Anheuser-Busch InBev SA/NV (BUD) CEO Michel Doukeris on Q3 2021 Results - Earnings Call Transcript

Oct. 28, 2021 1:32 PM ETAnheuser-Busch InBev SA/NV (BUD), BUDFF
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Anheuser-Busch InBev SA/NV (BUD) Q3 2021 Earnings Conference Call October 28, 2021 9:00 AM ET

Company Participants

Michel Doukeris – CEO

Fernando Tennenbaum – CFO

Conference Call Participants

Mitch Collett – Deutsche Bank

Edward Mundy – Jefferey's

Trevor Stirling – Bernstein

Sanjeet Aujla – Credit Suisse

Simon Hales – Citi

Olivier Nicolai – Goldman Sachs

Celine Pannuti – J.P. Morgan

Nik Oliver – UBS

Rob Ottenstein – Evercore

Operator

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 Investor's 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 questions following the presentation. [Operator Instructions] Some of the information provided during the conference call may contain statements of future expectations and other forward-looking statements.

These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that AB InBev's actual results and financial condition may differ, possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect AB InBev's future results, see risk factors in the Company's latest annual report on form-20F filed with the Securities and Exchange Commission on 19th of March, 2021.

AB InBev assumes no obligation to update or revise any forward-looking information provided during the conference call, which are 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.

Michel Doukeris

Thank you Jessy, and welcome everyone to our Third Quarter 2021 earnings call. It's a pleasure to be speaking with you all today and I hope you and your families are staying well and safe. As the world reopens, I'm looking forward to being able to meet with you in person in the near future. Today, I would like to start with an overview of our third quarter operating performance in key commercial and sustainability highlights. Then, I will hand it over to Fernando, to discuss our financials.

After that, we will be happy to take your questions. So let's start with our operating performance for the quarter. When compared to the third quarter of 2020, we delivered top-line growth of 7.9% with a health mix of 3.4% volume and 4.3% revenue per hectometer, driven by revenue management and premiumization. It did increase by 3% with an EBITDA margin of 36.5% versus third quarter of 2019, pre -pandemic levels, we group topline by low pings driven by the consistent execution for the strategy, and a strong underlying consumer demands for our brands.

This quarter, we also returned to growth at EBITDA level versus third quarter 2019, as we continue to manage our cost efficiently. Our underlying EPS increased from $0.80 to $0.85, and our normalized EPS was $0.50. We delivered a strong performance in the context of a challenging global operating environment, characterized by ongoing COVID-19 restrictions, commodity inflation and supply chain constraints. Our results were driven by relentless execution, demonstrated by our teams, consistent investments in our brands, and accelerated digital transformation. In light of our continued momentum, we are raising the bottom end of our EBITDA growth guidance from 8% to 12%, to 10 to 12%.

Looking ahead to 2022, the current supply chain disruptions will result in higher input costs. We have a proven track records of operating effectively inflationary environments around the world. We will continue to deliver on our best-in-class revenue management capabilities, while relying on the strength of our brand portfolio and enhanced digital capabilities to optimize our performance. In light of discussed headwinds, we continue to meet the moment and we have already taken action. We've increased pricing in several markets, such as Brazil, Mexico, Colombia, China, and Nigeria, among others. Now, I would like to share some highlights from our key markets.

In the U.S., both revenue and EBITDA grew by mid-single-digits, that's in 2019. Compared to third quarter 2020, our topline declined by 80 bps this quarter, driven by a lower industry and supply change disruptions resulting in out of stocks. we remain focused on consistent execution of our commercial strategy in re-balancing our portfolio towards faster growing above core segments. In Mexico, we delivered high single-digit top-line in mid-single-digits, bottom-line, sustained 19 fueled by ongoing portfolio development, digital transformation, and continued channel expansion through [Indiscernible].

Our biz platform continues to expand now, comprising nearly 70% of our revenue. In Colombia, we delivered record volumes this quarter, growing top and bottom line ahead of pre -pandemic levels, supported in part by our innovations. BEES share of total alcohol increased by approximately 120 basis points. Year-to-date, August versus the comparable period in 2019 resulting in the country's highest Beer per capita consumption in 25 years. These now represents 85% of our revenue in Colombia with an average in EPS score of 56. In Brazil, we achieved all time high rolling 12 months via volume in third quarter 2021.

Growing volumes by 7.3% versus third quarter 2020, and by 35% versus third quarter 2019. We outperformed the industry for the fifth quarter in a row, according to our estimates. All segments of our beer portfolio grew by at least double-digits versus the same period in 2019 with the premium and core-plus segments leading the way. BEES, now covers more than 85% of our active customers across the country. Our business in Europe grew revenue by low single-digits and EBITDA by mid-single-digits versus the same period last year, supported by premiumization, operational efficiencies, and additional revenue management initiatives.

