Good morning and thank you for waiting. We would like to welcome everyone to Ambev's Fourth Quarter 2020 Results Conference Call. Today with us, we have Mr. Jean Jereissati, CEO for Ambev; and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website, ri.ambev.com.br, as well as through the webcast link of this call. We would like to inform that this event is being recorded and all participants will be in a listen-only mode during the company’s presentation. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ambev's management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect future results of Ambev and could cause results to differ materially from those expressed in such forward-looking statements. I would also like to remind everyone that, as usual, the percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated, percentage changes refer to comparisons with 4Q 2019 results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of the Ambev's normal activities. As normalized figures are non-GAAP measures, the company disclosed a consolidated profit, EPS, EBIT, and EBITDA on a fully reported basis in the earnings release. Now I'll turn the conference over to Mr. Jean Jereissati, CEO of Ambev's. Mr. Jereissati, you may begin your conference, please.

Good morning, good afternoon. Thank you very much for joining our call. 2020 was unforgettable in many ways, what a year, on one side, all the sadness, hardship and challenges that COVID-19 brought. On the other, I praise the resilience of our team and respect their commitment with the profound transformation our company went through last year. Ambev made a positive impact in society. Ecosystem collaboration for a better world was the tone of 2020. We launched meaningful innovations to from Cusqueña in Bolivia, to the most commented sparkling wine, LP QTP in Argentina. Our innovations grew our portfolio and expanded our reach in terms of new propositions to consumer. In Brazil, Brahma Duplo Malte was the star of our pipeline. Thanks to an innovative development process, singular, liquid and a disruptive marketing launch, the Beats franchise revamp with GT and Zodiac also brought us a breath of fresh air with the new generation. Ambev's technology platforms were exponentially adopted [Chuí] in 2020. Digital businesses are here to stay and platforms like Ze Delivery and BEES, our super app, were at the right place in the right time. As for the fourth quarter, we build on the commercial momentum from Q3 to deliver a good finish to the year. More importantly, the success of our commercial strategy in the quarter also positioned us well for 2021. And here's why. Beer volumes continued to recover and grew year-over-year in 7 out of our top 10 markets, led by our double-digit growth in Brazil, in Chile, Guatemala, and Paraguay. It was also important to see our beer volumes in the Dominican Republic recover strongly despite the COVID-related restrictions. We have been strengthening brand equity and power of our portfolio and gaining market share in most of our key markets. In Canada, for…

Thanks, Jean, and hello, everyone. Let me start by talking about the tax credits in Brazil. Given that they were so impactful in the quarter. We recognized BRL 4.3 billion in tax credits, BRL 2.5 billion were recorded in other operating income and BRL 1.7 billion were charged to our financial results. These credits result from a 2017 Brazilian Supreme Court decision on the merits that declared unconstitutional the inclusion of the ICMS state tax in the taxable basis of the PIS and the COFINS federal taxes. As further disclosed in our notes to the financial statements, with the support of counsel and external advisers, in December, we concluded the estimation with reasonable certainty of the amount to which we are entitled. Given the nature of the dispute, these tax credits are technically part of our normalized results from an accounting standpoint. However, given the materiality of the amount, and to ensure greater transparency of the underlying performance of the business, we decided it was appropriate to do two things: one, disregard these tax credits for purposes of calculating our organic performance and treat them as a scope change. And two, we updated our accounting policy to record all extemporaneous tax credits under other operating income instead of the P&L lines that were originally impacted in the past. If it weren't for the scope adjustments, our nominal normalized EBITDA for 2020 would have been nearly BRL 19.5 billion with an EBITDA margin of 33.4% and normalized profit would have been approximately BRL 8.2 billion. There is still ongoing litigation in this matter, and we will keep the market updated as things progress. And any potential further tax credits will be recorded when the prospects of their recovery are practically certain from a legal perspective and the amounts to which we…

[Operator Instructions] Our first question comes from Marcelo Recchia, Crédit Suisse.

Hi Jean, Hi Lucas, thank you for taking my question. The first one would be about the tax credits. If I understood correctly there are more 1.9 billion tax credit to collect over time, correct? So, do you have any visibility on timing for that and on top of that will – will it be reasonable to accept a risk statement of Brazil beer sales of 2020? This is the first question. The second one, if I may. With the redesign in agreements between the Coke bottlers and Heineken announced it yesterday, one of the main concerns of the market has been about competition identification, particularly in the premium segment. So, my question is what can we expect from Ambev as mitigating levers for, let's say this potential higher competition? Thank you very much.

