Good morning and thank you for waiting. We would like to welcome everyone to Ambev’s Third Quarter 2019 Results Conference Call. Today with us, we have Mr. Bernardo Paiva, CEO for Ambev; and Mr. Fernando Tennenbaum, CFO and Investor Relations Officer.

As a reminder, a slide presentation is available for downloading on our website at ri.ambev.com.br, as well as through the webcast link of this call. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company’s presentation.

After Ambev’s remarks are completed, there will be a question-and-answer section. At that time, further instructions will be given. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996.

Forward-looking statements are based on the beliefs and assumptions of Ambev’s management and on information currently available to the company. They involve risks, uncertainties and assumptions, because they relate to future events and therefore, depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such forward-looking statements.

I would also like to remind everyone as usual that the percentage changes that will be discussed during today’s call are both organic and normalized in nature and unless otherwise stated percentages changes refer to comparisons with the third quarter 2018 results.

Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Ambev’s normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profit, EPS, EBIT, and EBITDA on a fully reported basis in the earnings release.

Now, I’ll turn the conference over to Mr. Fernando Tennenbaum, CFO and Investor Relations Officer. Mr. Tennenbaum, you may begin your conference..

first, interest income of BRL626 million driven by our cash balance and recovery FX disputes.

Second, interest expense of BRL394 million that also included interest income in connection with the Brazilian Tax Regularization program, as well as a non-cash accrual of approximately BRL60 million related to the put option associated to our investment in the Dominican Republic business.

Third, BRL312 million of losses on derivative instruments, which were up year-over-year explained by the increase of FX hedges carry cost linked to our COGS and CapEx disposure in Argentina, and by equity swap losses.

Fourth, losses on non-derivative instruments in the amount of BRL291 million, mainly explained by no cash intercompany tax valuation, mostly linked to the Argentinean Peso depreciation. Fifth, taxes on financial transactions only amount of BRL58 million.

Sixth, BRL121 million of order financial expenses, partially experienced by accruals on legal contingencies and pension plan expenses. Seventh, BRL174 million of exceptional financial income explained by non-cash intercompany transactions.

Finally eighth, BRL70 million of financial income related to non-cash income resulted from the adoption of hyperinflation accounting in Argentina. The normalized effective tax rate was 7.9% in the quarter. Year-to-date, the normalized effective tax rate was 13.3% versus 7.6% in the same period of 2018.

Cash generated from operating activity in Q2 2019 was of BRL3.6 billion, which is 34.2% lower than last year. Year-to-date cash generated from operating activities is declining by 8.5%, reaching BRL8.7 billion. CapEx reached BRL1.6 billion in the quarter and BRL3.1 billion year-to-date, increasing 38.2% versus the first nine months of 2019.

Thank you very much. Bernardo will now share some initiatives and thoughts on the Brazilian market before going to the Q&A..

Thank you, Fernando. Hello everyone. Before commenting the key highlights of the quarter, I’d like to spend some more time to talk about the transformational change in our business towards becoming even more consumer-centric and more technology-driven company. This transformation has two main pillars.

First, it’s all culture, never forgetting the core values that brought us here such as our ownership mindset, high-end developed great people, the culture of opening gaps and closing gaps, and never taking shortcuts. This guidance will continue to be the basis for us to achieve our objectives in the changes of site.

Second, our strategic growth platform. We’ve been very consistent on applying this strategy to all areas of the company and we strongly believe this is the correct path for sustainable growth and value creation for investors, consumers changing and they’re changing and evolving as well.

Regardless becoming an even more technology-driven company, we have some key milestones, that’s so important to highlight such as the acquisition off an IT solutions company, streamlining the IT areas to give more focus to our core and new business in adding a position of VP of technology.

Now, talk about this quarter, as mentioned by Fernando, we continue to deliver on our main initiatives including innovation and continue premiumization. during the quarter, volumes were down 2.28% while the industry increased low single digit, which means you lost share.

the impact for our price increase was amplified by simultaneous competitor discounting and a challenging macroeconomic scenario while in the first nine months of 2019, volume grew 3.9% while the industry grew low single digit deliver a share gain year-to-date. We continue to be excited about the prospects for Brazil. demographics are supported.

