Good morning, good afternoon and thank you for waiting. We would like to welcome everyone to Ambev's 2023 Fourth Quarter and Full Year Results Conference Call. Today with us, we have Mr. Jean Jereissati, CEO for Ambev; and Mr. Lucas Lira, CFO and Investor Relations Officer.

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

After Ambev's remarks are completed, there will be a Q&A section, when we kindly ask that each participating analyst asks only one question. 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 that, as usual, the percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated, percentage changes referred to comparisons with 2022 fourth quarter and full year 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, operating profit and EBITDA on a fully reported basis in the earnings release.

Now, I'll turn the conference over to Mr. Jean Jereissati. Mr. Jereissati, you may begin your conference..

Hello, everyone, and thank you for joining our Q4 and full year 2023 earnings call. Today, I will cover our last year performance and then shed some light on what to expect in 2024. Let's get started. 2023 in review, it was a noisy year with a lot of distractions. But commercial strategy in Brazil continued to work led by our premium brands.

CAC recovered thanks to [DR] which even went beyond 2021 results. Preparedness in Argentina made the difference with more cash flowing dollars being generated and profitability came back in a big way with gross and EBITDA margin expansion pretty much across the board, while ROIC also improved.

Translating this into numbers, EBITDA grew 43% organically and 7% in nominal terms, despite the impact of FX depreciation in Argentina. Gross margin expanded 240 basis points and EBITDA margin 430 basis points. Cash flow from operating activities grew 20%, reaching almost R$ 25 billion and free cash flow stepped the change to R$ 17.7 billion.

Normalized profit reached over R$ 15 billion. However, it was flattish on the account of increased taxes, mostly due to higher effective tax rate and currency devaluation in Argentina. All this while challenged by tough industries in Canada and Argentina, a tough comp on tax credits in Brazil and a steep effect devaluation in Argentina.

And this performance was driven by a consistent commercial execution throughout the year with focus on the consumer, with industry volumes growing in half of our top markets and seven out of such top 10 markets delivering a net revenue per hectoliter ex-marketplace performance above inflation, a continued development of our digital platforms, over 90% of our gross turnover in Brazil was transacted via BEES, supporting our NPS at all time high levels once again.

GMV of our third-party marketplace products growing over 44%, totaling R$ 3.3 billion. Ze Delivery in Brazil expanding coverage and awareness, reaching 5.7 million monthly active users and growing GMV by 8% and effective decisions around optimizing our business.

As a result, cash COGS per hectoliter and cash SG&A grew below net revenue growth, supporting both gross and EBITDA margin expansions.

This shows how sound our operations are and how well we manage to convert commercial momentum, such as in Brazil and CAC, into free cash flow or offset commercial headwinds to protect our financial performance such as we did in Argentina and Canada. Now I would like to share some highlights by geography. Let's start with Brazil beer.

In Q4, premium volumes grew in the mid-20s and we estimate having gained market share in the segment for the fourth consecutive quarter, with brand health indicators continuing to improve. Corona was the highlight, once again proving the effectiveness of our strategy.

Other segments, however, led total volumes to decline 1.1% as we faced a tough comparable from FIFA World Cup last year. Net revenue per hectoliter performance continued with momentum in the quarter, while cash COGS and cash SG&A grew below net revenue, leading to 27% EBITDA growth coupled with gross and EBITDA margin expansions.

In the year, we checked all the boxes. We grew almost 3 million hectoliters in premium volumes, coupled with brand health improvement, EBITDA margin expanded 500 basis points to 32% resulting in EBITDA of R$ 12.5 billion, the highest in our history. Let's go for Brazil NAB.

Volumes grew over 6% in the quarter, driven by the consistent implementation of our commercial strategy, increasing both the number of buyers and number of SKUs per POC. Our diet light zero portfolio grew over 22% with a highlight to the new Guarana zero and the continued success of Pepsi Black.

The 0.5% decline in net revenue per hectoliter was explained mostly by increased VAT taxable base for carbonated soft drinks and some general mix, with the increasing of the third-party distribution in our mix. Cash COGS per hectoliter and expenses, however, declined, supporting an EBITDA growth of 15% and EBITDA margin expansion.

For the full year, we estimate our market share remained stable, while we continue to grow in energy and health and wellness, both with ours and our partners brand, delivering an EBITDA of almost R$ 2 billion the highest since 2015. Let's talk about glass.

In Argentina, volumes in the quarter declined, driven by an industry that was impacted by macroeconomic conditions.

However, a new financial and commercial playbook on how to operate in the Argentina environment allowed us to accelerate revenue management, while keeping market share stable, offsetting increased costs and expenses due to accelerate inflation.