As vaccination rates continue to increase in our team markets, and as their own premise recovers, our performance is improving, driven by health distribution and market share gains for our portfolio. In South Africa, our business delivered volume growth in the mid-20's versus third quarter 2020. Compared to third quarter 2019, even though there were 25 fewer trading days, our revenue declined by only low single-digits. Reflecting a strong underlying consumer demand for our products. In China, the implementation of COVID-19 restrictions led to a total industry decline of mid-single-digits according to our estimates.

The restrictions disproportionately impacted our key regions, leading to a 7.1 volume decline. Nevertheless, the premiumization trend remains as strong as our super-premium portfolio once again, outperformed, led by double-digit growth of Budgul and [Indiscernible]. Moving now, let's discuss the key commercial in sustainability highlights from this quarter. We continue to develop a unique and diverse portfolio of brands to reach more consumers in more occasions. As you can see on the Slide eight, our mainstream brands grew revenue by 4%, gained share of segment across most of our main markets. Our premium portfolio, continued to lead the way delivering over 11% revenue growth.

Our Beyond Beer brand, continued to add profitable growth, delivering $1.2 billion in revenue year-to-date. Diving deeper into the performance of our global brands the combined revenues of Budweiser Stella Artois and Corona grew by 5% globally and by 9.3% outside of the brand's home markets where they typically command a premium price. Now, let me talk about innovation. Our innovations are meaningfully contributing to our results, making up approximately 10% of our revenue year-to-date. Based on the success of Brahma Double Malt in Brazil, we are expanding the double multi concepts to more than 10 markets, including the launch of Capsule Double Malt in South Africa, this quarter.

To address the global trends of health and wellness and moderation, we are developing a portfolio of differentiated offerings. We are ceding Michelob ULTRA, our premium low carb, low calorie beer in the markets. We're also enhancing our non-alcoholic portfolio by expanding Bud Zero to more than 10 markets by the end of the year. We continue to explore and innovate in Beyond Beer space. Michelob ULTRA hard seltzer, is leading the emerging seltzer segments in Mexico, with nearly 50% market share. In addition, Cutwater, continues to rapidly expand, growing triple-digits in the U.S.

We are also scaling the Michelob's brand family to more than 15 markets this year. Now, I would like to talk about how we are transforming our business with technology. Our digital B2B sales platform, BEES, is enabling us to turn customer ping points into opportunities for growth. We are in live in 13 markets, with 2.1 million monthly active users, with over $5.5 billion in gross merchandising value this quarter, demonstrating an accelerated growth trajectory in the past 12 months. To give you a deeper understanding of the value we are unlocking with our digital transformation. Let me walk you through the journey in our biz pilot market, the Dominican Republic we chose [Indiscernible] as the first market for the full rollout of our digital transformation.

Launching BEES in 2019, [Indiscernible] is an ideal candidates to test and captured learnings to inform the global expansion of the platform. First, it is a market of relevant sites which will allow us to understand the potential impact of a full transformation. It is also a market where we have a significant presence. We've got high level of direct distribution, which facilitates rapid expansion and adoption. Lastly, it is a market with lower these top penetration in the high level of traditional trained, which would provide us with learning's on how to address perceived barriers to adoption.

We have seen exciting results since we digitally transformed the market with the platform, unlocking incremental growth for our own business and our customers. The digitization of our relative market enabled us to fully execute our commercial strategy. With these now making up over 90% of our revenue in VR. We are reaping the benefits of accelerated revenue growth versus historical levels For these customers, particularly those that are fully engaged, we follow our features offered in our platform. We see accelerated performance across several key metrics with higher revenue per order, higher delivery frequency in more unique SKUs purchased when compared to 2019. We have now rolled out BEES to 13 countries in the last two years.

And we are incorporating the learnings we have gained along the way to accelerate the digital transformation across our global footprint. Now, let me talk to you about another pillar of our digital transformation, our own direct-to-consumer business, which generated more than $1 billion in revenue year-to-date and it is growing rapidly. The biggest contributor is our e-commerce platform, which grew by 93% year-to-date. In Latin America, we are building our only new channel ecosystem. We follow e-commerce courier platforms across more than 10 countries. Leveraging a best-in-class physical presence, we follow retailers in brick and mortar direct-to-consumer businesses.

In Europe, we are delivering a superior in unique at-home experience through in-home drops in products on our e-store. Now delivering more than $100 million in revenue year-to-date. Now, let me change gears and talk about sustainability. I'm so proud of our journey and our teams in the way we added advancing our ambitious sustainability and channels. We are taking action to decarbonize those footprint. Early this year, we announced our first carbon-neutral brewery, Yuan, China. This quarter, we achieved carbon-neutral for our second brewery in our first small calls in Brazil. As pioneers in sustainable brewing, we continue to pursue innovation in partnerships, in support of the transition to a low carbon economy.