Our population ordered in the legal drinking age is growing at 1.5% per year. On the penetration side, there are also meaningful opportunities as half of the population ordered in 2018 didn’t have a beer over the last 12 months and most of them due to affordability.

As the country evolves, we will continue to see strong development of the premium segment as well as an opportunity to increase consumption of beer by women in order to close the gap to more mature markets.

We remain confident in the growth potential of Brazil given our superior portfolio, which allow us to play in all the segments of the Brazilian market, reaching a more balanced top-line growth between volume and revenue, our unmatched distribution capability, exciting innovations we have in the pipeline, consistent investments in our strategic platforms and our people.

So now, let’s begin to talk about our first strategic platform, which is premiumized at scale. Premiumization is a continuous trend and is always important to reinforce that our strength in the segment is a great portfolio combining global and domestic brands.

Our premium segment grew double-digit this quarter, led by our global brands continued a strong momentum we have been having in the previous quarters. Budweiser, our largest global brand plays a key role as a breach for consumers, who are traded up towards the premium segment.

The brand’s quarter was marketed by a 360 campaign highlighting its functional attributes. Budweiser liquid is strike at first with this move finish make it the king of the beers. Stella Artois continued to embrace the food platform with a moderate addition of Villa Stella our proprietary event.

The brand volume was also supported by the continued expansion of new Beck formats, such as the returnable sharing size bottle. As a result, Stella Artois continues to grow very strong all over the country. Corona continues to embrace the better world platform, call the attention of the plastic dampened in the oceans.

The campaign undesirable museum impacted approximately 22 million people. We are very excited with our latest launch, Beck’s and Colorado Ribeirão Lager. The volumes of those brands are very, very incremental to our portfolio.

We are certain that the premium market is a portfolio gain and that we are in a very strong position to continue to gain share in the segment. Now, moving to differentiate the core. Brahma, our classic lager beer continues to experience a memorable momentum.

The brand connects its consumers through relevant platforms, such as Sertanejo, the Brazilian pop music and soccer. This quarter’s campaign would focus on Chopp Brahma, the outstanding Brazilian and draft beer in the Sertanejo platform.

Chopp Brahma campaign highlighted to me attributes of the brand with a six-episode digital show about aquatic Brazilian bars and leak it that to our franchise business show to Chopp Brahma Express, the in-home experience.

Through the Sertanejo platform, Brahma was present in more than 150 Sertanejo Festivals for Brazil, including the two largest; Barretos and Jaguariúna. Approximately, seven million people attended this event.

Skol’s quarter was marked by the continued campaign of the Skol family, reinforcing the most recent launch, Skol Puro Malte, which from a volume perspective, has been our biggest innovation in the recent years and continues to spend quarter-after-quarter.

Bohemia, a core plus pure malt lager also posted a major results, growing triple digit for the third consecutive quarter and over a meaningful base. I will now spend few minutes talking about driving market affordability.

One of our approach to the value segment is to be the regional connection that is creating brand equity at an affordable price point. In given local raw materials, local market and only most profitable packaging, we’re also able to deliver very healthy margin. This quarter, we rolled out Legitima in the state of Ceará.

Nossa, Magnífica and Legítima are performing very well with strong share gains in the states, in which they were launched. Before moving to operational excellence, I’d like to talk about Beats. This quarter, we announced that Beats and Brazilian pop singer, Anitta will join force to develop and create new product.

The first outcome of this partnership derived to drink Beats 150 BPM was launched in the beginning of October. Going back to operational excellence, our mantra is whenever we call it Brazil, there has to be Ambev. Operational excellence has always being one of our biggest strengths and the key differential.

