Welcome to Anheuser-Busch InBev’s First Quarter 2022 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. Michel Doukeris, Chief Executive Officer; and Mr. Fernando Tennenbaum, Chief Financial Officer.

To access the slides accompanying today’s call, please visit AB InBev’s website at www.ab-inbev.com and click on the investors tab and the reports and results center page. Today’s webcast will be available for on-demand playback later today.

At this time, all participants have been placed in a listen-only mode and the floor will be opened for your question following the presentation. Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements.

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

For a discussion of some of the risks and important factors that could affect AB InBev’s future results, see risk factors in the company’s latest annual report on Form 20-F filed with the Securities and Exchange Commission on the 18 of March 2022.

AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Michel Doukeris. Sir, you may begin..

Thank you, Jessie. And welcome everyone to our first quarter 2022 earnings call. It’s a pleasure to be speaking with you all today.

First, I would like to take a moment to share our deepest sympathies to all of those who have been affected by the situation in Ukraine and acknowledge the commitment and dedication of our teams in supporting our joint venture colleagues and their families, while wishing for this.

Today, Fernando and I, we'll take you through our first quarter operating highlights and provide you with an update on the progress we have made in the execution of our strategic priorities. We'll then be happy to answer your questions. So, let's just start with our operating performance.

Our business momentum continued this quarter, and we are very pleased with our performance to start the year. We delivered top line growth of 11.1%, with 2.8% volume growth.

Revenue per hectoliter grew 7.8% driven by the implementation of pricing actions across our markets and enhanced by ongoing premiumization and continued recovery of the on-premise channel. EBITDA increased by 7.4% as we managed anticipated commodity cost headwinds and elevated supply chain costs.

We delivered normalized EPS of $0.67 and underlying EPS of $0.60. Now I would like to share some highlights from our key markets. Our business in the U.S. delivered continued top line growth, driven by consistent execution of our commercial strategy and the rebalancing of our portfolio despite the soft industry.

Our above core portfolio continues to outperform, led by Michelob ULTRA which grew volumes by double-digit. Within the spirits-based ready-to-drink segment, our portfolio continues to grow ahead of the industry, led by Cutwater. In Mexico, we continued our momentum, delivering double-digit top and bottom line growth.

We grew volumes across all segments of our portfolio, resulting in further market share expansion. Our above core portfolio increased by double-digit, led by Modelo family and Michelob ULTRA.

In Colombia, we delivered double-digit top and bottom line growth and continue to grow the beer category through the implementation of our expansion levers, resulting in a new record high per capita consumption this quarter. We follow route-to-market, now digitized. 30% of these customers are also BEES marketplace users.

Our business in Brazil delivered double-digit top line growth. Our beer volumes once again outperformed the industry, growing by 2.1%, despite lapping a strong comparable. With our route-to-market digitized, over 60% of these customers are now BEES marketplace users.

In Europe, we grew top and bottom line by double-digit, driven by volume growth, on-premise reopening and supported by revenue management initiatives. Our premium and super premium portfolio led the way growing revenues by mid-teens, representing now over 50% of our total revenue.

In South Africa, we continued our momentum, delivering above 30% top line growth with volume increasing in the mid-twenties ahead of the industry.

All segments of our portfolio grew this quarter, led by over 40% growth in our leading core brand Carling Black Label, driven by BEES, our route-to-market is now digitized with almost 90% of our revenues coming through digital channels. In China, momentum continued into the start of the year, market by strong Chinese New Year.

However, the implementation of COVID-19 restrictions in March led to a total industry decline of low single digits in the quarter, according to our estimates. These restrictions disproportionately impacted our key regions and channels, leading to top line decline 1.2%.

Notwithstanding the restrictions, underlying consumer demand for premium products remained strong and the share of our total volume generated by our premium portfolio increased. I would like now to turn your attention to a few ESG highlights. In the first quarter we made progress across our ESG priorities.

We select highlights including; recognition of our strong sustainability track record, ambitious commitments and our focused ESG strategy. We have been awarded the Gold Medal for international corporate achievement in sustainable development by the World Environment Center.

Advancing water stewardship, we published a watershed health guide in partnership with The Nature Conservancy to share learning and capitalize action in driving measurable watershed outcomes. And fostering entrepreneurship, we have launched applications for the fourth cohort of our award winning 100+ Accelerator program.

Founded in 2018, The 100+ Accelerator identifies any scales, sustainable innovations focused on solving key challenge reading our ESG priorities. Now, let's focus on our strategic pillars.

