Carlos Alves de Brito - Chief Executive Officer and Member of Executive Board of Management Felipe Dutra - Chief Financial & Technology Officer and Member of Executive Board of Management.

Trevor Stirling - Sanford C. Bernstein & Co., LLC., Research Division Olivier Nicolai - Morgan Stanley, Research Division Chris Pitcher - Redburn Partners LLP, Research Division Mark D. Swartzberg - Stifel, Nicolaus & Company, Incorporated, Research Division Sanjeet Aujla - Crédit Suisse AG, Research Division Robert E.

Ottenstein - Evercore ISI, Research Division Edward Mundy - Nomura Securities Co.

Ltd., Research Division Andrea Pistacchi - Citigroup Inc, Research Division Mitchell Collett - Goldman Sachs Group Inc., Research Division Simon Hales - Barclays Capital, Research Division Eddy Hargreaves - Canaccord Genuity, Research Division Wim Hoste - KBC Securities NV, Research Division Brett Cooper - Consumer Edge Research, LLC.

Welcome to the Anheuser-Busch InBev First Quarter 2015 Earnings Conference Call and Webcast. Hosting the call today from AB InBev is Mr. Carlos Brito, Chief Executive Officer. To access the slides accompanying today's call, please visit AB InBev's website now at www.ab-inbev.com and click on the Investors tab.

Today's webcast will be available for on-demand playback later today. [Operator Instructions] Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements.

These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that the company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.

For a discussion of some of the risks and important factors that could affect the firm's future results, please see Risk Factors in the company's latest annual report on Form 20-F filed with the Securities and Exchange Commission on 24th of March 2015.

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. Carlos Brito. Sir, you may begin..

MixxTail, our flavored cocktail brand with 3 variance; and Oculto, a tequila-flavored beer. It's early days for these new innovations, but both are doing well. Moving now to Mexico. Our Mexican business continues to make good progress with another solid result in terms of volume, revenue and EBITDA.

We estimate that industry volumes grew by low-single digits in the quarter, driven by a growing economy and an earlier Easter, Easter being the most important holiday for beer in Mexico. Our own volumes grew by 2.1%.

Revenue per hectoliter was also very healthy, growing by 5.9% due to our revenue management initiatives and favorable brand mix from the growth of Bud Light. The strong top line result led to a growth in EBITDA of over 15% and margin expansion of more than 300 bps to 46.8%. Volumes of our Focus Brands in Mexico grew by 4.4% in the quarter.

This result was led by Bud Light and Victoria, which both performed well. The Corona brand also saw good growth despite cycling a tough comp resulting from the very successful FIFA World Cup promotion in the first quarter last year. Moving to Brazil. We're very pleased with our performance in Brazil, with revenues growing by 10.7%.

Our beer volumes grew by 0.4% despite the challenging economic environment and a difficult comparable with beer volume growth of over 10% in the first quarter last year. We estimate industry beer volumes are marginally ahead of last year, resulting in a flat share for the quarter of 67.5%.

Our beer revenue per hectoliter result was very solid with growth of 11%, reflecting our revenue management initiatives, increased own distribution volumes and premium brand mix, while keeping pricing in line with inflation.

The Brazil soft drinks industry saw some weakness in the quarter, but we estimate we gained approximately 50 bps of market share with an average share for the quarter of 18.8%. Guaraná Antarctica Black was launched during the quarter and helped to drive this result.

EBITDA in Brazil grew by over 18% in the quarter with margin expansion of more than 300 bps. Our guidance for net revenue growth in Brazil this year remains mid to high-single digits despite facing a tough FIFA World Cup comparable with volumes in the second quarter last year growing by 7%.

Our commercial focus in Brazil is to maintain a healthy balance between volume and revenue per hectoliter growth. We're delivering against this goal through our affordability impact price strategies supported by very strong, disciplined field execution.

All of our core brands, Skol, Brahma and Antartica, played leading roles in regional carnival events in this first quarter, building engagement with our consumers.

In addition, we continue to invest behind our premium brands, which include not only our Global Brands, Budweiser, Corona and Stella Artois, but also our strong domestic specialty portfolio.

We also continue to roll out innovations building off the strength of our core brands, such as Skol Beats Senses, which competes in the near beer space, and Brahma 0.0. Both products continue to exceed our expectations. Moving onto China.