In the year, cash flow generation in dollars improved significantly, even taking into consideration the FX depreciation in 2023 and the gap between parallel and official rates. As we implemented this new playbook, so in 2024, we already started to repatriate this cash generated in 2023.

As for the other operations in last full year EBITDA grew in the mid-teens with margin expansion, resulting in the highest nominal EBITDA in history. CAC volumes grew 7.7%, led by the continued recovery in the Dominican Republic this quarter.

A positive industry supported volume growth as Presidente brand family continued to recover and premium brands grew ahead of total volumes. Net revenue per hectoliter was up 4.5%, while costs and expenses grew below net revenue, translating into gross and EBITDA margins above 40%. This was a year of turnaround in CAC.

Volumes top and bottom line were back to growth with margin improvement. And as for Canada, volumes declined on the back of a continued tough industry performance in the quarter in a growing cash COGS per hectoliter affected by the lower volumes really impacted our EBITDA growth.

In the year, EBITDA grew low single-digits, thanks to initiatives to curb costs and expenses considering a sluggish top line. Now changing gears to 2024. First, let's talk about operations.

This year, we want to deliver consistent results with operational performance being the driving force behind our sustainable value creation path, being able to translate this commercial momentum into more free cash flow generation and to illustrate why we are confident in our strategy. Let me use Brazil as an example.

Although today, Brazil represents one of the largest beer per capita consumption in the world, we still see opportunities to grow such as in the north and northeast regions of the country.

And as for premium beers, it is growing, but it is still under-indexed in terms of participation in both beer and alcohol spaces as well as in the number of occasions, it is consumed.

Since 2019, our premium volumes grew about 8 million hectoliters while our total volumes grew over 11 million hectoliters, which is greater than the industry growth for the period. And in terms of costs, we expect to face less input cost pressure, given currency and commodities tailwinds, partially offset by mix and fair value adjustment of payables.

Therefore, assuming current commodities and FX prices, we expect our cash COGS per hectoliter in Brazil beer excluding non-Ambev marketplace products to decrease between 0.5% and 3% in the year. Second, let me share a little bit how we kicked off the year.

Carnival in Brazil was great, and we are off to a good start today, Brahma, Guaranantaska and Beats sponsored the three largest Carnival festivals in Brazil, Salvador, Rio De Janeiro and Sao Paulo and brought over 31 million people together during the period.

Sales volumes during Carnival were great and brand connection will last for the rest of the year. Carnival is a huge moment for our brands to connect with our consumers and to present innovations.

So we delivered a strong brand execution for Brahma and the new Guarana Antarctica Zero and scaled up Beats Tropical as the innovation of the season, performing over 2x better than what Caipi Beats did last year. And third, perhaps our main challenge relates to taxes in Brazil.

In 2023, we paid approximately BRL 32 billion in taxes, nearly BRL 11 billion of federal taxes and almost BRL 22 billion in state and municipal taxes. Our effective tax rate was higher than 2022, mainly as a result of higher profits in Argentina, the Dominican Republic and Canada and less IOC tax deductibility.

And in December, Congress in Brazil passed a legislation on deductability of IOC and state VAT government rents that should impact our effective tax rate going forward. However, the precise impact is not yet entirely clear. Lucas will come with more information about this topic. So let's summarize our call.

We are confident about accelerating volumes, especially in Brazil. We step changed the free cash flow generation and it will remain strong and solid in 2024, a year that will present its own set of challenges, just as every year since 2023. Nevertheless, my team has been managing to overcome them and deliver continuous and consistent improvement.

Therefore, I would like to thank my team again for the great 2023 and I'm counting on them to deliver in 2024, the next step in our transformation journey by doing what we have been doing the best, acting as owners listening to consumers and clients working collaboratively with our ecosystem, having a disciplined execution in the short-term, while laying the groundwork for sustainable value creation in the long-term.

So thank you very much. Now let me hand this call over to Lucas..

Thanks, Jean. Hello, everyone. We had four financial priorities for 2023.

First, to improve financial discipline, focusing on liquidity as well as cost and expense management while reinvesting for growth; Second, to improve profitability by increasing our return on invested capital but also expanding margins; Third, to further our value creation agenda, grow economic profit as well as free cash flow; and Fourth, returning excess cash to shareholders over time.

I'm happy to report that we progressed on all fronts. Liquidity remained solid throughout the year, which was valuable in the year where several other Brazilian companies faced numerous challenges stemming from the credit crunch in the country.

Disciplined cost and expense management resulted in cash COGS and cash SG&A growing below inflation with or without considering Argentina. We continue to invest for growth with sales and marketing totalling BRL 6.5 billion and CapEx totaling BRL 6 billion.