Given that point of sales connect our brands to consumers, customers’ experience is a strong focus. Complimenting this strategy, we have our customer experience center. All customers’ requests open in any Ambev channels such as the B2B, the telesales, WhatsApp and our sales rep during the visit direct to the center and solved in one single phase.

Talking about technology. As we highlighted last quarter, technology has been a key enabler for us to support our strategic growth platforms. to optimize Ambev’s operations, we continue with HBSIS integration, expanding and improving technology to all the areas of Ambev with more agility and scale.

As HBSIS ended the quarter with more than 500 developers also to give some update on numbers, sales, which are not conducted by sales reps at site, now accounts for 32% of the total of the on-premise channel and Parceiro Ambev, our B2B tool. This is surpassed 200,000 clients in September compared to 66,000 in January.

Now, moving to our non-alcoholic business position. We are quite pleased with our performance this quarter.

As a consequence of the implementation of our strategic growth platforms, volume increase came from all different segments in our portfolio and important highlights are the premium brands such as Tônica, Antarctica and Gatorade, which grew double digit bringing a healthy contribution to the portfolio mix.

Talking about sustainability, according to beer, it starts with the best ingredients and this requires a healthy natural environment as well as great communities. We have been drink for more than a century in once to make sure, that’s here for the next century. Bringing people together for a better word. That’s right.

Sustainability isn’t just a part of our business. It is our business, who are 20%, 25% sustainability goals, we are connected thousands of farmers to technology and skills, ensuring water access and quality in high water stress communities, partnered with our suppliers to increase recycle content and investing into renewable electricity capacity.

Finally, so far, 2019 has been a good year as our portfolio of brands is the living a healthy top-line growth, which is helping to offset the cyclical pressures arising from effects and commodities. When you look beyond such cost heading, we get even more excited about a strong fundamental and growth potential of our business.

we are only able to achieve such results year-to-date, given the amazing people, who have always been the foundation of our company. with our team, our culture and our consumer centric business model, we are confident to be in a strong position to deliver long-term sustainable growth. We can now move to the Q&A. Thank you..

[Operator Instructions] The first question comes from Isabela Simonato with bank of America. Please go ahead..

Good morning, Bernardo and Fernando. Thank you for the call. I have one question in Brazilian beer. If you could, when you mentioned about competition in the release and you also say some headwinds should persist in Q4.

Can you elaborate a little bit more on how do you see the competitive environments if you see some sort of structural change or if – in the beginning of fourth quarter, now in October, you already saw some move from the competition in terms of pricing, I mean when we look for Q4 and also for 2020 especially as your competitors should increase capacity, how do you see the market share to Liberum going forward? And if I may, a second question on soft drinks.

We saw I think, a very pressured margins in the quarter, not only on the gross side – gross margin side, but also on SG&A. How can we think the profitability of this business in the longer run? Thank you..

Hi, Isabela, fixed. Thanks for the question. I think let’s talk a little bit about the quarter in terms of the violence. So, we know that was down 2.8% in any of this of the growth of single digit – low single digit, which means that we lost year.

the impact of our price increase was amplified yes, by simultaneous competitor discounting in a challenging macroeconomic environment that you still have here in the country, in Brazil.

and all as well, I mean from decades that you operate in this market as promotional activities that to try to drive volumes in the short term, but is not build brand acting or a sustainable business for the future.

When they take a more longer view in terms of the volume and in terms of the industry, in the first nine months, I mean, yes, we are in still pretty good shape. We have ones grew 3.9% outperformed the industry that was low single-digit, which means that we are gaining share in this year. That’s pretty good news.

We had a very good and amazing first half outperforming the industry big tie. So, we entered in the – in this price increase in the third quarter, yes, and they burn some volumes compared to last year given the points that I mentioned before. but again, we’re still gaining share this year and outperforming the industry in the relevant terms.

It’s important to point out it does have not seen any disposable income presuming as well that affect the industry. And when these happen to be and had a positive news in terms of disposable income we will see a positive impact in our business for sure.