To enable the execution of our strategy, we have announced a newly aligned commercial leadership structure, designed to accelerate the next phase of innovation and growth at AB InBev, with the creation of the Chief Growth Officer position.

Under Ricardo Tadeu's leadership, this new structure will maximize data in digital integration, with our marketing and sales capabilities. We are also taking further steps to empower our teams locally. The titles of each of our six zone presence have been updated to regional CEO to better reflect the scope impact of these key positions.

Next, let's turn to pillar one of our strategy, lead and grow the category. Driven by the execution of our category expansion model, this quarter, we grew volumes in more than two-thirds of our markets. Let me take you through our category expansion levers. First, we continue to focus on making the beer category inclusive for all consumers.

Following the successful expansion of Coronita, our smaller bottle pack offering for Corona, we introduced it further smaller pack formats in several key markets in Latin America to provide consumers with price points and choice for consumption needs in different occasions. Second, we are offering superior core propositions.

Our mainstream portfolio delivered high single digit revenue growth in this squatter, once again, outperformed the industry across most of our key markets. Third, occasions development.

Stella Artois, our living brand in the new occasion grew by over 14% globally this quarter, with the planned expansion of our Sign Off, Dine, Bon Appetit campaign to a further seven markets this year.

In the non-alcoholic beer category, our portfolio delivered continued revenue growth, led by liquid and pack innovations, such as Corona Sunbrew that we launched in Canada. Fourth, we are leading in premiumization.

This quarter our above core portfolio delivered over 15% revenue growth, led by Michelob ULTRA, which is now available in 14 markets and grew by double-digits. Our global brands continue to lead premiumization across our markets.

The combined revenues of Budweiser, Stella Artois and Corona grew by 6% outside of the brand's home markets, led by Corona with 14.1% and Stella Artois with 11.5% growth. Budweiser grew by 0.3% impacted by the renewed COVID-19 restrictions in China. Finally, we continue to expand the category with our Beyond Beer offerings.

Our global Beyond Beer business contributed over $350 million in revenues this quarter, led by the U.S. where Cutwater grew by strong double-digits and in South Africa where Brutal Fruit and Flying Fish delivered continued double-digit growth.

Innovation this quarter supported category expansion across each of the five levers, contributing approximately 8% of our total revenue. Highlights include; expanding our superior product propositions with the launch of Budweiser Supreme in the U.S. The release of Stella Artois Unfiltered in the U.K.

and the launch of Corona Tropical across some of our key markets. In the U.K., we leveraged our direct-to-consumer solution PerfectDraft to exclusively release Stella Artois Unfiltered through the e-commerce channel. Based on the positive consumer feedback and insights from the launch, we are now expanding the brand into other channels and package.

Now, let's turn to our second strategic pillar, digitize and monetize our ecosystem.

As we continue to invest to become a tech-first FMCG Company, BEES continues to see remarkable acceleration in usage and reach, capturing approximately US$6.5 billion in gross merchandise value in the first quarter, up from approximately US$3.5 billion in the first quarter of 2021.

We are now live in 17 countries, with 2.7 million monthly active users. In 11 of our 17 countries, our customers are also able to manage their orders for third-party products through BEES marketplace. We know that for many of our customers, beer typically makes up less than 25% of their resource sales.

BEES marketplace offers a consolidated order and deliver management platform, solving pain points and empowering our customers. As of the first quarter, we have seen increased adoption and exponential growth, as 31% of BEES customers are now users of BEES marketplace with annualized revenues of US$800 million.

Our partners are also benefited from the digitalization of sales with increased retailer engagement, distribution reach, and cost efficiencies. We are still in the early stages of exploring the possibilities, and we are excited by the results and feedback from our customers and partners. Now, let's talk about direct-to-consumer business.

This quarter, our D2C products generated nearly US$300 million in revenues across 20 countries. The number of online orders grew by double-digits versus last year, surpassing 17 million transactions. In Latin America, Ze Delivery is already present in approximately 300 cities in Brazil, covering about 50% of the country's population.

Revenue from Ze Delivery grew almost 30% year-on-year. Based on the success of Ze in Brazil, we are scaling the courier product to another 10 countries in Latin America. We continue to deliver on our strategy with best-in-class creative marketing and innovation capabilities.

Following the announcement that ABI was selected by Cannes as the Creative Marketer of the Year, we were recently named to Fast Company World's Most Innovative Companies list for the first time. Fast Company recognizes ABI's ability to quickly seed and scale innovation to drive performance and impact.