Return on invested capital expanded over 330 basis points, thanks mostly to better no path margin but also better asset turnover, while gross margins and EBITDA margins also expanded as Jean already mentioned.

Economic profit grew compared to last year, while we delivered record levels of cash flow generated from operating activities at nearly BRL 25 billion. And finally, we paid ELJ BRL 1.7 billion in connection with the exercise of the Dominican Republic put option and still return BRL 11.5 billion to shareholders.

And all this while dealing with looming headwinds in Brazilian taxes and Argentina. So let me tackle these two because they are relevant going forward as well.

The constitutional amendment required for the tax reform on consumption was finally approved by Congress in December, and we now move to the next phase in the process, which is to pass enabling legislation before the transition period begins in 2026.

Lots of work to do here to ensure we move towards a less complex system and that does not increase the total tax burden of the industry, which is already among the highest in the world. And in terms of income taxes, changes were made to the rules regarding the income tax deductibility of the IOC and of state VAT government grants.

On IOC, adjustments were made to the legal parameters for purposes of calculation and deductibility of the IOC.

Accordingly, pursuant to the terms of the new law, the main change to our IOC basis is that as of January 1, 2024, it will be adjusted downwards by the value that was recorded in the carrying value adjustments account in connection with the stock swap merger carried out in 2013 that allowed us to move to a one share, one vote system.

As for the deductibility of state VAT tax incentives, the new laws are already being challenged by several parties on constitutional grounds. As a result, it's still premature to say whether or not there will ultimately be an impact on our results and if so, to which extent.

We will do our best to offset these headwinds as much as possible be it the income statement impact, be it the cash flow generation impact where we see more opportunity given that we have other tax credits to be used over the next few years.

This is important because it gives us time to reassess our capital structure in an orderly fashion as well as look for other opportunities within Ambev's corporate structure. And finally, on the tax litigation front, we ended the year with BRL 95 billion in disputes with a possible, but not probable, chance of loss.

During the year, we had a BRL 17 billion positive impact in these disputes due to favorable decisions at administrative or judicial courts as well as certain legislative changes. And so far in 2024, there have already been an additional $4 billion of favorable decisions as disclosed in Note 32 to our financial statements.

We will continue to keep the market updated as new developments arise in our main disputes, many of which we continue to expect will be subject to decisions at the administrative level during the year. Now Argentina.

Our results under IFRS were materially impacted from an accounting standpoint given the Argentinian peso devaluation in mid-December of 124%. Page 15 of our press release contains a detailed description of the different impacts. However, we have been preparing for this for over a year, so we will continue to follow our game plan.

And not all is bad news, though. Despite the accounting impact, the combination of operational performance, gradual reduction of our FX financial hedges and structural reduction of our exposure in U.S. dollars, allowed us to end 2023 having generated more cash flow in USD than in 2022.

Capital controls have also eased, which has allowed us to begin repatriating funds. We still have a long road ahead, but we know what needs to be done, and the team has demonstrated its ability to execute and deliver despite these extraordinary circumstances.

And speaking of the future, I wanted to call out that as from January 1, 2024, our definition of organic revenue growth will be amended to cap the price growth in Argentina to a maximum of 2% per month and corresponding adjustments will be made to the organic growth calculation of the income statement in our press releases going forward.

We believe that given the circumstances, this more closely represents the underlying performance of the business. And is in line with practices adopted by other CPGs. Turning to our financial priorities for 2024. It's all about consistency.

We will continue to focus on liquidity, financial discipline, profitability, value creation and capital allocation. We have important headwinds indeed.

However, since 2020, we've had to navigate a lot of uncertainty and volatility, but we found ways to overcome them to keep delivering growth, profitability, resilient cash flows all while building our path to sustainable long-term value creation.

Finally, before moving to Q&A, I would just like to call out some of our highlights on the sustainability front. Sustainability is about impact. And in 2023, we took concrete steps towards that end, particularly on the environmental front. Our 2025 environmental commitments are on track.

We were the first company of the brewing sector in Latin America to receive final approval for our emission reduction target from the science-based targets initiative. We closed the year with an average of 2.37 liters of water used per liter of beverage produced improving by more than 8% versus 2022 as well as with 15 carbon-neutral plants.

More details to come in our sustainability report, which should come out in the coming months. Stay tuned. With that, let's go to Q&A..

[Operator Instructions] The first question comes from Isabella Simonato with Bank of America..

Good afternoon, everyone. I have a couple of questions. First of all, of course, on the cost side, right, for Brazil Beer. I think it was a consensus view that costs could decline more than probably what you guys announced given the movement that we saw on commodities and the FX relief, right, from the BRL.