Our China business had another strong quarter, with revenue growth of over 15%, driven by a very successful Chinese New Year campaign. Our beer volumes grew by 4.7% in the quarter with our Focus Brands of Budweiser, Harbin and Sedrin growing by more than 10%.

The Chinese economy continues to be soft, although this appears to be impacting value in the core brands more than core plus and premium brands, which is where we have chosen to focus our efforts.

We estimate that industry volumes declined by approximately 2% in the quarter, an improvement over the fourth quarter last year, resulting in an estimated organic gain in market share of approximately 100 basis points to 16.7%. We estimate our market share in the quarter reached 18.5% when including our recent acquisitions.

Revenue per hectoliter growth of 10.1% was mainly driven by improved premium brand mix, led by Budweiser and Harbin Ice, as consumers continue to trade up to the core plus and premium segments.

China EBITDA increased by over 50% with EBITDA margin growing to 26%, driven by our top line result, the timing of our sales and marketing initiatives and strong operational leverage. Budweiser delivered a great result in the first quarter with volumes growing by double digits and leading the premium segment with an estimated share of well over 50%.

Budweiser was at the heart of our Chinese New Year campaign across 9 major cities in China, linked to celebrations in Times Square in New York included. We estimate the campaign reached over 500 million Chinese consumers in December and January.

It is programs of this scale, supported by liquid innovations such as Budweiser Supreme and the aluminum bottle, which are driving Budweiser's success in China. Harbin and Harbin Ice are also major contributors to our growth in China, building brand health through strong activations around our NBA program.

With that, I'd like now to hand it over to Felipe, who'll take you through some further details in our first quarter results.

Felipe?.

Thank you, Brito. Slide 16 shows the EBITDA breakdown by zone. As Brito said, our total company EBITDA performance was very solid, with organic growth of 11.1% and EBITDA margin expansion of 170 basis points. The EBITDA performance was driven by strong top line growth despite the difficult STW comparable in the U.S.

The result was also helped in part by a modest increase in sales and market investments of 1.3%, although it should be remembered that the increase in the first quarter of last year was 16.7%, reflecting the start of our FIFA World Cup campaign.

We are maintaining our guidance for the full year growth in sales and marketing of mid to high-single digits. Brito covered our 4 top markets, but I would just like to mention some highlights from other relevant markets.

The weak consumer environment continues to put pressure on volumes in Argentina with our beer volumes down low-single digits in the quarter. MixxTail, launched at the end of last year to compete in the near beer space, continues to exceed our expectations.

Industry volumes in Belgium declined in the quarter, although we estimate we gained share with a strong performance in the off-trade. In Canada, good weather in March helped industry volumes in the first quarter and drove low-single-digit growth in our own beer volumes. We estimate we maintained share.

And Corona, which we took over in March last year, continues to do very well. In Germany, our total volumes were marginally down in the quarter due to the timing of our price increase.

We have recently introduced a number of exciting new Beck's liquids, and Franziskaner no-alcohol products in the German market to build on the strength of these 2 brands. Our volumes in South Korea declined mainly due to some share loss against a difficult comparable.

And finally, in the U.K., our volumes were down as a result of a weak industry as well as a difficult share comparable. I would now like to quickly review the below EBIT results, starting with our earnings per share performance. Normalized earnings per share increased to $1.40 from $0.87 in the first quarter last year.

This increase was due to a $0.16 per share improvement in organic EBIT growth, driven by our strong top line result and favorable net finance results of $0.53 per share, which I will explain in more details on the next slide.

Net finance results in the first quarter was an income of $91 million compared to an expense of $866 million in the first quarter of last year, a variance of almost $1 billion.

This was driven by -- primarily by $757 million market-to-market adjustments linked to the hedging of our share-based payment programs compared to a loss of $52 million in the first quarter of last year, a swing of $809 million.

In addition, our first quarter net finance results includes a positive currency impact and other hedging costs of approximately $153 million and the payment of other bank fees and taxes in normal course of business of approximately $37 million.

Our normalized effective tax rate for the first quarter was 18%, down from 18.8% in the first quarter of 2014. This decrease is mainly due to the nontaxable nature of the gain from the hedging of our share-based payment programs in the first quarter of '15. At the same time, one should keep in mind the first quarter 2014 loss was non-deductible.

Our guidance for full year 2015 remains in the 22% to 24% range. And as a reminder, this guidance continues to exclude the impact of any future gains or losses related to the hedging of our share-based payment programs. Our capital allocation objectives remain unchanged.