We continue to be very excited with how the portfolio is performing wanted to deliver a strong brand power I mean, you have innovation in the markets, Skol Puro Malte, Bohemia Pure Malte, Colorado, Beck’s all of them performing very, very well. We’ve got into the fourth quarter. I mean, we do not comment in the current trading. That’s what I could say.

So, all in all, it was a quarter that we underperformed the industry at, I think that the promotional activities of the other companies – exactly in that moment that we increased the price. But I mean four years, doing well gaining share on the few years after an amazing first half..

Hi, Isabela. Fernando here, your question on soft drinks. On soft drinks, if you see what happened throughout the whole year, you saw that SG&A was higher, because volume was performing very well. So that’s somewhat negative volume and somewhat negative investing behind the brands.

And that’s definitely been offered, because we saw that top-line and soft drinks continues to be very robust in the third quarter. What was a more of one-off, you could say, so was the cost of goods sold, because if you remember last year, we had a huge improvement on cost of goods sold on the third quarter. And this year it’s more of a normal year.

So, the basis was very hard, that’s why we see such a pressure. But actually, we are quite excited for our soft drink; business top-line is performing in a very healthy way. and just to highlight some numbers, not the volume, the first – the third quarter was 6.5% of both last year and nine months.

Year-to-date, 9.4 in this low single-digit, top-line, the nine month of 70.5%, I mean this is doing fairly, very well. The growth platforms are working. they are working in beer. they’re working the non-alcoholic business, driving premium, smart affordability.

Our core brands are doing pretty, pretty well, so very happy with the soft drinks and the non-alcoholic results so far. Thank you..

The next question is from Lucas Ferreira with JPMorgan. Please go ahead..

Hi gentlemen, thanks for your time. I wanted to explore a bit more of the volume performance in Brazil for beer.

If you could give us some more information about that, which were the categories that surfer demos – which were the categories that you had more competition so – and also on a region wise, you have been having a very good performance in the North, Northeast of Brazil, if there was still the case in the quarter.

So, if you can give us more color on the breakdown of this 2.8% volume performance and how competition was doing in each of the categories and regions. And then my second question is regarding the fourth quarter outlook as well.

So, do you also foresee more pressure coming from pricing, how your competition is shaping up in terms of adjusting prices closer to your portfolio. If you can give us more color on what could happen in the fourth quarter and distance, that would be super helpful..

Thanks, Lucas for the question. again, I mean, just to reminders and repeat ourselves to Isabela, probably, in the years working very, very well and gaining share in all segments, stable in the core gaining share in the premium – gaining share in the volume. So, innovations are working. So, in first half, we offset one’s rule, a big, big time.

third quarter, we increased price on factors with promotional activities. I feel if discounts go in the opposite way. And this activity was in all segments, when this happened and then you have all the experience. We have the segment of that that’s really, surfer more, because of the affordability issue, no disposable income, more of the poor segment.

That means that the core brand is not doing well. They are doing really pretty amazing, Brahma, Skol family, the innovations that we’re putting in place to support the core as well.

But because of affordability, you should have to continue to have in Brazil a disposable income that’s very low when we’ll have a wine, that price gap, the core brands in the shorter-term surfer more. But again, what is that? I mean promotionals, discounts are to try to drive volume in the short term, but does not do the business in deliverance term.

We are not in this game. You’re in the game of building brands and building the strong business in the longer-term. We are here in Brazil for decades. We have already been seeing those search of competitive behavior before, it didn’t work for any company in the past, and have been working for us in the long run.

So that’s why despite of the – of this price increase in the upcoming that we’ve done. And then this – and we tell to leave competitor a discount that happened.

We’ll continue to seek to the long-term approach supporting strategic growth platforms, investing in our brands, innovation in the Ambev ecosystem that we – I mean before getting investing even more.

regarding any price increase, what we could see that after three or four months, you can see a kind of a historical based equilibrium in the market, that’s what I would say, the history says. but again, we don’t comment in current rate or anything about the fourth quarter..