So I wonder if you could break that expectation down a little bit. I mean, you mentioned the AVP and also the mix, right? So if we could split right, the key drivers of cost per hectoliter, I think that would be very, very helpful. The second thing is on SG&A, right? So you guys have said, delivered a more efficient SG&A in 2023.

So I wonder when we don't see that much of a cost payoff in 2024, how SG&A plays out as a margin driver potentially for the year. And finally, my last question is on Argentina. I think, of course, there was a big headwind from FX. But on the other hand, margins were quite strong as increased prices.

So how can we think about the top line margin equation for 2024 in this new environment?.

Isabella, this is Lucas. Let me kick off with question number one, and then we'll take the other two, the SG&A and [indiscernible]. So with respect to cash COGS per hectoliter, a few points, Isabel.

I think first, when we factor in only FX and commodities, right? And here commodities I'm referring to not only what we can financially hedge but also what we can physically hedge.

And when we factor in efficiencies on top of that, we would get all else equal, we would get to a mid-single-digit decline in cash COGS per hectoliter, okay? However, when we account for the higher premium mix right? I think we had some commentary on how our premium volumes are growing well ahead of the rest of our volumes of our brands.

And it's important to remind everybody that there's a benefit in obviously the mix shifting more towards premium because even though it impacts COGS, it has a positive effect in net revenue per hectoliter and in terms of profitability, right? Then when we factor in as well the payables fair value adjustment, which, by the way, has a virtually neutral effect on net income, right, because there's the impact on our finance results.

And then general inflation and, to a lesser extent, kind of change in royalties because there was a new law passed last year. That's how we get to the low single-digit guidance. Those are kind of the building blocks.

So if we were to look only at FX and commodities, mid-single digits, but when you factor in premium mix, payables fair value adjustment, inflation and the royalties, you get to the low single-digits that we're providing guidance for.

And within those four, the two biggest ones are really the ones that we called out on the press release, which is mix number one and number two, the NPV.

And those two correspond to more than 50% of the impact, okay?.

Isabella, Jean here. So moving into SG&A, I think it was a great year for SG&A in 2023. Cash SG&A declined by 2.3% year-over-year in Q4, right? It was a combination of a good grip on administrative expenses.

Basically, because we changed the way we operate, working more as a platform with less silos and really leveraging the whole company for all the business that we have, like beer, nobs, innovation, tech.

So there was a big reshuffle internally that led to a very good performance on [Ajime] the investments in tech that made us more efficient to distribution did very well. The combination of commodities and higher efficiency in our logistics footprint with Ze delivery efficiencies kick in. So these are two high note points.

And moving forward, looking ahead, we are seeing more of admin coming back in to mean as I referenced inflation. We begin to see an equation where we're going to put more fire on sales and marketing really to support our portfolio, support the brand, but with a more disciplined CapEx.

So this combination of a very rational CapEx after years investing in technology capacity of brewery, we feel comfortable with the level that we are but time for us to invest more in the brands and distribution will be a good year for the distribution expenses again. Okay. Moving to Argentina.

So yes, Argentina, I think we changed the way we operated over there. We created a new playbook of commercial and finance playbook on the way we would operate. We changed the way we did deals with suppliers. We changed the way we priced our product. We changed the way we hedged ourselves from more financial hedge to more operational hedge.

So it's a completely changed on how to operate. It paid off last year. So in the end, we ended the year of -- even though with this impact on the translation on the P&L, cash wise, we really end up in a good place with more cash in the bank being able to begin to bring cash back in 2024 now in the beginning of the year.

And what we're going to see in Argentina now, it is that a correction overall in the industry in volumes as the price follows what's going on in the inflation. And the biggest part of margin expansion will kind of stay moving forward, but the big upside was really in this year.

So now it is to protect ourselves on the inflation and understand how it's going to be the resilience of the consumers over there. And based on that, we are going to play a very nimble over there, really disciplined, but we have to understand where the volumes will land..

And then just to add one comment here, Jean. If you go beyond EBITDA in Argentina going back to Jean's comment around focus on free cash flow in U.S.

dollars, I think another point of note for 2024 that given that our hedge position, right, in Argentina was reduced significantly and we started the year without financial hedge, we should during the course of the year, not have, right, the carry cost impact. And that should also help us deliver free cash flow in U.S. dollars as well. .

The next question comes from Leonardo Alencar with XP..

I have two questions, mostly focused on Brazil. You mentioned the decrease in volume for the fourth quarter because there's a hard comps due to the World Cup in 2022. But then when we look at the prices, it was quite a positive surprise to see the 7.2% net revenue per activity to increase.

I understand that probably a good part of that increase is due to the volumes of premium increasing as well. But then I wanted to understand to get a little more color into this. If there was room for volume increase and the strategies is different or if there's changing in strategy for the short-term as well.