The award highlighted our beer innovations, tech products and our biotech initiatives, Evergreen. Big congratulations to our teams and partners for this remarkable achievement and further recognition of how we are embedding creativity and innovation into our strategy.

With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimizing our business.

Fernando?.

Thank you, Michel. Good morning, good afternoon, everyone. We aim to maximize value by focusing on three areas; optimize resource allocation, robust risk management and efficient capital structure. With respect to capital allocation, we aim to maximize long-term value by dynamically balancing our priorities.

We continue to invest in organic growth and support our strategy to lead and grow the category and digitize and monetize our ecosystem. The excess cash generated by our business is then dynamically allocated to our other key capital allocation priorities; deleveraging, selective M&A, and return of capital to shareholders.

In line with our capital allocation priorities, this quarter we completed the redemption of US$3.1 billion of bonds. Our debt maturity profile remains well distributed with no near and medium term refinancing needs, with the weighted average maturity more than 16 years.

Our debt portfolio does not have any financial covenants and is comprised of a variety of currencies, diversifying our FX risk. In addition, approximately 93% of our bonds have a fixed rate, insulated from interest rate volatility and inflation, with an average coupon rate of approximately 4%.

Our proactive revenue management, combined with our hedging policy and operational efficiency contributed to 7.4% EBITDA growth and an increase in underlying EPS, growing by $0.05 to $0.60 per share. I will now hand it back to Michel for some final comments.

Michel?.

Thanks Fernando. I would like to take a few minutes to recap our reflections and learnings and how we are meeting the moment in 2022. The beer category continues to demonstrate strength. We are operating in a big, profitable and growing category. Beer is gaining share of throat globally. Our business has momentum.

Driven by our leading brand portfolio and our accelerated digital transformation, volumes grew in more than two-thirds of our markets. On top of that, this year presents unique opportunities to activate demand, such as continued on-premise reopening and return of marquee events, such as Carnival and the World Cup.

In conclusion, we are confident in our business fundamentals and our team's ability to continue to meet the moment and create a future with more cheers. I would now like to hand it over to Jessie to begin the Q&A session..

Thank you. The floor is now open for questions. Thank you. Our first question is coming from the line of Trevor Stirling with Bernstein. Please proceed with your question..

Hello, Michel and Fernando. Two questions from my side, please. First one, maybe more from Michel. Michel, you've got very robust price mix of 8% in the quarter.

Are there any signs in any markets that consumers are starting to react against the pricing, and we're starting to see some volume elasticity creeping in? And the second question, maybe more for Fernando. Just trying to understand the various drivers of gross margin, Fernando.

And I appreciate it's a very complex picture of varying enormous in country-to-country.

But within price mix, can you give us some sort of broad sense of the components of price, of brand mix, of channel mix, and indeed, the role of the third-party brand sales through the BEES marketplace? And likewise, on the COGS side, what is the mix between underlying policies, currency and again, that product mix through the BEES marketplace?.

Hi, Trevor. Michel here. Good morning. So taking on the first question, I think we discussed this a little bit during the full year results. We have announced or implemented the majority of our price in quarter 4 and quarter 1 this year. And we've been seeing across the globe inflation continue to move up, most of the categories increasing prices.

And I continue to think that's a little bit too early to measure all the impacts of that and the consumer elasticity. But it's also, I think that through, and we see this across the globe that inflation is actually trailing ahead of what was the expected numbers and forecasts that we saw last year.

We can see clearly on the price to consumer that beer is behind inflation so far. And we can also see that the majority of the market that is this combination of the economy continues to do well. Employment rates are holding. In some of the developing markets, commodities are helping the overall economy. So, the elasticity is not really present yet.

Even though, I think that as we face towards quarter 2 and quarter 3, we will have much better data to understand where and in which market elasticity will play a bigger role.

And you also know, based on what we discussed during the road show in quarter 4 full year announcement that we kind of organized the markets in three different clusters, a little bit anticipating potential elasticity impact. And we continue to monitor very closely how things are working.

But all-in-all, two-thirds of our markets with very robust growth in the quarter 1 and overall quarter 1 double-digit top line growth. I'll hand it over to Fernando to take on the second question and third question..

Okay. Hello, Trevor. Thanks for the question. So, at the end of the day, when we look at revenue per hectoliter, consistent with what we are doing, of course, we have some tailwinds in different regions. Like Europe, the on trade reopening definitely helped the net revenue per hectoliter.