Additionally, in September, at the 76th session of the United Nations Global Assembly, we were recognized as one of only 37 Global Compact Lead Companies, for our ongoing commitment to the UN Global Company. It's 10 principles for responsible business in the related sustainable development goals. Congratulations to our teams and partners for these important achievements that are driving our sustainability agenda forward. With that, I would like to hand it over to Fernando to discuss our financials. Fernando.

Fernando Tennenbaum

Thank you, Michel. Good morning, good afternoon, everyone. I hope you are all safe and well. Let me first take you through the drivers of our underlying EPS. Our underlying EPS increased by $0.05, from $0.80 to $0.85. Normalized EBIT, increased by $0.13 per share. In net finance costs, we recorded lower interest expense due to growth debt reduction, partially offset by other finance clause. We saw higher income tax expense, due to increased profitability, country mix, and reduced benefits from tax attributes was $0.05 per share.

We also recorded higher share of results from associates worth $0.01 per share, and highest profit attributable to non-control in interest worth $0.10 per share, resulting from higher profits of our lifted subsidiaries, Budweiser, a back and Ambev, along with the issuance of a 49.9% minority stake in our U.S. based metro container operations in December 2020. Moving on to Slide 18, you'll see that our debt maturity profile is well distributed with no significant maturities over the next five years. Let's elaborate further on our debt portfolio shown on the previous light.

As a reminder, we do not have any financials covenants on our entire debt portfolio, including our sustainability linkage, revolving credit facilities. Our bond portfolio remains largely insulated from interest rate volatility as approximately 95% holds a fixed rates. Furthermore, the portfolios comprised of a varieties of currencies with 52% denominated in U.S. dollars, 34% in Europe, and the remainder in currency such as the Canadian dollar, pound, sterling, and Korean-won diversifying our effects risks. The weighted average maturity of our debt portfolio is more than 16 years. Finally, we continue to have a very manageable weighted average coupon of approximately 4%.

Now let's talk about capital allocation. Maximizing long-term value creation drives how we balance our fourth capital allocation priorities. Our top priorities, for the use of cash history invest in our brands, and to take full advantage of the organic growth opportunities in our business. Our optimal capital structure remains around the two times net debt to EBITDA ratio. With respect to M&A.

We will always be ready to look at opportunities when and if they arise. This is subject to our strict financial discipline and the leveraging commitments. Finally, we include return excess cash to shareholders in the form of dividends and not share buybacks. However, in lining for financial discipline and the leveraging objectives there will be no interim dividend. The board's proposal with respect for full-year 2021 dividend will be announced that we followed full-year '21 results on February 24, 2022. I will now hand it back to Jessy so we can begin the Q&A session. Thank you.

Question-and-Answer Session

Operator

Thank you. The floor is now open for questions. [ Operator Instructions] Thank you. Our first question is coming from the line of Mitch Collett with Deutsche Bank. Please proceed with your question.

Mitch Collett

Good morning, Michel. Good morning, Fernando. My first question is on pricing. Can you comment on the pricing environment in your key markets? You've been able to take up pricing in Brazil, for example. But perhaps you can tell us what you're expecting for pricing in F22. Secondly, I would like to ask about your direct to consumer growth. And I think the 60 million DTC orders you've achieved in the 9 months implies $21 million in the third quarter, or up 40% versus Q2. Say, can you comment on what's driving the acceleration and how you're benefiting from both the economics of DTC and the additional data it brings to the business? Thank you.

Michel Doukeris

Hi, good morning, everyone. Good afternoon. Thanks for the question, Mitch. Michel speaking here. I think that taking on the first part of your question, the one related to price. What we see is input costs going up across the globe. I think that this is not new news. And we see that there is inflation picking up different levels across different markets as well. We continue to analyze everything, and using our revenue management tool kits in order to face this moment and make sure that we are planning accordingly, and taking under consideration our overall business performance.

In the markets where we already moved with price this year, some of them more than once, such as Brazil. We see that, the inflation is peaking up, so consumers and consumer demand remains strong. And we have other examples, such as Colombia, Mexico, Nigeria, China, where we are already on the move and taking actions. When we look forward to at this point, it's too early to see what's going to happen and how costs will be next year, commodities and everything else. But we rely on the strength of our portfolio, best-in-class revenue management capabilities, as well as our enhanced digital capabilities to help us and support us in optimizing our business.

Then moving on to the second question, direct consumer. This is being a very important journey for us, very relevant, in the way that we've been implementing our to digital transformation, and perhaps one of the most important components of our current strategy. We've been seeing meaningful developments in the direct-to-consumer. COVID, as everybody talked about, accelerated a lot of consumer behaviors in this front. We generated this year more than $1 billion in revenues. Huge presence for direct-to-consumer in Latin America, we are now in 10 countries.