What you're expecting from the first quarter if the events, Carnival and everything is also doing well. If it's going to be more room for volumes in the next quarter but then was a very good number to see the price increase despite the volume coming lower? And the second question is regarding the non-alcoholic beverages.

We've mentioned the third-party distribution that helped increase volumes but also impacted negatively the prices. I wanted to look to get a bit of understanding on that because for the last quarters, we've been seeing the strong performance of BEES helping NAB and this strategy was positive for volume but then sacrificing prices.

It was interesting to see that. So just to get a better understanding of just two questions..

Let me try to give you a broader overview on Brazil once you asked about Q4 and Q1. So we are very happy with the Brazil beer performance. Brazil was very solid in 2023.

It was a great year in our view, looking back to 2019 when -- like before the pandemic and in 2023, the industry of the country grew 11 million hectoliters and 100% of this growth came to us, okay? So when we compare 2023 with 2019, 100% of the industry growth came to our products.

And we made it clear that in 2023, we had a priority that it was once top line was very resilient and growing. It was time for us to reignite margins, and it was a year of 500 basis points of margin expansion that was very solid.

So the combination of the journey of really volumes up, strong top line and then recovering margins in 2023, that it was our priority. We really felt that it was great. So what we are seeing so and then when you go to Q4, specifically, so we had a tough comp of the World Cup.

So as [inaudible], I mentioned in last quarter that the performance of volumes in Q4 would be similar to the performance of the full year and it landed pretty much there with the caveat that we had a tough comp that we did a good World Cup in the previous year.

So if you take this effect out and as we move by the end of the quarter, what we are seeing it is that a strong industry in Brazil, that kind of surprised us because it's really resilient, and we are entering Q1 with a lot of momentum because the industry is solid. And our market share is very well positioned for the start of the year.

So what we saw, it is really volumes igniting into 2024. When we talk about prices, I always mention that -- so EPCI is a reference for us to us it measures the basket and disposable income of our consumers is another one. And then on top of that, we have the plus and minus of mix.

Sometimes you have brand mix helping, sometimes you have regions negatively appointed as we are growing into Midwest into Northeast and Northwest, but it was very solid the price in Q4 overall to beer and we're going to continue to aim the EPCI with the plus and minus of our performance, okay? So but what we see in beer is really volumes accelerating, okay.

When we come to NABs, we launched it by the end of the quarter, the new variant of Guarana Antarctica zero sugar. And it was amazing to see the response of the trade and of the consumers about the product. It didn't impact the full Q4, it will impact fully the Q1 of this year, and we are super excited about how it is performing.

So part of our volumes was that and it's amazing how consumers are saying that there is no difference into Guarana Antarctica regular with sugar in this new Guarana with no sugar. So the ability to acquire new consumers with Guarana Zero is being amazing.

So having said that, the biggest impact that we have in the net revenue per hectoliter of NAB, it was more on the VAT change than on the mix okay? And the mix, these things happened.

It was a combination of expanding into Midwest and Northeast and North that a part of the distribution cost kicks in the net revenue per hectoliter because the wholesaler compensation kicks on the net revenue per hectoliter.

It is something that we're going to see this part of the equation happening as we grow towards Midwest, North and Northeast, but it's something manageable inside the whole mix that we have. So single serve, it is something that we have to drive energy. Red Bull with something that has another.

So we have another lever to compensate in this equation of boeing Northeast, Midwest. That is something really that is planned, something that we want to do and it will continue to do that. It benefits a little bit the SG&A too so because we allocate in others. So this is planned, and it's something that is intentional..

For now, I believe it's 100% clear. Just a quick follow-up, just to get your perspective. This reaction to the lower volume in Brazil seems that the most investors are kind of expecting something different than what you've been disclosing for the last few quarters. As you mentioned, the expectation was really to focus on margins now.

And despite seeing that delivered, we're still hearing lots of questions regarding the volumes coming lower than expected just to get your feeling on that..

Yes. So I'm not exactly sure about the reactions at this point on our Q4. I'll tell you that we are excited about two KPIs. So 2024, we are confident on volumes. We started well it was something that at some point in time beginning of 2023, I mentioned that was the big question mark because every other thing is on our hands.

So let's see how the industry will be resilient. So I'm much more confident in terms of industry and volumes and our market share performance in 2024. So I'm really confident on that that this will accelerate, as I mentioned in my summary.

And another thing is that even though despite all the noisy and the changes in the hyperinflation and the discussion on the tax side, free cash flow generation is something that we stepped up in 2023, and it will stay solid into 2024. So 2024 volumes and cash, I'm really -- we are really confident on that..

The next question comes from Ben Theurer with Barclays..