But when you step back and look overall, probably the stronger component on net revenues per hectoliter was revenue management. That's the major driver. And when you go down to cost of goods sold, of course, you always have some mix impact. But it's fair to say that the bulk of the impact was the anticipated commodity and FX headwinds.

The marketplace and all these things, they are not that meaningful in the grand scheme of things. It's really commodities and FX and -- which was anticipated. It's already baked into our four to eight outlook for the year..

Thank you very much Michel and Fernando..

Thank you, Trevor..

Thank you, Trevor..

Thank you. Our next question is coming from Tristan van Strien with Redburn Partners. Please proceed with your question..

Hi. Just two for me. One, just a follow-up on Trevor. Some of your peers are talking about taking another price increase this year.

How are you thinking about that? Is there something that's maybe on the table for you as well, particularly in some of your developed markets where that seems to be needed? The second question is just on South Africa, which is a really strong performance, especially when you consider there was a late Easter.

So, I'm trying to understand what's driving that performance. What's the balance between what you are doing versus perhaps the market, because both you and your biggest competitors seem to be doing well? So, I wanted to just understand South African's performance a bit better. Thank you. .

Hey, Tristan. Good afternoon. Thanks for the question. Michel, here. I think that on the first one, when we talk about the price increase, we discussed this, and we said that majority of the price actions were announced or implemented between quarter 4 and quarter 1. But as you know, each market has a little bit of a different agenda.

And in some markets where we have very high inflation, it's common for us to have more than one price increase during the year. As I said now answering the question from Trevor, one thing that's very clear now is that the inflation is moving much faster than what was anticipated and that the beer prices are lagging inflation so far in the year.

So, we continue to monitor how things are unfolding, and we continue to work very close to the market and making sure that we are meeting the moment.

As we think as well about the experience that we have and the entire revenue management that we have across the markets, we also know that as inflation is moving up and the environment is inflationary, it's better to take the price and to be part with inflation than trying to recover this later when inflation is moving downwards.

So, in principle, we continue to monitor. We have markets that have more than one traditionally. Inflation is ahead of what was the expectation and beer is behind inflation so far. So, ready to meet the moment.

The second question on South Africa, I think that several of our emerging markets, they continue to confirm what we've been saying, that beer is big, profitable and growing. And this growth is being led by emerging markets, not only, but most emerging markets.

Our category expansion model has been very helpful across the board, as we focus on the five levers to continue to make the category more inclusive, more premium. South Africa is an outstanding example of our core products performing very well and our ability to expand to more occasions, driven by the Beyond Beer expansion.

Brutal Fruit, Flying Fish are performing very, very well in South Africa. And when you think about the remaining parts of Africa as well, from Nigeria to Tanzania, market's performing very, very well. So, demand very robust. The levers that we are executing and the strategy of digitizing and expanding occasions is driving a very robust market.

And we are very pleased with the performance, not only in South Africa, but across most of our markets and especially, emerging markets..

Thank you, Michel. And can I just follow-up on Nigeria, because you mentioned that there. Obviously, you're constrained on the growth currently because of capacity. Is that something we should continue to expect? And as a result, I guess everybody is pricing at this moment to recover the currency declines over the last few years.

Is that the way we think about it? Or is capacity coming online soon?.

Yeah. Nigeria, we had a very strong performance in quarter 1. The underlying demand for our brands continues to be very strong. Our brands are gaining power. There is inflation and there is price in the market and we have capacity coming. But as you know, building the capacity in Nigeria is not very easy and very quick as it can be in some other markets.

But we have more capacity coming this year, and we are preparing to supply the demand that we have now and in the future giving the power of our brands end markets. Pleased -- very pleased with the performance of both the top line growth, but also market share and brand performance there. Thank you, Tristan..

Thank you..

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

Great. Thank you very much. Michel, in the U.S., the -- what could be termed adult alcoholic beverages, combining seltzers, ready-to-drink cocktails, both malt and spirits base, really seems to be driving overall beverage alcohol growth.

And I was wondering, is that the case? To what extent that is the case outside of the U.S.? How important a driver do you see this being, again, when you're looking at total share of alcohol? And how is the firm looking at this opportunity through a long-term strategic lens? Thank you..

Robert, good morning. Thank you for the question. I will try to address the things that I got there entirely that you are asking for. So, I think that in the U.S., we continue to see this Beyond Beer or adult alcoholic beverage, as you called, growing. The quarter 1 was not different. We saw growth there.

And one of the most important and attractive points of that for us is that it's really driving share of throat towards this ready-to-drink beverage. And our capabilities from route-to-market, production capacity, ability to introduce innovation in new brands makes us well-positioned and optimistic to continue to drive growth in this area.