Yes. And Lucas, this is Fernando right, you’re asking about the fourth quarter outlook. We cannot give any outlook. The only thing we said in the release is that some of the headwinds might be carrying into 4Q.

And at the end of the day, when you mention something like that it’s always a combination of volume and net revenues, and the headwinds might impact each one of those in different ways, but I cannot comment much more than that..

Perfect. Thank you very much..

Thanks, Lucas..

The next question comes from Luca Cipiccia with Goldman Sachs. Please go ahead..

Hi. Good morning. I’m going to hit as well, sorry on Brazil just to clarify a couple of points. So, I think your point about the fact that the nine months before months did show positive volume growth.

I think it’s fair, I guess what surprised us I would assume almost everybody else is that the magnitude of the decline in the third quarter ain’t be given the comps and the timing of the of the price increase. And I think you point to two factors, you point to the macro environment, you point to the competitive landscape, competitive reaction.

So, a question would be on the first point, for the longest time we heard the thesis that soft drinks is a more macro sensitive category as compared to be a yet, it’s been awhile now that actually we see beer suffering proportionally more at least at times of price increases even where you have a clear leadership in that category.

So, my question would be why are we seeing this greater elasticity, if you like, in beer as compared to soft drinks, which seems to have rebounder, not just for you, but also for the market leader. And secondly, on the pricing, you’ve definitely done a lot.

You’re clearly doing a lot on innovation, bringing new products to the market, new launches, new packages, new initiatives. Yet it seems that, your competitor is using the oldest drink in the book and when they do holding prices, doing promotional, they do have some significant results.

They managed to disrupt a little bit of the competitive landscape. So, my question would be, are you doing enough on affordability or pricing or should you maybe, re-oxygenate the market given that the beer volume growth seems to really struggle to come back or anytime, pricing doesn’t come through, then we have an impact on volume.

So, can you maybe expand a little bit on this comparison between the volume industry, volume trends in soft drinks, in beer and also, should there be an effort to increase further affordability for the beer segment. Thank you..

Luca, thanks for the question. I mean, let’s talk a little bit about beer first.

I mean, I think it’s always important to see in the longer-term, because when you see quarter-by-quarter and you will have a specific discourse in the third question, I will repeat a price increase as you can see only our net revenues for activators and competitors at the same time, discounting, it is not so common in the market.

I mean not even the Brazilian market, I mean in the past. So – and when you have a situation like that in one quarter that the disposable income is too low, the volumes tend to surfer more. And on top of that, when you increase price a little, where you contract the industries always have. So, there’s a two effects.

I mean, every time, you have any company increase prices and the leading company like ours increase price of contract, a little bit contract in the industry. And at specifically, that affects our volume.

Not that you lose lots of sharing this third quarter, that’s not the case at all, but when this happened a price increase in competitors putting price down, that was not so common, not even in the Brazilian market. What we have experienced in the past is that this is a strategy that does not work due to the value in the longer-term.

So again, the repeat, that’d be here in Brazil for decades. We saw this before, driving volume or try to driving volume – try to driving volume for short-term price. This is not end well for any company in any industry. So, we are liking this gain.

That’s why I’m saying this strategy is working, team is growing double digit, innovation is growing big, big time. Yes. In the shorter term, the core brands, they suffer more, because there are bigger price gaps. We’ve seen a longer view nine months, the number that I can say to you, not even say I have the first. We still gain share.

So, even with this thing that was very typical, this behavior of competitors in terms of the – after a price increase, we are gaining share in the year, I mean we are growing volumes 3.9 in this low single-digit.

So that shows the resilience of our business, the portfolio that’s working, the innovation that’s working, so even in a very typical pricing behavior in the markets in the third quarter we are still getting share. So, this is the beer business. for the NAB business, the industry is too low. We are gaining share a lot.

So, we can have the numbers here, but it’s a low single digit and the volumes in the in the third quarter was three point something that’s – I’ll give you the right number, 6.9 and in the nine months is 9.4. So again, we shared a big time. So, the industry is low single digit. So, this is the first point. And this is very, very similar.