Just wanted to follow-up on your expectations just from the last question as it relates to the volume outlook across the different verticals.

Maybe help [Technical Difficulty] and what you're going to do differently in order to drive a volume upside from a commercial perspective? How should we think about marketing expense into 2024 on the execution side? And how do your digital platforms play a role in helping you getting that growth you just talked about?.

So we've been building for a while now this new portfolio of brands that we started like innovating in white spaces and really supporting a basket of brands in a more intense way, like really unlocking Corona capacity that is something that two years ago I couldn't do.

And during this period, we invested a lot on capabilities on our supply side to be able to sell Corona this pattern performance that is something to that is doing great. So Budweiser there is another brand that really reunited in the previous year and a strong growth. So somehow, we've been building a better portfolio.

So the KPI that we follow, there is love of from our consumers towards our portfolio continue to increase. I have 4 million people more declaring that loves one of our brands in our portfolio. So this is really 4 million when we compare with 2019. So this is still growing.

So somehow, we are very well set in our portfolio and we made a statement on the premium side, right? So 2023 was a year that we -- you really win on the high end materially, right? So it was really a year where Corona performance, patent performance, Stella is doing well. So our portfolio is very well set.

We're going to allocate more money in marketing for these brands. So this is in our plan. And we're going to continue to increase with really investing on platforms, bringing platforms from the U.S. to work down in Brazil. So somehow marketing dollars is something that we're going to -- we'll be investing ahead of inflation.

The good news is that the CapEx really to produce Corona, to have the capability to produce nationally. And the CapEx that we had should do digital platform. So the big tick is behind us, now I can be more rational on that and I have the capabilities moving forward. And so on top of that, I'm seeing -- I saw the industry in Brazil.

So we are seeing -- we have been seeing that by the end of the last year, and we've seen the start of 2024 with momentum industry overall, our market share overall and we did a great carnival.

So somehow a little bit more rational CapEx, more money to support brands, a very good performance on the high end and important innovations that are really coming in the pipeline. So we have been investing on functionality in beer. So we have these zeros really accelerating.

So but zero is a success in Corona zero is coming for the Olympics in the middle of the year. So this is very accretive and is doing very well. Stella no gluten is evolving to Stella Pure Gold with no gluten, low carbs. So this is really performing very well. We started by the end of last year, and it's really surprising us.

And beyond beer is really something that we made a huge growth during the Carnival with the brand beats with this idea of putting famous cocktails in cans like we did with Caipirinha last year, we did now with famous drink here in Brazil that's called tropical, is yellow fruit with gin that we put in the can and we'd explode it.

So somehow brands better positioned, innovation working digital platforms really supporting all this growth in the industry that looks good. So I'm really excited about our voyage..

The next question comes from Thiago Duarte with BTG Pactual..

Yes, I was looking to go back to the discussion on the Brazil beer volumes in the portfolio.

But with the hope of breaking down both the expectation for 2024 and also the performance in the fourth quarter of 2023, particularly with regards to the core and the core segment, right? I mean it's clear from many of the things that have been said already, you talk about a more balanced performance, top line performance between revenue per hectoliter and volume.

Jean, you sounded very, very confident about the volume performance and the market share protection that you're intending to have in 2024. So the question is really, what should we expect to be the toolkit for protecting the core and the core plus parts of your portfolio? Because as you said, you did a statement in the premium segment. That's clear.

But it seems based on what we saw in Q4 that it's really these two parts other than the value, but in terms of the ones that are more representative. These are the two parts of the portfolio that lost a little bit more of market share and seem to be the ones that could command a better recovery in 2024. So just if you could elaborate on that.

Is it just the pricing initiative or there is a lot more than that. So just if you could comment even from a competitive point of view. And if I may, as well, and this one, I think it's to Lucas, Lucas when you debated the impacts of the new regulation regarding the deductibility of IOC.

Back in many conference calls ago, you mentioned that the company had a toolkit to address that. It's something you have been working on, either with regards to changing the capital structure of the company.

Is there anything now that we know what the final impact is going to be? And how it affects your effective tax rate and so on? Is there anything that you could share with us already with regards to what we can expect in terms of either levering up the company, more dividends, acquisitions, capitalization of reserves, whatever? Something that we could expect to see going forward?.

Let me start with the volumes. So in the end, yes, I'm confident about volumes. Happy with the high end, as you mentioned, really doing well.

What we envision for the core, it is that the core in 2023 was in line with my overall performance, okay? When we put my three brands, it was pretty much in line with my total okay? And what we see, it is that I aim to maintain my core brands in line with the industry.

It's really something that we missed a little bit because we missed the total but somehow, I see my core brands with potential to perform in line with the overall industry.