The example that we always give here is Cutwater, which is a very new brand, that continues to grow very strong double-digits ahead of the industry this quarter. We just launched it and introduced Nutrl in the market, because it's already the leading brand in Canada, and we are now expanding to the U.S.

So far, very successful as well in all markets that we launched it. It's more in the light refreshing area, but is moving very fast and growing distribution very fast. It's going to be, for sure, another important play in our portfolio. As you look at this globally, the manifestation is different market-by-market.

I just mentioned to Tristan now, for example, Flying Fish and Brutal Fruit in Africa growing strong double-digits, very important contribution to the South Africa market. We have BEES in Brazil doing very well. We have now Corona expanding with Tropical in Mexico and some other Latin American markets.

And different manifestations, but an opportunity, that's a global one. Our capabilities and how we are positioned globally to really take advantage of this consumer trend and this opportunity makes us feel very good. I'm very optimistic about that, because again, we have the brands. We have the knowledge from the developed markets.

We have the innovation and the liquid capacity. We have distribution. And we can take advantage and really lead this expansion lever globally. And that's why this is one of our five category expansion levels in the model that we tested, and we've been proving that works very well in different markets. It's not the same product.

Manifestations of what the Beyond Beer is, is different across different markets, but it is a huge opportunity for us globally to gain share of throat..

And I think Brendan mentioned at a recent conference that this was roughly 70% incremental in the U.S. Are you seeing that same rough level of incrementality outside of the U.S.? And just can you tell us just a little bit more about the Corona Tropical product? The packaging is amazing.

Is this something that you see taking globally?.

Yeah. The incrementality numbers, they -- in the U.S. are very clear. You have all this household penetration and the panels where we can measure. And depending on the innovation, it's between 70% and 80%. So, Brandon is spot on, on his comment on the 75%.

And that's why the share of throat opportunity is so big as we go into this beer adult alcoholic beverage. In the other markets, what you see is that this helps us in continues to drive share of throat, because beer itself is already gaining share of throat in the majority of the emerging markets.

But moreover, it opens up more occasion opportunities for us to continue to premiumize and drive growth. The Mexican and the Colombian innovation in this area with Corona, it's a great opportunity to make the brand even more spread, even more premium and even more available in different occasions for different consumers.

So, the other indications are very good. We need to solidify the pilot and the innovation there. And if works, then of course, the opportunities to expand to other markets, because we've been working on other very important competitive advantage that I think we have on this, which are global brands. So, we have lemonade across different markets.

We have Cutwater that has opportunities to go to different markets. And Corona is already a global brand. And if this innovation works well as we expect and the orbit signs are, there is no reason why this cannot go global as well under the Corona franchise. But this decision is to be made later..

Terrific. Thank you very much..

Thank you..

Thank you. Our next question is coming from Edward Mundy with Jefferies. Please proceed with your question..

Hi, Michel. Hi, Fernando. Two questions from me, please. The first is, could you provide some examples as to what in practice the newly aligned commercial leadership structure might mean for accelerating the next phase of innovation and growth? And then, the follow-up question is really around your trading momentum from the first quarter.

If we back out the near-term disruption from COVID in China, has trading momentum in the rest of the business continued into the second quarter?.

Hi, Edward. Good morning. Thanks for the question. On the structure, I think that the whole thing in a nutshell what the main idea is, is going back to the idea that this structure should always follow strategy. And this specific part of the structure has one single objective, which is to accelerate growth.

The question then comes down to how will that happen, right? And I think that today, we've been building on both sides, on the sales and marketing capabilities, but also in data and digital front.

And it's only natural now that with this strategy simplified on lead and grow, digitize and monetize and optimize, the combination of the capabilities that we are building in data and digital, integrated with our sales and marketing capabilities will enable us not only to execute better our strategy, but also to accelerate innovation.

And we think that this comes in a simple way because this structure now simplifies the way that at global level, we make our platforms and programs interact with the zones.

And we simplify a lot the idea of where the capabilities are being developed, global level versus this regional CEO, where the accountability for execution and implementation of these initiatives like switches in the and in the region. So simplified structure, integration of data and digital capabilities with marketing and sales capabilities.

And Ricardo Tadeu is only the right guy to do that. Great experience in the , great experience as Zone President and now at the forefront of the digital transformation in the company. Then putting down to China, what we saw was a very strong start of the year. Chinese New Year was great.