And then I will see here that the competitive environment in the NAB business is more rationale, that’s why it’s reflected as well in the numbers. Well, that’s what I could say to you regarding both business..

Okay. In an environment in beer, where to your point, there’s been a lot of promotion, a lot of pricing disruptors, right? Is it somewhat surprising that volumes are not benefited more or an aggregate for the industry. as compared to again, NAB, where in fact pricing is coming through and volumes are growing.

So, I struggled to reconcile maybe, the fact that the industry volumes struggle to come back in spite of pricing or promotional activity has been quite elevated on low comps?.

I think that let’s – let’s really talk about the industry a little bit in Brazil first. I mean the industry in the quarter is low single digit. So, we have this information. So with that, I mean, we know that the way that you measure that specific industry, we have some delays, because it’s the Newsome athletes have delays in terms of timing.

And we know as well that one very important region in the country that’s the North and Northeast in terms of volatility of volume, the coverage of the news and let’s say, over the lot, it’s not so good there.

So, with that, what I could see that our volume in the North is feasibly ahead of being this and the industry there is not so represented in the food industry of the country.

So which means that our performance of beer to the industry, maybe it could be a little bit better what they never say, but the numbers, other numbers and have been using in for Q2, using over the coverage a lot, used to be 65% of these 80%. That’s not going to 100%.

So basically our internal numbers probably the industry would be a little bit even including low, lower that the numbers that we show to you, but the numbers of the numbers then using was around low single digit..

Okay. Understood. Thank you. Thank you very much..

The next question comes from Antonio Gonzalez with Credit Suisse. Please go ahead..

Bernardo and Fernando, thank you for taking my question. I am so sorry to come back to the same topic that everyone has asked so far. But just two quick follow ups. The first one, you are highlighting extended headwinds into 4Q right? But obviously, there's two months to be played yet.

So, I wanted to ask if the status without commenting on your strategy, which I understand you cannot the status so far, are you still seeing a lot of discounting as we speak or what leads you to give the comment into 4Q coming still two months ahead of us? That's the first question.

And then the second question, I wanted to see if you can comment, you've shared with us in the previous quarters, what was the movement between mainstream and value, right? 200 bps at the beginning of the year, the market migrating to mainstream than flattish in the second quarter.

Can you share those trends with those for the third quarter?.

Hello, Antonio, Fernando here. So, let me start by your last question.

We saw our declining in the first quarter on the value segment and since then it's been stable, which means that probably year-on-year little bit better, but is it stable since the first quarter? One question on the 4Q, we cannot comment on the current trade or give guidance, but what is fair to say is once you increase prices the market take a little bit of time to find its new and leave them to go back to normal even in the dynamics between kind of the moment we announced increase prices the trade kind of one that little bit to have had to make sure they have the volume, then the volume goes down, kicks a little bit for the price to go through for the final consumer.

So, the market takes a little bit of time. So two, three months to finance new deliver. We've seen that – we've seen before, seeing that every time when you do, you are going to see that your share is going to suffer little bit. But then again, there's some scene over.

What I think is, I think we can see as the highlights is that even in a moment there increased prices. You'll see that the premium segment continue to perform very well. You'll see that the quarter, which is the one that expect to suffer, it suffer, but the brand power is still quite strong.

So, I think, sorry I cannot comment too much more about the – about going forward, but despite this kind of a setback, if it could say sound third quarter we continued to be very excited with the strength of our portfolio..

And then Antonio, just to share some stats again to reinforcement, in the first half of the year that to have a more stable, a more stable market environment. I could say, our value grew seven plus, outperforming the industry. So good that the strategy is working.

Now the volume is coming, share is coming, that you could answer in a quarter of a price increase. That was a typical given all the promotional activities that we saw in the market.

But we enter in this quarter in a very strong, we've a very strong base in terms of share and volume in a way that we continue to gain share in the year-to-date numbers and in a way that our volumes stood at 9% of both less to you even with this third quarter. So the fundamentals of the business are there.