Thank you for the question Marcelo. I will hand over the first one to Lucas and then I get the second one.

Okay. Hi, Marcelo. Thank you for the question. With respect to the tax credit Marcelo, there is no clear timing yet as it relates to the 1.9 billion of potential tax credits that we disclosed in our footnotes to our financial statement. This really is because this is the pendant on the judicial system in Brazil. So, we still await the judicial decision that will give us reasonable certainty to be able to record and recognize these credits. So, it is really depending on the core of the judicial dispute in respect to this amount.

Okay, thank you.

And about the [duo] Heineken and Coke, Brazil has always been a very competitive market. And it is too early to say something about how this duo will unfold. For me it is a little bit, it is highly anticipated this type of move and what I can say is that, for a while now, two years ago we really started to transform big time our [indiscernible] market and it remains unparallel and we believe that we are getting a new edge on that. We have to remember that 30% of our volumes are distributed by 150 wholesalers that is with us, they are with us for 20 years and they are going through business transformation adoption these. Some of them are adopting Zé Delivery. The remaining 70% is distributed by approximately 200 direct distribution centers. And we are betting big time on the thing about technology on the DTC and on the BEES that we believe that it will be the edge of – and the many possibilities of hypersegmentation of supporting a broader portfolio, launching innovation, is with this type of platforms like this that we are seeing that in the past, we had sales rep going to a customer, and he would have like 7 minutes, they can order. Now, because of our platform in the wholesales, in the our customers, they are staying 30 minutes a week in the platform, looking innovation, learning about marketing campaigns, connecting. So in the end, we have our strategy of transforming our company. We are pretty much sticking to – investing on that. And the deal, I think, is highly anticipated, let's see how it unfolds.

Okay. Thank you very much, Jean and Lucas.

Our next question comes from Andre Hachem, Itaú.

Hello Jean and Lucas. Thank you for taking my question. I have basically two questions here. The first one is regarding the 10% volume increase you mentioned this year. Could you just provide us a bit more breakdown in terms of regions and mix and how that's been developing? We're curious, especially because of the end of the government aid program. So, especially in North and Northeast, we were wondering if you have been seeing, let's say, lower volume recoveries than in the other regions. The second question is relating to your digital initiatives. Could you guys comment a little bit on minor.com it's been evolving quite well, I know it's been, let's say, a big bet in terms of the cash and carry or fighting off the cash and carry. So, what is the strategy on that front? And how do you see this developing going forward?

Okay. So, let me start with the volumes. So, I've been saying – we used to say that we lost close to 10 million hectoliters in Brazil beer from our peak volumes in 2014, and we have been working to get this 10 million back. 2020 alone was a year where we were able to recover 4.5 million hectoliters since the low point that was 2018. And that was possible because we created – it was less about the industry and more about our ability really to create new occasions for in-home consumption. We revolutionized the way we connected with our consumers. 2020 marked a moment where we can say that pretty much all the additional volumes sold in the industry was re-driven by Ambev in a holistic play on portfolio technology lives RTM marketing. And so these things are pretty much structural. And that's because of that, that we see the momentum that we still have in Jan plus Feb in 2021. And so that's it, we are pretty much investing in the things that we can control, and we are excited about these new things. The scenario is still very fluid. We don't know how this is going to evolve. But a big part of our volume, there is a part of it that really are market share gains when you talk about the Acelio and the Northeast. So we have a lot of market share gains in the north and in the Middle East, too. So it is something that we are pretty much looking at volumes that were generated by our occasion expansion, industry expansion and market share gains. So that's pretty much it. So, having said that, the world is transforming. It was amazing how we see the digital platforms really been adopted exponentially. It was really something that we didn't – it was like a 5-year plan that helped – that happened in 5 months. So we are – with Ze Delivery for a while now, and it really exponentially grew last year. BEES is something that is more recent, is something that we are working for 18 months and then, but it is really – it was an explosion of adoption with our customers during last year. And in the end, a big difference of all the things combined in our RTM is really the – so the digital hook and the deliveries. And so in the end, it's – so this is type of service that we are able to do from the highest north of [indiscernible] is really – our network is really granular. And I think this is a different animal when we compare with the other options or what other industries are doing in terms of cash and carries or even other industries trying to get that reach. I think that's how the world will evolve. We have to be prepared with technology, with the evolution of the RTM, and we are very excited about it.