Our first priority will always be to invest behind our brands and to take full advantage of the organic growth opportunities in our business. M&A remains our core competency, and we will always be ready to look at opportunities when and if they arise, provided that the target, deal structure and price makes sense.

We do not feel any pressure to do deals, and there isn't -- no predetermined time table for that. We recognize the value of growing dividends over time consistent with the low volatility of our noncyclical business. Our goal is to reach a dividend yield between 3% to 4%, in line with other consumer goods companies.

Our optimal capital structure remains a net debt-to-EBITDA ratio of around 2x. And at this level, the return of cash to shareholders is expected to be consistent of both dividends and share buyback programs. And with that, I will hand back to Maria to begin the Q&A section..

[Operator Instructions] Our first question is coming from the line of Trevor Stirling of Bernstein..

Relating to the other operating income and the $50 million gain coming from investment incentives, you highlight in the text, Felipe, that that's recurring, but should we be expecting a further $50 million increase in each of the 3 quarters to come this year?.

You should look at that as a percentage of net revenues, Trevor. There has been an increase throughout 2014 coming from a lower base as you look into the first quarter 2014 to approximately 6%, 7% implied this quarter. And you should think about that as a percentage of net revenues going forward.

As we keep investing, there may be more incentives grants, but that is specifically for Brazil and to a certain extent to China as well..

Our next question comes from Olivier Nicolai of Morgan Stanley..

Just one question on Brazil. Revenue per hectoliter grew by 11% in Q1. Could you please quantify the 3 elements here? So the mix, the pricing itself and the increase in the weight of direct distribution.

And should we also expect revenue per hectoliter to be as strong for the rest of the year or should moderate a bit?.

Olivier, as you said, our net revenue per hectoliter grew by 11% in beer Brazil, with all the real growth, that is what's above inflation, coming from premium, which is growing ahead of our total volume, by the way growing double digits, and increasing direct distribution, which now reached 72.5% of our volumes.

So and we'll continue with our policy of increasing prices in line with inflation. So anything that's ahead of that in terms of real growth or net revenue came from this -- basically these 2 initiatives, premium growing out of total volume and direct distribution having a bigger impact..

Our next question comes from the line of Chris Pitcher of Redburn..

Brito, I was wondering if you could comment on your strategy in craft, not just in the U.S., where you continue to buy brands, but what you're learning from there, obviously, buying brands in Brazil? And whether you can confirm that you've taken a minority stake in a craft brewer in Colombia as well.

And then as a follow-up, sort of following on a bit from craft, could you talk about your learnings in social media? Because you've had some successes and some recent mistakes, let's say, or problems.

Could you talk how you're learning on there and to help build your brands?.

Yes. So in terms of crafts or specialties, the strategy in different places, of course, in different countries are slightly different because they are at different stages of development. In the U.S., for example, the segment is more developed than in other countries, of course.

And here, we're adopting the strategy very clearly of having more regional relevant brands. So that's the case when we joined with Goose Island, Blue Point, 10 Barrel, Elysian, but also developing our own like Shock Top, and also trying to focus in a few that could be nationally expanded.

So a few will remain regional, some will go national and some specific segments within will build the craft portfolio. So for example, IPA, it's cleared IPA, with wheat. It's cleared Shock Top. And with -- if you think about specialties, with lager, it's clear. In a broader sense, it's Stella Artois. So that's our strategy for the U.S.

In other markets, what we're trying to do is get the U.S.

learnings over to other markets and try to be, of course, ahead of the curve, especially markets where we lead, like Brazil, where we are trying again to -- together with our domestic specialties that we have in Brazil, to have the -- to have also some other local specialties like walls that we acquired.

So that's pretty much how we expand it, and that's how we'll continue to do in other countries. To your other question, social media, as we all know, social media continues to grow within our mix of media spend between social and traditional. We are learning every day by connecting more with consumers and making our contents relevant.

Of course, it's a very fast paced type interaction with consumers, and we don't intend to get everything right all the time. But I think when we don't get it right, we apologize and learn from it. We take it very seriously, our messaging to consumers.

So that's -- we've always been -- as a company, we take things very seriously, and we'll continue to do, be it from social media or traditional media. But the learnings are very interesting..

Felipe, could you just confirm whether you've taken a stake in the Colombian craft brewer, Bogotá brewery, because there were press reports on that Bogotá Beer Company..