That's what I could, I mean talk about the past regarding the year-to-date numbers..

That's clear. And if I may just very quickly follow-up on a different topic. Is it possible to comment, and I presume it depends ultimately on your awards, a proposal and approvals, what dividends so far, would you expect more of a bullet payment at the end of the year as opposed to installments, which has been the case historically obviously.

Anything that you can comment on that front?.

HI, Antonio, Fernando here. On a not whole year, normally we have our – we'd have our head being some dividends of the year.

But in Brazil I will see is very important kind of the way you paid and this year and give a hyperinflation in Argentina and the impact that it had in our balance sheet accounts it's much more – more optimal if you leave it later for the BIOC.

So the idea is for those as always, from my sale of quality to pay out over the long run all our free cash flow, but more than that I cannot comment, because as you mentioned, well we needs to be approved by the board and it should to be disclosed in the proper way, but the long run it doesn't change our approach, we always like to pay out all the free cash flow over that..

That's very clear. Thank you..

The next question is from Robert Ottenstein with Evercore ISI. Please go ahead..

Terrific. Let me try to change the topic slightly. Two questions. One, can you give us a little bit more sense of the weakness in Canada, why the industry should be so weak? I don't think the weather was too bad, tied to that, your plan's on a CBD rollout there. So that's the first question.

And then the second one are you seeing any signs in Brazil the taxes either at the national or state level will go up? I know they have to be all done by the end of the year. We're two months or so away. So those would be the two key points that I'd like to hear about. Thank you..

Okay. Robert, Fernando here. Thanks for the question. On your last question. So no signs, no news on that front. Too early to comment on taxes, but no news on that front. If there's anything I can see about it. On your first question on Canada, I think, we saw an overall in the softness for a market share standpoint, and no issues there.

I think we are getting a good shape, but the overall industry was, well it was quite weak. I think weather was not terrible, but it was not rate either. But overall the industry as a whole, we can see were soft.

When you – on your second question or on a panel is, I think we announced that we are – we will be we launch our product, but only with CBD, and I think the timing, I think we still need to wait for it to be properly regulated to be available on the market. At the end of the day Fluent, which is the company that JV in Canada.

They will launch the product. We then to lead the cannabis industry in Canada when it comes to responsible marketing of its products, ensure that it's always focus on legal age consumers and fully compliance if all Health Canada and provincial regulators.

We then to have the product foresee to and consumers as early as December, 2019, but of course, it's subject to the regulatory timelines implemented by the Health Canada and provincial regulators.

So, I think we are excited, but it is too early to make any comment and even the timing, I cannot be 100% precise, but could be as early as December this year..

And just on that, do you currently have the necessary licenses? Does your facility that you have or your partner have, is it at the current, the necessary license to produce products and whatever regulatory approvals you need at this point?.

This is kind of, we want to make sure that when the time is right, December 2019, we have all their licenses without it, of course, we'll never be able to sell it kind of values is a very regulated markets, so the moment that we came out with the product in the market you can make sure that we have all the necessary approvals and licenses..

Okay.

But do you have them now?.

Right now I cannot comment on that, because it's – the regulation was already approve it. But even if for to have your product validated, it takes a while in Canada. It's not something that is kind of the regulations approval that everybody can sell. I think, I would be surprised if anyone would be in a position to sell right now.

I think the earlier you weren't going to be in a position, it's probably December..

Thank you very much..

Thanks Robert..

The next question is from Thiago Duarte with BTG. Please go ahead..

Hi, good afternoon everybody, Bernardo, Fernando. I have actually two follow-ups on previous questions and answers.

The first one Fernando, you mentioned in the previous question on the performance of the value segment relative to the mainstream segment you mentioned that the value segment loss ground in the first quarter of the year that's been stable ever since.

So just want to confirm that's the case because that would imply to the value segment, my understanding lost share versus the mainstream segment on a year-over-year basis versus the third quarter last year. So just want to make sure..