The high end is really -- there is a lot of growth over there, and we're going to see the core plus reigniting to the positive territory again with Budweiser really leading the way. And Brahma Duplo Malte that was really an innovation that went up and it's finding its new base volumes in 2024.

So the combination of the shoe brands will be positive again in 2024 with Budweiser really doing well. And the value is where we made a conscious decision in terms of revenue management, in terms of allocation of my supply capabilities to really be made the decision that I did on really reducing promotional activity over there.

So what I see moving forward, it is a strong high end, a core plus reuniting in a core in line with the industry and let's see where the value can land. .

Thiago, Lucas here to cover your question on IOC. The alternatives that we have, Thiago, to seek to offset as much as we possibly can, right, the impact from an income statement standpoint or from a cash standpoint haven't changed.

The first and perhaps the most important one in the short-term relates to other tax credits that we have already recorded in our asset base, right? It's there in our financials.

And so as the IOC is no longer deductible, right, at the same levels as in the past, we will look to right use these other tax credits over time and that should help us offset the cash impact, okay? That's where it will be most relevant, number one.

Number two, the capital structure, you're right, we have alluded to this in the past and this continues to be an alternative. But it's an alternative that we are still in the process of reassessing. No decision has been made yet, in part because of the fact that we have these other tax credits to use.

So there isn't necessarily in the short term a need to revise the capital structure just yet, but it's a live conversation internally and this will be discussed with the Ambev Board in due course.

And then number three, as I've mentioned in the past, we also have within the Ambev corporate structure, certain transactions, right, between Ambev and its subsidiaries in Brazil and abroad that may be revisited over time again, given that we have these other tax credits to use in the meantime, but we're also in the process of revising those, okay? And as we have more clarity in connection with this combination of other tax credits, reviewed capital structure and corporate transactions within the Ambev structure, we will obviously update the market from time to time.

But that's what we have for now..

The next question comes from Carlos Laboy with HSBC..

Might you comment on the rhetoric that's coming from the European spirit side that spirit consumers in Brazil are trading down into beer? And I'm asking because is it possible that perhaps beer is premiumizing better and holding on to beer consumers better and capturing and holding on to women in the category better.

And that's really what the dynamic is that we're seeing starting to happen. In other words, premiumizing a beer rather than down trading from spirits..

In the long run, beer category is very healthy down here in Brazil in terms of share of truth, in terms of being part of the culture of the young generation in Brazil, as we are seeing really excitement about our category. We are in a good level of share of truth when we compare with other countries.

But still, we see upside on regions, North and Northeast, for example, on occasions. If I could break down a little bit occasions to you, so beer, it really leads on this social bonding occasion. It's the main product for social bonding and our stronghold is there.

But we are seeing that high-end brands has been able to gain traction in occasions like mixed social bonding, relaxation pretty much led by Corona, for example, food out of home with shop Brahma our original really being brands that really part of this occasion in Brazil and Paris, okay? So we are seeing that we maintain our stronghold in occasions.

We are gaining traction in mixed agenda, in relaxation, in front of our home and we are again closing the gap in parties overall that we see overall spirits with a strong performance. Somehow, when we look at consumer, so the average consumer of beer and spirits is the same.

Usually, we have 50% of the consumers that transition in between the two categories but we’ve seen is that the high-end beers are being able to be more time with this consumer because it's really leading in new occasions for beer.

I think another point is that this round of innovation that we had in Brazil that the pure mouth established in the Brazilian market and the double mouth came and then the pallets that were more bitter like bags, and the craft and now we spot income coming with this concept of being stronger.

And the zero beers and the low carb beers coming, and we have seen a lot of traction on functionality on zero and low carbs. I think this is -- it was a strategy that reopened the connection of beer with another occasion with the same consumer that goes into two categories, okay.

So somehow, I'm really excited about the category about the things we have been doing. And on top of that, we have beyond beer on fire. We are super excited about this unit is something that we are seeding for two years right now. And we accomplished the mark of BRL 1 billion in gross revenue last year and with a really good momentum in performance.

So the ability to innovate and it's really connected with the generation. So somehow excited about the category, I mean, excited about the brands and the products that we developed in the last years..

The next question comes from Lucas Ferreira with JPMorgan..

So my question is about the international operations. So in 2023, those took a bit of the shine of the Brazil, very good results.

So I was wondering if you could do a quick recap on each of those, maybe skipping Argentina since we spoke about Argentina already, but what to expect for 2024 in terms of especially volume recovery? But since you gave some guidance on Brazil cogs, if you can also kind of at least qualitatively touch on potentially margin recovery for those operations as well talking about Canada, what to expect for volumes top line and Central America that would be great..