Yes, on April 17, we closed a transaction in Busch InBev, became indirect owner of 100% of the shares of a company called Bogotá Beer Company, a very successful company in Colombia.

And again, as we did with Goose Island, the craft feature creativity and dedication that makes Bogotá Beer Company an exceptional brewery will remain unchanged and will be critical to business success in the future.

What we're trying to do in Colombia -- Colombia is a very exciting market, is of course to play in the high end with our Global Brands and local brands..

Our next question comes from the line of Mark Swartzberg of Stifel Financial..

One, Brito, on Brazil, can you just help us better understand what you think the scale and pacing of the opportunity you might have there as you acquire more of your own distribution? And then, Felipe, the repo rate of nearly $500 million with $1 billion as the target basically says if you keep up that rate, you'll be done by June/July.

So my question there is what next?.

Well, on distribution in Brazil, it's something that has been going on now for 20 years, as far as I can remember. And so there's no news really there. I mean, it just continues and it's now at 72.5%. Last year, I think it was more towards 70%. So I mean, there's not really any news there.

It continues to be the consolidation pace we've had for many years. It's interesting because it provides scales, provides alignment, but that's not the only way to do it. That's the way we figured out in Brazil. And the U.S., for example, is a different way.

We're very happy with wholesalers we have in the U.S., and we do amazing things when we are aligned with them and when we go to market on a focused way. So it's business as usual, I would say, in Brazil..

And so is the corollary then, Brito, that in spite of the lack of volume growth there, you're not putting a greater emphasis on taking that 72.5% up?.

No. I mean, the strategy on direct distribution in Brazil has been a consistent one, and it's not going to change because of one year volume softness or anything. I mean, it will remain consistent. Business as usual..

Well, on the second part of your question, you are right about the pace. However, we are kind of a company that we want first to cross the finish line before deciding the next move, which is something that is up for discussion with the board. And as we get there, we'll make that decision..

So I think -- we should think more like the second quarter we'll get an update on any incremental repo or some different approach with the balance sheet if there's no news between now and then?.

The current buyback program was much more risk management-driven than capital structure-driven, as we are hedging the stock exposure under the stock ownership plan, which is something we'll keep doing, and as we continue to gravitate towards the 2x net debt-to-EBITDA optimal level..

Our next question comes from the line of Sanjeet Aujla of Crédit Suisse..

I just want to get a sense of why you think the beer category seems to be holding up relatively better than other consumer categories, specifically soft drinks?.

Sorry, can you repeat the question, please, Sanjeet?.

Sure. Yes, I just want to get a sense of why you think the beer category around flat from Q1. It seems to be holding up relatively better than soft drinks and other consumer categories..

You mean in Brazil?.

Yes, in Brazil..

Okay. Well, I think that's a very interesting question. Thanks for it, because it -- our guys in Brazil, which has been through tough years before, at the beginning of this year, they decided they were not going to be part of the bad mood or whatever that was in some other industries in Brazil.

They decided that we would focus on the things we could control. We felt we had good plans in our hands. So we decided to keep our head down, focus on execution and out-execute competition in the marketplace, at least have that intent.

I like to remind people that despite the bad mood or some poor macro indicators, the fundamentals in Brazil remain the same. So demographics, the fact that LDA is growing at a healthy pace, it'll be a plus. The weather, the beer culture, the regional differences, middle class, all those things are there.

Plus, our plans, which is to continue to grow our core brands and some line extensions derived from very strong core brands that we have, accelerate premium. Premium is getting now to 8% of the total Brazilian market. So we look towards [indiscernible] for example, it is more than double that.

And we feel that there is -- and that space for us and the other competitors to continue to accelerate the premium growth. So that's very promising because our margins are much better. Near beer is also another great opportunity in Brazil.

That's pretty much now being scratched a little bit on the surface by us with Skol Beats Senses, which has a very low cannibalization. So 70% of its volume source comes from outside beer, from other categories. And then you talk about the off-trade, everything we learn in the U.S.

and Europe getting the off-trade to be more of a sophisticated execution, a more segmented execution in Brazil with coolers and shelves and tap prices and promo opti. So lots of things we've been developing out-of-market, and they're on-trade.

Now with bourbon on-trade, as we call it, sales force more segmented to high-end parts, it's key to develop things like the high-end brands, specialties, but also things like the Skol draft, which is a new initiative in Brazil. So I mean, we just decided not to be part of this whole bad mood and decided to focus on amazing business we have.