At the end of the quarter in March, because of the implementation of the COVID restrictions, was then much slower. And we saw like half of the on trade cost closing. Like the nightlife cost, we saw like 10% to 20% slowdown in the restaurants. And we saw the maintenance of the off trade because then we have a lot of orders and e-commerce on that.

The underlying momentum remains strong, but the COVID restrictions were also in place through majority of April and early May. But now in May, you start seeing Guangdong, a little bit of Fujian coming back. And this number of improving is likely. And as the restrictions are lifted, then the consumption comes back. And we see China as one thing.

But even in APAC, when you look, for example, Korea, the momentum is very strong. And outside of Asia, the underlying momentum remains strong as we faced out of the quarter 1..

Great. Thank you, Michel..

Thank you, Ed..

Thank you. Our next question is coming from the line of Mitch Collett with Deutsche Bank. Please proceed with your question. Mitch Collett, your line is live. You may proceed with your question..

Hi, Michel. Hi, Fernando. My first question is hopefully pretty straightforward. So, you did 7.4% organic EBITDA growth in Q1, which is pretty close to the top end of your guidance range for the medium term in the year.

Can you talk about the puts and takes for the balance of the year and that could see you at the top or the bottom of the range? So, I'm thinking about COGS pricing, potential lockdowns on trade recovery and anything else? And then, maybe a second more open question about BEES, because you're now rolling that out into geographies where you don't maybe have the same scale advantage.

Do you still get the same benefits when you take these into markets where your market share is lower? Thanks..

Thank you, Mitch. Let me get the first one. We are reiterating the outlook we have, the 4% to 8%. Of course, it has been a very dynamic environment and is likely continue to be a very dynamic environment. We have very good visibility in our costs given our hedging.

And we have a team that over the last two years has become more agile, more digital and data-driven and that to say better equipment to navigate a more dynamic environment. We continue to see strong demand -- strong consumer demand for our brands.

And we are confident that our team is going to be able to meet the moment and reiterating our outlook for 4% to 8% growth for the full year, acknowledging that revenue is going -- is likely to grow ahead of our EBITDA.

And the second one, Michel?.

Yeah. Mitch, on BEES, what we explained and we talked about before was this idea that there are like three waves, I would say, on this implementation. And one is where we have direct distribution.

One is one of the products in the district called link that we are developing specifically for large key accounts, and this is a way to make the ABI that exists for 20, 30 years, much better. I always say that it's trying to transform the landline phone on the mobile phone, right, because we can have a lot of technology to what was the old ABI.

And that's going to be a big wave that we are already testing in countries such as Brazil and the U.S. And then, you have this three-tier type of markets. And some of them, as you said, lower share that we need to implement. And the implementation of this brings one more complexity, which is the integration of the ERP.

It's not only that for taking orders. The real value is how we do the integration of the data, the algorithm selling, and we work with the partners to make that business better. I think that the value proposition works well across the board.

Because the value proposition is a powerful tool that allows you to gain time to have visibility on the products to manage our business and everything else that comes as a benefit with BEES. The speed of this implementation, of course, whether we have less integrated systems, lower market share, is different.

But to give you one example, China, which is a three-tier type of market where the language is very different, where the technology needs to be a little bit adapted for the Chinese standards, BEES is moving very fast. And we have lower market share overall in China, as you know. But the excitement around this is the same.

And the speed in which we are ramping up in China is a very good one as well.

Which in turns, each market is different, but we continue to make progress in the number of customers that we have using BEES, and the number of partners that are joining us on the marketplace and in our ability to make the platform great in solving pain points for our customers.

Because at the end of the day, they are the ones carrying on BEES and using, right? And as they use more opportunities and that happened for us and for them, which is great..

Understood. Thank you..

Thank you..

Thank you. Our next question is coming from the line of Sanjeet Aujla with Credit Suisse. Please proceed with your question..

Hey, Michel, Fernando. A couple from me, please. Firstly, can you just comment on the on trade recovery you're seeing across your major markets? Where are you versus 2019 levels? And tied to that, are there returnable glass bottles also coming back to 2019 levels? And then, my follow-up question is just on the online marketplace.

You're annualizing around $800 million of revenue there. Is that profitable for you yet standalone? And what level of revenues do you need to achieve to breakeven there? Thank you..

Hi, Sanjeet. Good afternoon. I will answer here is that you have two questions if I got this right. One is about on trade, and the other one is about BEES and marketplace. On the on trade, what we've been seeing is different behavior market-by-market.

I think that's very clear for us that as you see markets reopening in some places, restrictions coming back, partially lifted or fully lifted, that is different behavior.

