they are gaining momentum. That’s the case for Cutwater in the U.S., for Nutrl in the U.S., for Flying Fish in Africa and so on and so forth.

So because we first streamline the portfolio, we had a very clear view that this is a growing segment and that we can win big globally. Now we are in full execution mode. And because of that, volumes are accelerating, top line is accelerating, the rollouts, they open a huge opportunity for us to be in more markets because consumers want this proposition across the globe and the brands that we have now, they fit for each of the needs that the consumers have there for more light and refreshing to more complex and full taste. So from Nutrl to Cutwater and everything in between, we can cover with these five brands. So it’s an exciting space. It’s a growing opportunity and we think that we are well positioned to continue to drive the growth of this segment with our portfolio and to be, of course, increasing our volumes and penetration with our brands as these propositions, they resonate somehow globally.

Thank you.

Operator: Thank you. We reached the end of our question-and-answer session. I’d like to turn the floor back over for any further or closing comments.

Michel Doukeris: Thank you. Thanks, everybody. Thank you for your time today, for the ongoing partnership and support for our business. Stay safe and well, and we’ll talk soon. Thank you.

Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.