Our people in Brazil are used to deal with tough situations, and we have a great team there. So that's why we feel good about and very happy with this first quarter..

Our next question comes from the line of Rob Ottenstein of Evercore..

Just 2 questions on the U.S. market, please. First, in terms of volume, industry volumes overall, I think you said you thought they were down.

I was just wondering if you could talk about that in the context of what we hear of an improving economy and the lower gasoline prices and perhaps what you're doing in terms of growing the beer market as a whole? And then second, also in the U.S.

market, perhaps give us a little bit more perspective on your price mix realized and some of the factors, positive and negative, on that, particularly given the fact that your mix continues to improve in terms of your above-premium..

So in terms of your first question, and then as we said in our outlook, we expected the industry volumes to improve this year, 2015, compared to 2014. 2014 was already an improvement versus the prior-year '13. So in '13, the industry declined 1.8%. In '14, it declined 0.6%. And in this first quarter, it declined, according to our estimates, 0.5%.

So heading in the right direction. What we're doing as a market leader, we invest in our core brands, Bud Light, Budweiser, Ultra, and we're coming with innovation. We're also investing in different segments like craft, and we continue to support our value brands. So I mean, that's our, let's say, our contribution to a better industry.

In terms of your second question, which was around the revenue realization, as we said in our release, I mean, this quarter, first quarter, our net revenue per hectoliter increased by 1.3%, and that's to be adjusted by 0.4%.

That had to do with the mismatch between STWs and STRs and the way promotions are accrued based on STRs and gross revenue based on STWs.

So you can see that with this divergence in STWs and STRs during this first quarter, this has led to disproportionately higher accrual for price promotions than would be the case if STWs and STRs were more closely aligned, which is normal decay. So that's why we continue to guide for STWs and STRs to converge on a full year basis, as we always do..

Okay. Were there any other factors? I mean, even at 1.7%, that is somewhat less than in -- over the last few years..

Well, again, we have some packs that we introduced. Some are, like the 25-ounce can, that are dilutive at the top line, but accretive at the bottom line, as we said before, last year. It's a very -- it's one quarter up. So it's very hard to drive any conclusions from just one quarter..

Our next question comes from the line of Edward Mundy of Nomura..

Just following up on the U.S.

revenue per hectoliters, would you say that 1.7% is a reasonable guide for 2015?.

Well, we don't provide that kind of guidance. But yes, what we said about the U.S. was -- in terms of guidance, was that industry would be better in our view, and that we expect STWs and STRs to converge. And that's it. I mean, in terms of top line, that's the guidance we gave..

And as a follow-up, I mean, as you go into the peak summer selling season in the U.S., I mean, what makes you most excited, Brito? Is it the improved performance of Budweiser? Is it the launch of so many innovation? What really gets you excited?.

Well, lots of things, yes, I was very excited. I mean, first, the Bud Light program, which proved last year -- because you have to remember that Bud Light for many years didn't have much support as a brand during the summer because most of its investments was tied to sports and NFL, which in the summer doesn't really take place.

So it was a very low support season for Bud Light. Last year, we decided to -- as you saw, we upped our investments in the U.S., one of the reasons being we decided to support Bud Light during the summer. And the results were quite impressive. So this year, we're doing that again. So that's one thing. The other thing is Budweiser.

With the Super Bowl Brewed the Hard Way, we kind of -- we encountered the whole or went back to the roots of the brand in terms of tradition, heritage, quality, Brewed the Hard Way, 30 days as opposed to 15 days, I mean, everything that made this brand stood the test of time.

We went back to the roots, decided to communicate that back to consumers, and the consumers reacted very well. So we decided again to put more money when things are working, and that's going to be no different for Budweiser.

So the Bud & Burgers, together with Brewed the Hard Way, together with Made in America, this time linked to National Parks Foundation. So it's going to be a very strong program for Budweiser as well. And then, of course, you have the Ultra. Ultra, Michelob Ultra brand, which continues to grow, grew 10%.

And you have the high end and you have the Ritas, which we have most of our investment for the year kicking in now in May, June for the summer season. So I mean, the summer's going to be very active. And so very excited about the summer..

And Brito, you didn't touch very much on innovation, the MixxTails and Oculto, which I think in your opening remarks you said that they are both doing quite well.