We follow Ze Delivery, our international courier platform, delivering beer to 30 minutes, call to consumers at great prices. And in Europe, we have a slightly different approach, also, Omid Stores, but also doing perfect draft, which will be helping us a lot to bring the draft experience between home in Cape for example, we have a huge base of in-home bars now that people are using with our perfect draft.

I think that the main mission on our direct-to-consumer is in one hand, best-in-class consumer - centric experiences but also gather more data, understand better occasions, and making sure that we are there when consumers need us. Brazil's that delivery now covers more than 50% of the Brazilian population. more than 280 cities and continues to expand very fast. Not only Brazil, but also they stand in another 10 countries in Latin America. Thanks for the question.

Mitch Collett

Thank you.

Operator

Thank you. Our next question comes from Edward Mundy with Jefferey's. Please proceed with your question.

Edward Mundy

Hi, Michel. Hi, Fernando. Afternoon, morning, everyone. Two questions. please. You're a 100 days into the role and you highlighted in your presentation, some of the things that are working well on the category development side and also through digital transformation. As you doubled down on these, to what extent do you think there'll be sustainable leavers to growth beyond the current recovery period? And then my second question is, coming back to COGS. You didn't really have the same digital capability, last time the industry faced these COGS headwinds. How do your B2B and DTC assets make it easier to navigate a rising coax environment.

Operator

Ladies and gentlemen, please standby, we are currently experiencing technical difficulties. Again, please standby, we are currently experiencing technical difficulties. Thank you for your patience.

Michel Doukeris

Hi, Ed. Michel here. Thanks for the question. I think that we were in mute before. So talking about the 100 days, I think that there is a lot to learn in 100 days, it goes by very fast. but when you are focused at the same time you can achieve a lot. I think your question was more in to the digital part, and we are doubling down on that. I think that on digital is, as I said on the last quarter, that is this concept off stepping stones. So we started this journey, five-six years ago, and we knew that as we progress, we will be learning much more, and we will be building momentum with the data that we gather, with the experiences and with the learning along the way. What is very relevant here is that, this is a long-term investment, very strategic.

We are doing first and foremost, focusing on consumer and customers. On the consumer front is, reasonable experiences and being there for consumers when they want us, on the occasions that they want, and making us more available in a broad range of occasions and tapping into the digital trends that consumers are really engaging with. On the B2B, this is a very interesting opportunity to digitize part of all context strategy, making sure that we learned more promoted scale through data. And now as we capture this data, and we improve our execution capabilities, our overall strategy gets a much better execution because, we free up time from our people, from our team to focus on what matters the most. The premiumization of our portfolio, the activation of all occasions and this unlocks new revenue stream s for us.

And of course, we have 13 countries now with BEES. We continue to expand quickly in this countries. We are going very deep, 70% to more than 80% of our revenues now coming from BEES. And the more we go, the more we learn, and the more we get further opportunities to continue to expand beyond only our own business. So we have examples of marketplace, We have examples of services, we have examples off credits.

And when you think about COGS, how does digitalization of our relative market and relative consumer helps that? It gives us more information, that ability to forecast our own volumes and how to adapt and adjust our supply chain to be more effective. So that is a lot of learnings that we are building there. A very unique position given our size and our footprint. And this is also giving us better ability to utilize and maximize our revenue management strategy.

Edward Mundy

Thanks, Michel and just -- just coming back to your example on the Dominican Republic on Slide 13, you said that net revenue per delivery, those are getting out -- does it help from a pricing standpoint to have some BEES.

Michel Doukeris

Yes. That is again a very interesting market for us was the market where the team decided to take BEES to full execution. The base team did a great job that understanding all consumer pain points, building up the tech knowledge, enhancing all the models that we had. A working beyond two weeks ago, which the team, reviewing everything and all the progress that we're making there. So we're showing here the Beer only revenues on the example and you saw that there was an acceleration. This acceleration, of course, is a product of following entire commercial strategy.

Not only BEES, because that is more communization in the market, there is morning innovation, there is more deliveries and there is more availability. And this is helped and supported by BEES. On top of that, we also have now lower marketplace than with BEES. So there is more revenue than the one that we put on this live. And of course, part of our overall strategy is revenue management. So this growth that we saw in this live is, the combination of volume growth plus revenue per hectoliter growth. And they're both enabled by this, but also by our overall commercial strategy that has premiumization, that has digitalization, that has a very strong execution in the marketplace.

Edward Mundy

Great. Thank you.

Michel Doukeris

Thank you.

Operator

Thank you. Our next question comes from Trevor Stirling with Bernstein, please proceed with your question.

Trevor Stirling

Hello Mitchell and Fernando 2 questions on my side. Mitchell, and Fernando you increased 2 guidance today, but just wondering if you wanted to highlight what went so well in the Third quarter that gave you the confidence to increase the guidance. The second question is, what's coming back to your first 100 days, Michel, what do you think is the biggest changes we've made since you took over as CEO?