I mean you're right. I think our international operations in 2023 dealt with, right, many different circumstances, geography by geography.

I think last we've already covered today with the commentary on Argentina and Jean in his prepared remarks talked about how the other last countries, right, continue to perform well, delivering mid-single mid-teens EBITDA growth in the quarter, and they had a good year as well.

So between Bolivia, Chile and Paraguay, we had a good 2023, obviously, right? More to do in 2024, but we're happy with the performance outside of Argentina in last.

And as we've been mentioning in the past, when you look at cash flow performance, right, I think Argentina did very well given the circumstances and that's kind of supported further in terms of cash flow generation in last as a whole, given the performance of Bolivia, Chile and Paraguay.

As you move north, if you look at CAC, I think CAC had obviously an important recovery throughout 2023.

And this is true not only on a year-over-year basis, but also sequentially how the Dominican Republic, which led this recovery, right, to manage to improve quarter after quarter on a sequential basis was also -- gives us confidence that we're on the right track.

And one data point that for us has been relevant in 2023 is that if you compare our 2023 performance in the Dominican Republic in particular, with our 2021 performance because 2022 was down right? The facts are that the Dominican Republic delivered kind of a record performance in 2023, even when compared with the higher performance in 2021.

So that gives us confidence as a data point that we're on the right track. And then when you double-click into the dynamics, you see our Presidente, right, family of brands really coming back and that gives us optimism going forward that as we continue to take, right, the Presidente family forward.

And if we do a good job with respect to the other kind of segments within our portfolio, be it core plus, be it premium because these are still underrepresented in that part of Latin America. We see more room for growth in the Dominican Republic, and that should also help CAC because the Dominican Republic represents roughly 80% of CAC.

So it's going to be a combination of Presidente, Corona, Modelo Especial in the DR that we're going to focus on going forward. And then if you go to Canada, I think Canada had a very difficult year. And so as far as volumes are concerned, the big drag was the industry, unfortunately, not only beer but also beyond beer.

We did lose market share basically due to kind of mainstream volume performance because if you look at Corona and Michelob Ultra they delivered solid performance in 2023, not only in terms of volume growth but also market share and brand health indicators.

And so going forward, the focus in Canada will continue to be behind the trade up, the premiumization of the portfolio because that's where we do see momentum, and we also have to improve our performance beyond the beer side of the portfolio as well.

And then my last comment is, even though we did see industry drag in Canada, even though we still saw in CAC, right, challenges in Panama, for instance, when you look at the cash flow performance in both geographies, right? We had actually a better performance year-over-year. So right, we see the different dynamics kind of on the EBITDA side.

And obviously, we have some work to do in many of these markets. But when you look at what the team managed to do in terms of cash flow performance, last delivered better cash flow, CAC deliver better cash flow and Canada delivered better cash flow year-over-year.

So when you add to that the performance in Brazil, that's how we got to the record operational cash flow performance for the company as a whole. .

Super brief, if I may a quick follow-up. Last year, I remember the guidance was that Brazil's EBITDA growth -- organic growth would be pushing the average higher. So do you think that this should be the case for 2024? Or you think international ops will probably outpace Brazil in '24..

I think the challenge here is like Argentina, obviously, right, where we made the comment around organic revenue being capped. So I think that's different from what we had in 2023.

If you look at kind of other geographies as compared to Brazil, I think Canada in 2023, we managed to deliver despite the tough Q4, we managed to deliver EBITDA growth, right, 2.7% for the full year, which for Canadian standards was much better than past performance.

So there, if the team succeeds in improving volume performance, maintaining net revenue per hectoliter growth and deliver operational leverage, perhaps we'll be able to deliver better performance in Canada for the full year. Let's see.

I think Canada -- I think CAC, Dominican Republic, the challenges, too, right, not only keep momentum but build on the momentum that we delivered in 2023. And so to the extent we managed to improve the performance of Panama. I think that could also help us for the full year to kind of improve as compared to what we delivered in 2023.

And so I think those are the opportunities that we have. But again, still a lot to do, years just beginning, so far, I think so good with what we've seen but a lot to do still..

So that's it. Thank you all who joined the call. Thank you for your time and attention. The summary overall, it is that operational performance is going to be the drive of our sustainable value creation path.

And to translate commercial momentum into more free cash flow generation is really what we are into Brazil solid with momentum and started well with a good Carnival. CAC went back to its journey. Argentina is really about the playbook to operate over there and really focus on cash generation in dollars.

Largest Argentina being resilient in Canada, aiming for a year of EBITDA growth. So that's pretty much the summary. Thank you very much. See you in May and have a great day..

Thank you all very much. This concludes today's conference. You may now turn off your phones. Thank you..