I mean, how do you think about the rollout of these? And can they be as impactful as the Ritas back in 2012?.

Yes, what we're doing at this point, Edward, is that, of course, we're in the early days. So it's very hard to predict anything at this point. But we are using some focus markets. For example, Oculto we're heavily in Miami, building showcase for what it can be and learning from it before we go heavy upward investments in other places.

But the share of throat's a big play for us in the U.S. and both Oculto, MixxTail and Ritas continue to play in that arena. And again, let's remember, they all have -- command a much higher revenue per quarter and are less cannibalistic, therefore, more incremental. So all good news when you talk about near beer-type products..

Our next question comes from the line of Andrea Pistacchi of Citi..

So the first one, please, is on Corona. Now I think you said the brand globally grew 2.7%, which doesn't seem that much considering that you're starting to leverage the brand globally. So I was wondering what held back the performance somewhat.

And should we expect an acceleration in the sort of coming quarters, and driven by what? And then, secondly, if you could please give us an update on your brewery project in Vietnam, whether -- when do you expect to start shipping beer there, and if greenfields like Vietnam are something we should expect to see more of going forward?.

Well, thank you, Andrea, for the question. I mean, Corona, we're very happy with Corona around the world, outside of Mexico, also in Mexico. But of course, you have 2 different growth brands [ph]. Mexico's the #1 brand, so it is growing this year. Corona grew over 10% the first quarter in Mexico. So I mean, last year.

So very tough comps because of the World Cup. So this year, it grew again, but of course, low-single digits. So that's -- and because Mexico has a much higher base than the exports to the rest of the world, of course, outside of the U.S. because it's not ours.

Then you have to understand that outside of the world, things are doing much better than Mexico. But Mexico, of course, being against a very tough comp of 10% last year because the World Cup kind of dragged down those volumes a bit down. But again, very excited. All the countries who've put Corona, there's been an amazing power.

People know about the brand. It's very premium and it's doing very well. So in terms of Vietnam, yes, we're building a brewery there. We expect to ship beer in May. So this month in Vietnam. We're very excited about Vietnam. It's a country, again, demographics, weather, beer culture, 90 million people, a very extensive or a very big high-end segment.

And that's where we want to play with Budweiser, Stella and Corona, also Hoegaarden. So very exciting market, we're very committed to it, and learning from our experience in China to do a lot of what we did with Budweiser in China in Vietnam..

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

I wanted to ask about U.S. margin, obviously there was some negative operating leverage this quarter. But I guess there wasn't positive operating leverage in the comparable quarter. So I just really wanted to ask whether the slight decline in margin is maybe structural rather than driven by operating leverage.

And then, secondly, you've obviously got clear guidance on sales and marketing expenses. I recognize it was up significantly this time last year. Can you perhaps give us some color on the likely timing of sales and marketing investment? It was only -- I think it was down 1% this quarter.

In your guidance, it's going to be up mid-single digit?.

Yes, Mitch, I mean, in terms of the U.S., I mean, to take this quarter as any indication of anything would be a mistake because, of course, this quarter you had a 6% volume drop because of everything we explained. The tough comps last year because of the union negotiation. Our STRs were down 1.5%.

But our STWs, which is the one that moves the P&L and the financials, went down by 6%. So of course, when you have a 6% drop in volume, it's very hard to compensate anywhere else. So that's one point. So I wouldn't take this quarter as any guidance for anything going forward or anything. It's a one-off.

In terms of sales and marketing, our guidance, as you all said, for global sales and marketing remains, as we said before, mid to high-single digits.

And this quarter, the fact that we were up only 1.3% has to do with some timing issues, and also the fact that we are against last year's 16.7% growth in sales and marketing, okay? So I mean, you're comparing against 16.7%. And you also had in the U.S.

some savings that will be there throughout the year because we have a niche sourcing -- we had a niche source model of media buying and planning. We decided to outsource that to MediaCom. And with that came sales that we'll be seeing in U.S. beer.

So -- which means that if you -- we could be spending the same amount of money in the U.S., but with more immediate pressure because we're reinvesting the sales, okay? So that is going to be something that will be, again, a one-off for this year in the U.S. business, which is a big business for us.

That will impact also -- again, our guidance is the same..

Our next question comes from the line of Simon Hales of Barclays..

Just a couple of follow-ups really. Brito, just going back to the U.S. market, I don't think you mentioned the performance of Montejo in the quarter. I don't know whether you could just update us on the performance of that brand.