Fernando Tennenbaum

Thanks, Trevor. On the guidance, in the beginning of the year, we provided our guidance of an EBITDA growth of eight to 12. Now, we already have nine months behind us, so it's natural that we raised the bottom end of our guidance. Now we added 10 to 12 and we continue to maintain there's going to be 10 to 12 and our revenue is likely to grow ahead of which going to be a healthy combination of volume and price. It's fair to say that our teams worldwide has been successfully navigating our quite a complex environment with our customer and consumer - centric approach. And we are confident about the momentum of our business performance. So as a consequence, we are raising the lower end of the guidance and now we're at 10% to 12%.

Michel Doukeris

Hi Trevor. Michel here taking on the second part of your question, related to the 100 days. As I said before 100 days, they go by fast, but focus always help and thank you to execute an extract more on what you're doing. I think that the real deal on their 100 days so far was really talking towards team and listening from everybody.

I'm very impressed and humbled by their passion and their execution in focus on what we need to do. I continue to learn over this 25 years and really our team has been teaching me and sharing a lot with me. So I shared with you before that my 3 focus as I got started was really about, mid the moment and deliver a great 2021. Make sure that, we are very clear about what's working. And therefore, able to investing and accelerate, what's already working, why you're building this extreme focus on being sustainable leader with consistent financial performance. I think that -- I talked about this on the press release.

So what I'm really trying to bring to the team here is, a sense of simplicity and focus, and really focus on relentless execution, invest behind our brands, playing to my strengths and my market here by heart and this is what I like doing. And accelerate our digital transformation. So those are the three points. So relentless execution, focus and investment behind our brands, and accelerate our digital transformation.

Trevor Stirling

Thank you very much, gentlemen.

Operator

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

Sanjeet Aujla

Hey, Michel and Fernando. My question is really looking at many of your markets. Industry demand is well ahead of prepandemic levels. Notably Colombia and Brazil. What do you think is driving that and how sustainable is this? Do you think volumes can continue to grow on this new hi base? Thank you.

Michel Doukeris

Hi Sanjeet. Good afternoon, Michel speaking here. Thank you for the question. So I think that when you look at the market demand and the way that the category has been developing, I'm very glad to see markets such as Colombia, Brazil, Mexico. We talked about Canada industry growing the last quarter, and I'm very excited with the category development. I'm even more excited when I think about Brazil and Colombia this quarter, because there's really kept awarding growth all-time, high volumes, so we are unleashing the category growth and we ABI, we are leading this growth. So it's really innovation.

The performance of our brands, the execution of our digital strategy in these 2 countries that has been bringing consumers to be closer to our brands. And therefore, we are reaping the benefits of this category developments. When you think about the long term, I think that's in both countries. And moreover, across the globe, the category continues to have a lot of opportunities to develop and now we are learning from the FTD model.

In everything that we've been building over the last 5 years and accelerating now, we forward deals of what the category expansion model can do and be for us is very exciting and be it is gaining share of [Indiscernible] globally this year, and I think that this is very good for the long-term prospects in the category. And in Brazil and in Colombia, is about innovation, is about an incredible execution for our teams new to markets, and is about the pace of our digital transformation.

Operator

Thank you. Our next question is coming from the line of Simon Hales with Citi. Please proceed with your question.

Simon Hales

Thank you. Hi, Michel. Hi, Fernando. Two for me as well, please. Michel, you talked at the beginning about, the pricing you've been taken up late and how they're probably going to be more to come, as we look forward over the next few months. Some of your competitors has been highlighting that, given the broader inflationary backdrop that sitting consumer's pockets, that they've started to see some signs of a slowdown in some markets in terms of consumer offtake for Beer. How do you think and how confident are you, in the beer categories ability really to hold its fair share of the consumers wallet, against that inflationary backdrop as we look into 2022? And then secondly, on the U.S. How do you see the backdrop for the U.S. businesses, as we look into Q4? You clearly had some out-of-stocks in Q3. Is that correcting itself or our ongoing glass and supply constraint is likely to intensify from here into the year-end.

Michel Doukeris

Hi, Simon. Thank you for the questions. I think that brought the 2 questions here. I will start to the first one on pricing and category and with specific. I think that the beer category globally has been proving to be very resilient. And they think that it's not resilient over the years but throughout the pandemic, we saw that spike off fall change than shifts in channel lock-downs, the consumer demand was there and continues to be there. And the category continues to grow and as I said before, gaining share of throughout globally, I think that being key markets where we already got the price going, examples, Brazil, China, Mexico, Colombia. The demand for our brands continue to be a better [Indiscernible].