And on average, which I think that is the point that you are looking for, is when everything goes back to normal, that is a pretty good 90%-plus of the in the volume versus 2019 back right away. And that was the reality in the United States when we saw the reopening. That was the reality in Brazil when we saw the reopening, it was in Europe.

Interesting enough, this number gets to be above 100% as you are rebuilding the pipeline and resupplying the points of sales. And after this , let's say, right, because the volume goes up beyond the 100%, it settles in between 90% and 100%.

I think that the main reason for that is because in some places -- or in majority of the places, the base infrastructure, meaning the number of points of sales, it does not come back day one. As the markets remain reopened, you see that new restaurants are being opened, new bars are being opened.

And I would expect that at one moment, this would stabilize pretty close to the 100%. But it is like -- the average is 90% to 100%. It gets to be beyond 100% as you are resupplying and then settles between 90% and 100%. Infrastructure, meaning number of , the main reason why it's not 100% yet.

And in some places, you see a new wave of new bars and restaurants being reopened. On the marketplace, as we said, like close to 10 markets to date operating marketplace. Number of customers growing, average to date 30%. The highest level is around 60%, let's say, Brazil. Number of partners growing, number of orders growing exponentially.

Annualized revenue as of March, $800 million, which is already meaningful in a way for the year results. But as you know, beer is only like around 25%. 75% of the revenues come from other categories and products. We are just scratching the surface here. It's just at the beginning.

And if I got the back end of your question, it's like the revenue is growing very fast. We are servicing the customers as well as we can with the partners. And one thing that we have as an operating principle here is that we are making money on the orders, right? So your question is not whether or not we will achieve breakeven.

So, the breakeven is present since the beginning.

Now, it's a matter of how fast we can grow and how well we can serve both the customers on one hand and our partners on the other hand, because it's very important for us that our partners get to get bigger reach, so bigger distribution that our brands can perform well and grow and they can get a much better understanding of their route-to-market through data and the analytics that BEES can provide to them.

So, early beginning. We decided to share here some numbers with you. They are not as material as we think that they will be in the future. But that 30% marketplace buyers already in 10 countries is a very exciting part of what BEES can become..

Thank you..

Thank you. Our next question is coming from Laurence Whyatt with Barclays. Please proceed with your question..

Hi, Michel, Fernando. Thanks very much for the question. Just following on -- again, on BEES. There's a number of markets that you've achieved nearly 90% or around 90% of your revenues coming through the digital channels. But Mexico remains somewhat below that level at around 75%.

Is there anything specific about the Mexican market that means it can't achieve similar success to other surrounding neighbors? Is there anything you would highlight in Mexico that means you can't get there? Thank you. .

Hi, Laurence. Good afternoon. Thank you for the question. There is no really special point. I'll go back to this idea. I'm trying to simplify three waves of implementation. So, in Mexico, interesting enough. We have the combination of everything. We have direct distribution. We have large accounts. And we have wholesalers, distributors.

So, the entire direct distribution in Mexico is already using BEES and is very high adoption and very high coverage. The BEES link is not yet available for the key accounts. So, in the key accounts, we continue to use regular ways of taking the orders.

And we are implementing what I call the third wave, which is BEES for the wholesalers in Mexico, but is not fully implemented yet. That's the difference why in Mexico we have 75%, and in Brazil we have above 85%. But Mexico, for sure, get there very, very soon..

Excellent. Thanks. And just perhaps following up on Mexico. You've entered a number of the OXXO stores, which are in the stronghold of your nearest competitor. I was wondering, has that all gone to plan as you expected? Or is there anything you'd highlight that perhaps was slightly different to your expectations in that part of Mexico? Thank you..

No. OXXO is an incredible opportunity and a great partner, a great retailer in Mexico. We have now covered two-thirds, give or take, of that stores. And the remaining part and the last wave, we call the seventh wave, eighth wave that we just got into, is more in the north, more where our market share is smaller and our availability is more restricted.

Therefore, the opportunity and the growth opportunity in these areas is only bigger than what it was before. So, we are very happy so far with the evolution. Two-thirds gone, one-third to go. And in this one-third, the opportunity is bigger, because our market share and our distributions are much smaller than our average in the country..

Excellent. Thank you very much..

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

Hi. Good morning, Michel, Fernando. Just a couple of questions, please. Focusing on the U.S. First of all, we've seen a bit of a slowdown in the hard seltzer category, which used to be a tailwind for you and for some of your competitors.