And secondly, just sticking with the U.S., distribution expenses I noted were very relatively low in the quarter, the change was relatively low. I mean, I assume we're seeing the benefits of lower oil costs starting to peek through. But you were warning back at the Q4 stage that you were still seeing elevated freight cost rates.

Just wondering if you could just update us on what's happening there and how we should think about that expense looking forward..

IN terms of the whole strategy for the Mexican segment or more broadly for the Hispanic consumer, which is what we should think about -- you talk about Montejo. Of course, that's a very important piece. But even more important than that is Budweiser and Michelob Ultra because those are brands that are very big with the Hispanic consumers.

And we're spending more money last year and this year on Hispanic media and touch points because those brands are the big ones. Bud Light, for example, is the biggest brand for Hispanics in this country, right? So those are very important brands. But for the first time ever, we are now able to play in the Mexican segment with Mexican brands.

We were never able as -- AB as a company to do that, and now we're able to do it. So we brought our first one, Montejo. There's more to come. The first one is Montejo. I think it's doing well, very well, for a brand that has to be built at the same price of other established brands that have been here forever at core plus-type prices.

So we're not discounting or anything to get quick gains. We want to build this brand for the long term because we're here for the long term. So we're going to build it the right way. So we're selling at the same price as the next competitor. We're selling that core plus brand. And when we started, we only had one pack. Now we have more packs.

And these packs, the tall can, the big can, is very important for the convenience channel, which is important for the Hispanic consumer. So -- and we're also expanding now toward the states. So I think, again, we're very excited, very committed. Montejo is all about Mexican authenticity.

It comes from us, and we are the Mexican -- leading brewery in Mexico. So talk about authenticity, that's what we offer. So very excited about this, more to come. But again, don't forget that Bud Light, Budweiser and Michelob Ultra also play a big role in the Hispanic market..

So in the second part of your question regarding distribution expenses, I would point out to the global guidance of the distribution expenses per hectoliter to increase organically by mid-single digits.

As you look into the first quarter, we are above that level, which implies unexpected improvement in the coming quarters in terms of year-over-year growth. And U.S. is not an exception, given its size..

Our next question comes from the line of Eddy Hargreaves of Canaccord..

Just a couple of questions on China from us. You record a very strong EBITDA margin advance in the quarter, 677 basis points, and that was probably a good advance in the prior-year quarter as well.

And to what extent was the phasing of sales and marketing responsible for that? So can you sort of give some indication broadly of whether that margin was flatted somewhat by the marketing phasing? And then the second question is, the Chinese market was down 2%, you estimate, in the quarter. You're keeping your guidance for growth in the full year.

Now clearly, you've got some very weak weather comps in the middle part of the year.

Would it be fair to assume that the underlying trend, if you like, is still negative for the Chinese market as a whole?.

Well, I mean, we're very happy with China's performance. I mean, it has been very consistent if you look at the last 4, 5 years.

We'll be gaining share, growing margins, and we are more and more -- and more and more, we have our business in that core plus and high end of the market, which is less affected when you have a year like this where the economy is still growing at 7%, but softens up a little bit.

That affects much more the value in core brands and much less our business, which is in the core plus and the high -- in the super premium, in premium. So as you saw once again, like last year, the industry declined 2%, but we increased 4.7% the first quarter. And our revenue, up by 10%, 10.1%, mainly driven by these positive rate [ph] effects.

And in terms of our guidance, I mean, we said that we expect the industry volumes to return to growth in fiscal '15. That was not the case yet in the second quarter, although better than last year, because last year, industry declined by 4%, 4.2%.

And in this quarter, it declined by 2%, okay? And we also said that we expect that revenue per hectoliter to continue to be driven by favorable brand mix. So it's a very positive story. We're very excited about it. And now we're bringing to China brands like Corona, which will, again, redefine what premium pricing is in China.

And again, given our road to market in China, this fits very well with the Budweiser road to market, given that Budweiser is the #1 premium brand in China. So we're very excited about growing that premium part of our business in China, which is now most of it..

On the sales and marketing piece, as you pointed out, a 2.6% reduction which leads to $5 million out of a $90 million organic EBITDA increase, I would also refer to the fact that in the first quarter of last year, sales and marketing growth was 35%. So the slight decline this year is versus a very, very high base.