And this has to do with all investments that we've been doing to our brands and the number of consumers that Lahore brands. This has to do with forward execution, so our teams have been working very hard and has to do as well with the ability to innovate and continue to support and drive the consumer demand. I think that input costs, they continue to be on the rise. I don't think that we have all the data today to be quite honest, we queue on what's going to happen as all categories, as you said, our increasing prices when inflation continues to pick up. But what we see as well is that like shortage in labor, solids are going up, and consumer purchase power continues to be strong.

So in facing these inflation scenario, but at the same time, having consumer purchase power, we expect the category to continue to perform well. And on our side, which is very important, we continue to invest in our brands to drive consumer demand, innovation, and enhancing our digital capabilities. Moving then to the second topic, which is U.S., I think that we need to step back for a second, I know that you are doing this. And looking at last year, if we think about third quarter last year was an amazing quarter for Beer, with industry growth in regroup both top-line and bottom line last year.

As we cycled, this third quarter, we are faced with tough comps, but also a lot of supply chain disruptions. The disruptions came most as you just said now from glass. There was 2 important events. One was the end of the winter storms in the south that just caused the big crunch in transportation, but also glass availability. In the second one is well normal this point cyber event that also cut in the North of the U.S. this supply chain availability. So we have a lot of trouble together as the industry in the quarter three, our positions in terms of inventory now are much better.

We are coming back to a much better supply for our wholesalers in the floor or retailers. We're not over yet, but the position for the quarter four looks to be much better as we got started, October as a matter of fact at the end of September. And now we're forecast with what we know now is that it's going to be better for quarter four this year, quarter one next year. Thanks for the question.

Simon Hales

Thank you.

Operator

Thank you. Our next question is coming from the line of Olivier Nicolai with Goldman Sachs, please proceed with your question.

Olivier Nicolai

Good morning, Michel. Good morning, Fernando. Just one question actually, on the U.S. and the hops of the category, which has been stirring down in the recent months. We have also seen a proliferation of brand and line extensions of any from you or so for many of your competitors? Now do you expect the slowdown to be temporary? And do you think you've got Korea, could accelerate again? And also what's your view on how Tesla outside of Europe, off of the U.S. and thinking about Europe or Latin America? Thank you.

Michel Doukeris

Hi, Olivier. Thanks for the

Olivier Nicolai

question. So 2 parts here. The first one is in the U.S. category, and they would like to go back to the answer that they just gave. And when we compare the last 3 months or quarter 3. There was really this test comp [Indiscernible] last year. And if we all just like -- just think about everything that we discussed last year, the U.S. had a very different behavior in terms of industry during the pandemic as compare as the rest of our markets, right? And this difference was driven by 2 things that I would say, many more but 2 things. 1 is the different channels in the U.S.

Michel Doukeris

Where the off-trade represents more than 80% of the category. And when you have all the lockdowns, the off-trade was open and there was a lot of pantry loading. The second part was, how quick the government's reacted in the U.S. with the stimulus package, and then people had money, and they had the channels open, and they bought a lot of beer, a lot of products sold there. Industry in the U.S. performed quite well during the pandemic. So much sold that even though business slowed down in the quarter three, the quarter three this year was both quarter three 2019 for the industry, as well as for our top-line and bottom-line.

Therefore, I think that there was a typical but the industry overall remains in good shape in the prospects and that our view are very positive for the U.S. On the second part of your question, when we think about self-service, I always go back to this point that self-service and Beyond Beer are very good [Indiscernible]. And we see industries like the U.S. I always refer back to Canada as well, that has a different Beyond Beer compositions are really self-service. These industries is structurally for long time, they've been, which is low down, have growing revenue, but not in volumes. And in the last 2 years, they're growing. And they're growing because self-serving Beyond Beer.

They attract consumers from outside of the category and more than 50% of growth of our Beyond Beer and seltzers, they are from wine and spirit occasions and consumers. Therefore, there is a lot of incrementality there. The manifestation of this Beyond Beer, it came across this markets in different shape and form, right? So what first ciders, then seltzers, then ready-to-drink cocktails. In Canada, there's a very strong ready to drink beverages, but also vodka seltzers. So this is good if in transformation over time. But what is true is that it's very incremental.

And we do have capabilities because of the packaging in which the Beyond Beer shows up because of the channels and because of our ability to constantly innovate, to take advantage of this, not only North America, but also globally, we're very well, equipped as we expand Beyond Beer globally. Look at South Africa, the results of flying fish in brutal fruit there. Look at Mexico, how fast we're gaining, sharing the Beyond Beer, and then we continue to expand this in other markets.

I think that self-serve and Beyond Beer group continued to grow in North America. Of course, we'll discuss this at the beginning of the year, we said that growth would be around 20 to 50%. As of today growth is around 20%, the bottom end of what we said there, and we continue to grow 1.8 times what the category is growing so happy. We continue to invest, we continue to innovate and we're very excited when it's ready-to-drink [Indiscernible]. So Cutwater is expanding fast year-to-date triple digit, quarter three triple-digits and we are investing to continue to expand distribution, but also brand preference in growth [Indiscernible].