Correct..

Yes, that's okay. Perfect. Thank you.

So, and the second follow-up is again back to the statement that you guys had in your earnings release where you say that the headwinds some of the headwinds specific for the third quarter, are you see that carrying over into the fourth quarter? I just – it's still not clear to me where do you see those coming from in the sense that you can anticipate it? So just I want to make sure, I mean the cost environment should look better in the fourth quarter as per your guidance since the beginning of the year.

The industry is growing as per what news in report that you guys put. So, I don't – it doesn't seem to be an industry issue on an overall demand issue, even though the industry is not growing much, it seems to be growing over a reasonable comparison base.

So just want to make sure, are you guys anticipating that the competition is going to remain promotional throughout the rest of the fourth quarter or just whatever you guys could add on that just to, if you could be a little bit more specific would be great.

And finally, my question is on the performance of the – is marked affordability initiatives in the Northeast of Brazil. It's clear that those segments are doing very well since the launch is start that last year.

So just wanted to hear a little bit more on how incremental those volumes have been to your portfolio and, or how much have had there's been some cannibalization between those new brands that you guys introduced in certain states relative to your mainstream portfolio and relative to the competition portfolio.

Just want to see how those, how those brand shifts are taking place in the Northeast? Thank you..

Hi, Thiago, sorry to disappoint you, but that we cannot give much more details on Q4 or I'll discuss kind of current fleet.

I think, you flag it, right kind of on the cost side we gave the guidance and we're not changing the guidance so there shouldn't be too much surprising that what was a little bit of new news and kind of is actually third quarter and the whole competitive environment coupled with the market environment that get a little bit worse in Brazil.

So, I think these are the two main reasons we are kind for being a little bit more cautious going to 4Q, but on the cost side is as you ask – as you said, we gave our guidance and we're not changing the guidance. So there shouldn't be no lawsuit prices in that..

And Thiago, link it to the brands for them. There's not affordability brands after the launch of the Northeast, they're very incremental. They play segment that's the better segment that that is big, that we are – I mean under the first share EBIT time. So they are helping us in those days to gain share in the better segment.

And link it to this specifically, I mean, again a real repeat, because I think have a slightly different view specifically of this quarter and the volume and the share. In every market that we have been operating that we have problems with disposable income, any market.

I mean, so I mean by being either markets, not only in Brazil, I mean many, many crunches that I saw that I live.

When you increase prices, the competition has this kind of promotional activity that that had here usually the facts in your volume is usually the strong, it's very, very strong, but the good news and then that shows that our extra is working, our innovations are working, they are incremental of our business.

That, I mean, we ruled 7.2% when the first half of the year. And we're entering this price increase that what very critical in a very strong mode and – the three quarters gain share with 3.9% volume of this year. I mean, it shows how resilient this portfolio is becoming. Because maybe in other countries in other, I mean we would lose share.

That's not the case. So the fact that you continues in the year-to-date gain share and outperform the industry in a meaningful way.

And I talk about the year-to-date of 3.9%, this is low single digit, which means that the portfolio is resilient, that the innovation is working, and we see that kind of the shorter term promotional activity does not create value to anyone had been here for decades as we said, it's a shorter term tool to try to drive volume.

That means we saw this before in many, many times and given the work. So we are here to build brands to gain share, view the brands and a sustainable business.

And we're very happy with the performance of a 3.9% volume in the first nine months against the [indiscernible] despite of this third quarter very typical, whatever pricing behavior in the market, so great process in the bottom our strategy and in the performance our portfolio in Brazil..

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Bernardo Paiva for any closing remarks..

So before we finish our call, I'd like to close saying that we are confident again as I said, that's where evolving in a consistent way with our strategic platform not only Brazil, but in every country that we are operating.

Despite the short-term volatility in the region that we know in many countries like have you operated here in those countries for many, many times. We'll continue to focus on the long run and sustainable value creation. Thank you. Have a great day. Enjoy the rest of your day. Thank you again..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..