And again, this is connected to the calendarization of this year. And we will continue to invest in China as we have been, big time..

Big time, big time..

Our next question comes from the line of Wim Hoste of KBC Securities..

I have 2 questions, please. First one, on Mexico, you estimated industry volumes grew low-single digits in the quarter, and you were up 2.1%. Could you shed a little bit of light of -- about the regional market share trends and market dynamics? And then another question following up on your premium portfolio.

You noted that Stella is growing below Budweiser and Corona, up 1.2% in the quarter. Is your findings with Corona and your enthusiasm on Corona, is that impacting your views on the -- your outlook and potential for Stella? Was it -- in other words, will you be mainly focused on growth in the U.S.

and getting a little bit less emphasis in other regions? Thank you for sharing your views on that..

Budweiser, Stella, Corona. Stella this quarter suffered from a weak U.K. business performance, but that's one quarter, but did very well in the U.S., did very well in Brazil and in other markets. So a very good Stella business.

Corona, again, as we explained, has to do with Mexico lapping a very tough first quarter from last year because of 10% growth because of World Cup, and that's a bigger base compared to our export volumes. But the export's growing way ahead. And with Budweiser, you see the kind of growth that has been very consistent at this level of 6-plus percent.

In terms of your question about Mexico, we kind of grew with the industry, low-single digits, 2.1%. And regional mix impact was not relevant this quarter. And as you know, our share numbers for Mexico, we only have for the full year..

Ladies and gentlemen, we have time for one last question. Our final question will come from the line of Brett Cooper of Consumer Edge Research..

We've seen some brand fragmentation in developed markets over the years.

How concerned are you about that taking place in some of your core markets? And then, I guess, the opposite of that is how big of an opportunity does that represent for you in markets where you have no or small representation today?.

Thanks, Brett. I mean, you're right. I mean, brand fragmentation is a reality. It has to be managed, though. One of the ways to manage it is with technology.

So for example, by increasing the use of smartphones with our sales reps, which is something we do, and using more algorithms, you can be better at your offer being tailored by a customer when you have a bigger portfolio. You also have to be smarter about how you split your market money and sales money in support of those brands.

So we're developing better models to check return on investment on both traditional and social media. So we are sharper on how to allocate resources behind brands.

And you also have to have better training of our people, so they can talk to customers and also try to tell customers and get insights to customers on how they should build their assortment because what we see these days is that some customers that went too wild on assortment lost business on a relative basis.

And they keep asking themselves, "Why, if I'm offering more assortment, which is what consumers seem to want, how come I'm losing share of business to my competitor, my neighbor?" And what we -- the insights we bring is that there is a point at which more assortment becomes like overwhelming to consumers. So they buy less of it.

And not only that, it also becomes much harder to operate. So think about this. If Bud Light, which is a high-turning SKU, had 6 phasings in a cold box. And now there's only 3 because you increased your assortment and you put lots of brands that turn much slower.

Some consumers will be frustrated because they will come and their Bud Light will not be cold because they have just been replenished. So -- and then, they will go to another store with a better assortment and with a cold Bud Light and things of that sort. So if you have some of those craft brands, for example, in the U.S., we've been proven.

Data proves that some of them should sit outside of the cold box because they turn 1 six pack per month.

And that, of course, doesn't compare to a Bud Light that turns 6 packs in a day, right? So those are the things that with increased fragmentation, we need to do -- we need to be smart about technology in our production, sales and distribution facilities. We should use more insights to help us and our customers to think about assortment.

And I think we should use the scale and the company to go for then enhancing fragmentation and try to get rid every time of the very destructive fragmentation because you have both. Good fragmentation's great, bad segmentation should be dealt with. So again, it's where the market's going. It's a little bit of pending [ph].

Some customers of ours have seen -- we have seen customers of ours that are going too much to the one side with lots of SKUs being added, and then come to the conclusion that their costs were getting hit big time because of more working capital tied up in new inventories, more bad products having to be thrown away because of best-before dates, and then going back and losing share because of consumers being overwhelmed and not having their cold beer available, coming back for more rational assortments.

So we're helping our customers with those category insights. Thank you. Thank you, everybody, for your time this morning. We are very excited about the beginning of this year. We had a great quarter in terms of both revenue growth and EBITDA growth.

So that is a great start for the year, and we'll talk to you again on July 30 when we report our second quarter. Have a great day. Thanks for your time. Bye..

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