Fernando Tennenbaum

Thank you for the question.

Olivier Nicolai

Thank you very much.

Operator

Thank you. Our next question comes from the line of Celine Pannuti with J.P. Morgan. Please proceed with your question.

Celine Pannuti

Thank you very much. Good afternoon, good morning, everyone. My first question is on gross margin. I thought that your gross margin was down a bit, 130,140 basis points in the quarter. And is it possible for you to give us a bit of the building block because I would presume you still at some mixed benefit. And obviously your pricing plaque, two liter, where does well better. So if you could help us there.

And given I appreciate, you can give and actually for 2022?roe metallization?, but I presume you probably have a view for the first half of the year, does it means that we should expect that kind of triple-digit gross margin appraisal as we look into H1? And my second question is on innovation. I'm pleased that innovation was 10% of your sales year-to-date. How do define innovation like new product launch on how many -- I mean, on what time frame basis. And I saw that you have a plan, a lot of roll out and yet your SG&A in the quarter was flat. So what is the outlook for SG&A as we look into the next year? Thank you.

Fernando Tennenbaum

Thanks Celine, Fernando here. On your gross margin question, I'm going back to our guidance. Our guidance would be to grow EBITDA 10% to 12% and we were saying that our revenues would be growing ahead of forward EBITDA. And the main reason for that, and we discussed it that several times, is even the effects and [Indiscernible] pressures that would have on your cost of goods sold that will have an impact this year. On 2022, we are not giving any outlook yet. So what we -- we've been seeing is the different forces per Michel 's comment about the input cost pressures.

So they -- they are here, they are real. On the other hand, we have a lot of farther initiatives on our revenue management, on our digital capabilities, on innovations to be able to manage through that, okay? In your questions on innovations. What innovation, how they calculate innovation? Innovation is 30 -- is, new products that didn't exist over the last 3 years or 36 months. So that's how we defined innovation on our numbers.

Celine Pannuti

And on SG&A?

Fernando Tennenbaum

G&A. No, we're not also giving outlook on SG&A. The only outlook that we're giving our EBITDA is 10 to 12%.

Celine Pannuti

Thank you.

Operator

Thank you. Our next question comes from the line of Nik Oliver with UBS. Please proceed with your question.

Nik Oliver

Hey, thank you for the questions. Two from my side as well, especially on Brazil, if you could just share a bit more color on what appears to be a material out performance in the market in Q3, at least versus the production data that we all track. And then secondly a longer-term question. I guess in the past we tended to think about AB InBev as an EBITDA margin expansion story. Is it right to think more about the Company now in dollar profit growth? as opposed to purely FIPS margin, given some of the commodity pressures we've talked about. And also some of the innovations which I guess may be additive from a dollar basis, but not always from a percentage basis. Thank you.

Michel Doukeris

Hi Nick, Michel here. Thank you for the question. So starting with Brazil, I think that lots of things, about Brazil, but maybe starting with one general constitute is probably when we look at Brazil and our commercial strategy the also, top line growth, Brazil is one of the countries in reach. our strategy is more developed and the implementation is well advanced, from portfolio re-balance, to innovation, to digital transformation in the consumer end, but also in the retail end. We have a great team in Brazil. That execution, its outstanding and they've being pushing this will, this strategy relentless. Even in face of all the challenge that we had during the pandemic.

Prioritizing our people, our communities and our business partners. I think that the store in Brazil, as you can see is really a top-line lead recovery. because there is a locking effects in commodity as Fernando was saying before. And 3 main points in Brazil were balancing the portfolio, reigniting in the accelerating innovation, and digitizing our business in the consumer front but also in the retail front. When we think about the margin question, I think that's an excellent question because we have fundamental drivers, that they give us the leading margins that we have in industries.

So do we need portfolio of brands that we have? And the premium price that these brands command in each and every market. Our consumer - centric strategy and digitizing now our right route to consumer. And now our route to market. It only gives us enhanced capabilities to continue to drive our margins. Our leadership position in the key markets, very important industry profits pools. Our operational excellence in the way that we manage our business. And most important of all, our ownership culture. When we think above the low term and just think about this year, for example, our top-line growing ahead of our bottom line is because there is a lot of growth that we're pursuing. And this growth can be incremental in terms of margins in cash flow-generation and therefore we want to pursue growth.

And I think that you're right when you say that the dollar growth is far as more important than only the margin growth. As a matter of fact, they will always [Indiscernible] like 2 examples to build on that. I think that's one we just talked about Beyond Beer and Cutwater, for example. On dollar per hectoliter, each and every case that we sell Cutwater has high year margins per hectoliter. But because there is a lot of costs that go in between the net revenue in the margin. and because we are still building scale on Cutwater the percent of margin that you get on each case is not as good as a case of beer or a case of the Light in the U.S. But it's still total margin, total practical litter is very incremental.