You're gaining share, but how do you see prospects, the growth prospects for the category in the midterm? And then, in the U.S., just for this quarter, STRs were down 5%. I know the comps was difficult, but we've heard a lot of commentaries around pressure on disposable income.

So, I was wondering if you've seen any changes in consumer behavior for the core mainstream beer drinker in the U.S. I know you indicated in the press release that premium was growing. I'm more interested as a mainstream drinker here. Thank you..

Olivier, good afternoon. Thanks for the question. I think that there are two parts. We answer first the seltzer part and the Beyond Beer. I think that on seltzer, three comments to make.

The first one is that we've been repeating this over and over again, that seltzer is part of this Beyond Beer space and is one of the manifestations of how consumers interact on this ready-to-drink space for their needs.

And the growth of seltzers was accelerated during the pandemic based on the -- at the right moment being the hot new kid on the block. So, there was a lot of accelerated growth driven by the in-home consumption. And this is a very fast-moving part of the industry. The Beyond Beer is like, give or take, 10% to 12% of the industry.

We have seen before other manifestations. And now what is growing very fast is the ready-to-drink cocktails, no longer the seltzer. So, the Beyond Beer continues to grow, and this is the exciting part.

So, despite of the fact that seltzers are growing less or declining, the Beyond Beer overall is growing and is being led by ready-to-drink cocktails, where we have, fortunately, Cutwater performing very well. And we just launched Nutrl, which is our second leg into this market.

Continues to be great to the category, continues to be incremental to the category. Robert was saying 75%, and the numbers that we see is always between 70% and 80%. And we are well-positioned with Cutwater and Nutrl, which is somehow like the next wave of growth that we see coming on that.

The second point on seltzers and Beyond Beer overall is that is very seasonal. And so far, the quarter 1 is the low seasonality for this Beyond Beer. And it was colder than average. And you had the Omicron at the beginning of the year, which I think that impacted overall the category, and that's why the industry is down in the quarter 1.

In terms of mainstreams -- mainstream brands. Mainstream brands are also extremely seasonal as the category is. They got heavily impacted by January, which was a very, very tough month to the industry. And as you can imagine, and I'm sure that you know, mainstream is more impacted by seasonality than premium offers.

So, we are all looking forward to the summer in the North American zone. It looks like that the winter is definitely gone by the time that we speak here today. And we need to see now how May and June will perform.

And then, our expectation is that mainstream brands will perform well during the summer, because we don't see indications of hard elasticity or less consumption so far in North America. And given how robust the economy so far, salaries are moving up, employment is up, I think that beer will weather very well what's coming ahead in the North America.

But we need the summer to start. That's what we are looking for..

Thank you very much. We are looking for -- towards the summer as well..

Thank you..

Thank you. Our final question will come from the line of Pinar Ergun with Morgan Stanley. Please proceed with your question..

Hi. Thanks for taking my question. ABI's balance sheet should be stronger by the end of this year compared to few years. Now, I appreciate organic growth is still our top priority. But I was wondering if you're coming across any interesting M&A opportunities.

It would be great if you could please remind us of which categories or geographies would be of most interest. Thank you..

Hi, Pinar. Thanks for your question. Fernando here. So as you said, our balance sheet continues to improve. We've had just another important data point. We just redeemed another $3.1 billion of bonds this quarter. And we should be in a better place by the end of the year.

Always keep in mind that there is a natural seasonality in cash flow generation, and deleveraging has historically been strongly weight towards the second half of the year. It's important to highlight that leverage is a metric, but having a 6% and 4% interest rate in rising interest environment and high inflation, it's a very good place to be.

We -- I always like to highlight that we reiterate that we capture the majority of the value creation as we continue to move closer to three times net debt to EBITDA. On the business itself, we definitely have a great business. And as you mentioned, we continue to invest in the organic growth opportunities, which there is no shortage of.

On the inorganic question, we're going to access and valuation the opportunities when and if they arise. And, of course, nothing to share at this moment. But the right framework to think about is, with the fast cash that is generated by our business, we aim to maximize value creation more than anything else.

And we will do that by dynamically balancing the capital allocation by audits, which are deleveraging, M&A and return of cash -- the return of excess cash to shareholders. Thank you..

Thank you..

Thank you. This was the final question. If your question has not been answered, please feel free to reach out to the Investor Relations team. I will now turn the floor back over to Michel Doukeris for closing remarks..

Thank you, Jessie. And thank you all for your time today and for your ongoing partnership and support of our business. Please stay safe and well, and we look forward to see you all..

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