When you then deploy your full commercial strategies, the digital progress that we have, example that I just gave in Dominican Republic. You can take a lot of examples where you are managing is on a percentage base much better that because it's a fixed cost is a 1/3 of this type of margin. You get more dollars in a lot of incremental margin from the digital products that you are offering. So the balance of everything is very hard to quantify on a short period of time. But the most important thing is that, you brought the point is, how we are bringing incremental profits and incremental cash flow.

Nik Oliver

Great, super clear. Thank you so much.

Michel Doukeris

Thank you.

Operator

Thank you. Our final question will come from the line of Rob Ottenstein with Evercore. Please proceed with your question.

Rob Ottenstein

Great. Thank you very much. When I look at the global beverage space, in particularly the global alcohol space, I don't think I can remember a time in which the valuations between the beer companies and the spirits companies has ever been this great. And certainly the Diageo 's and the Pruno 's are fantastic companies, they're doing really well. But the valuation differences between them and yourselves and Heineken are really hard, in my mind to get around. And clearly the spirits companies are doing better in the U.S. You mentioned though, throughout the presentation that, globally Beer is gaining share of alcohol. So given the extreme disparities in valuation, can you talk a little bit about how that informs your strategy? And maybe a little bit more details about, what is going on around the world in terms of beers performance versus spirits. And whether, you see opportunities in the spirit space. Obviously, RTD is something you've mentioned. Thank you.

Michel Doukeris

Hi, Robert. Good morning and thank you for the question. So I think that there is several pieces of the question. I will try to address in the sequence that you brought to us. But in terms of valuation I'm not going to get too deep on that and know that you all are much better than I am in the work of making the valuation of the companies. I think that there is a couple of points though that are very important for us to highlight here. As I said before, first I think that we all saw how resilient the Beer category was over the pandemic. And I think that these needs to bring us to reflect the fall. The way that we've been thinking and talking about the beer category.

And it's true when you look at data or monitor, we've been putting some data together because this data is not really available from one single-source across all countries. But when you combine the different pieces of data, it's very interesting to see that, despite of the narrative that, I don't know how it's built from there. Beer is gaining share of throat globally, right? And I think that is growing, and it has a lot to do with elicit alcohol that is no longer growing. Our beer is capturing because of the moderation and because of the affordability. It has to do with the expansion of the categories, some very important markets. You mentioned China, Colombia, Brazil, Mexico as we just saw it.

And then it's much more that we can continue to do. I think that we learned from SAV the model of the category, but the modern itself is just like a picture. The really important thing is how we are now activating the different [Indiscernible] and soft drink category and the innovating to drive growth. When you think even more mature markets, I assume that this is good for us to remember, always you think about North America, U.S. or Canada. You think about UK. Beer is growing since 2020, since 2019. And Beer is growing by innovating, beer is growing by tackling new occasions. And be it is growing by driving growth with the Beyond Beer. So there is very important intersection between wine, hard of liquid, a beer, where the Beyond Beer.

The fourth category as people call it here in the United States, is an incredible opportunity. It's sorts as more than 50% of its growth from wine and from hard the liquid. And because we are well-positioned with [Indiscernible]., with our for addiction facilities and the wishing innovation to drive growth in this space. We can continue to drive the category forward, and we can take these learnings down to developing and emerging markets and drive further growth in markets such as Brazil, Mexico, Columbia, South Africa.

We've been using a lot of data to drive this growth, we've been digitizing our role to market and our role to consumer to understand better, not only the points of sales, but also the consumer occasions. And I believe that we are very well-positioned as ABI to lead this next wave, and to continue to lead the beer category to a better momentum and to further growth. And we see this, I would not take this lightly, but record volumes in Brazil, record per capita consumption in Colombia, those are not small markets. Those are very relevant markets, where it's being proving that, yes, we can do it. We can preimmunize, we can innovate, and we can lead the category. So I'm very excited with that.

Rob Ottenstein

Thank you.

Michel Doukeris

Thank you. Thanks for the question.

Operator

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

Michel Doukeris

Thank you, Jeff. And thank you all for their questions. To wrap up, we had been focused on meeting the moment and delivering a great 2021. We continue to build on our momentum by investing in and accelerating what's already working and focusing on our consumer and customer centric mindset, to drive long-term value-creation. I would like to invite everyone to join our Capital Markets Day, which will take place virtually on December 6th. Additional details in links to register will be available on our website in due course. Finally, I would like to thank the opportunity -- take the opportunity here to thank and express my gratitude to our 106 to 4 thousand colleagues globally for their continued execution, passion, and ownership. Thank you all for your time today and for your ongoing partnership and support of our business. Please stay safe and well, and I'm looking forward to talk to you soon. Thank you.

Operator

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

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