Just to supplement, specifically to your question around menu.com. This was an investment that we made a few years ago. We found a group of entrepreneurs that we were very impressed by and decided to partner together with them to develop a marketplace in the Brazilian market. And I think 2020 was another year where they consistently managed to expand their presence in the market. And the more we work with them, the more opportunities we see to leverage the scale and the infrastructure of the broader Ambev organization, to help improve service level to clients across the country. So, this is not just about menu.com and BEES and Ze Delivery. We also have Donus, which is our fintech start-ups that we've been investing behind as well. So, we're really trying to create a menu, no pun intended, but a menu of options to serve better on the logistics side, on the financial side, on the products availability side so that we can ultimately deliver tangible benefits to our clients and our consumers. It's about an ecosystem. It's not just about one or the other.

Perfect. That’s very clear. Thank you.

Our next question comes from Thiago Duarte, BTG Pactual.

Hello Jean, hello Lucas. Good afternoon everybody. I have three questions, two of them focus on the digital initiatives and last one on the market. The first one, if you could talk a little bit about the BEES, particularly the BEES service and how that affects our commercial and go-to-market strategy. I get the benefits of scalability, use of Big Data and the amount of services that you can put together to customers. But I was wondering, in the past, our understanding was that one of the competitive advantages that Ambev had with the in-person presence in the point-of-sale was in terms of the competitive advantage that you built relative to the competition. So, my question is how going digital and that platform may eventually cannibalize or even enhance the direct route strategy, whether it's detrimental or incremental to that that will be an interesting discussion? The second question is on Ze Delivery and the DTC initiatives, right? I know you're focused more on nominal dollar growth than margins, right? But you mentioned that one of the reasons for the increase in SG&A expenses in Brazil was because of the expenses related to this DTC initiative. So, can you talk a little bit to us about how this platform stack up against your regular off-line business in terms of gross margin and SG&A, that would be an interesting point as well? And the third question is in your earnings report, you mentioned or you show in that chart that in Brazil, the share of off-trade channel in Brazil beer is back to 2019 levels. So, back to pre-pandemic levels. So, can you talk to us a little bit about how that normalization of sales channel reflected in your packaging mix and brand mix or weather packaging and brand mix is also more normalized in the fourth quarter? Thank you.

Okay. Many questions here Duarte, let me see if I get all of them and if I miss something, you can add on the end. So, the BEES, so – and there was the question about menu first that I didn't get it right. So, BEES and menu are two strategies, two ventures that we are really working together to get this RTM revolution that we are proposing. There is a nonlinear transformation of the RTM, thinking 10 years ahead and not the way we think it should be, okay? So BEES and menu, both are working helping us on that direction. Having said that, we don't forecast for now to lose the human contact with our customers. I think – so what we are working very hard right now is really to upgrade and to evolve and to transform the role of the sales representative that it was in the past, pretty much order taking and some type of execution to a more business representative that has a lot of data in his hand and really can help our customers in category management, in more profits, in innovation, on technology adoption. So, in the end, we are pretty much worked on a new approach, there is an evolving approach from we have today, but we continue with the human contact on the BEES, okay. Just talk about BEES a little bit. It centralized different services. There's a 20-hour 7 days platform that creates customized touch point and it's really improved service level, and it's really helping to really digitalize our customers. And it's something that we thought it would take much more time, would be much more difficult. But the adoption and with the sales representative there, the way we have been able to put the apps in our…

Amazing, Jean. Thank you so much.

Our next question comes from Lucas Ferreira, JPMorgan.

Hi Jean, hi Lucas. Good afternoon everybody. You're giving a guidance of [indiscernible] increase in the COGS per hectoliter. So, I have two questions about underlines on the P&L for the year. So, Jean just discussed that Ze Delivery is still in a client acquisition phase for – to support its growth. So, wondering if you guys can comment about the SG&A trends for this year. If you still think that you should trend maybe slightly above inflation or relative to your regular revenues, how that should behave if you have room to some savings here and there? Or in future bringing new brands to Porto Alegre, you're going to have to speed up the marketing for those. How to think about SG&A? And the other question is on pricing. First of all, how you see your price – the price point of your main brands relative to competition? Do you believe that there is room for some catch-up there or not? And how do you see the overall pricing for [indiscernible] this year given that not only you but everybody should be [facing corns pressure]. So, my question is that do you believe that we should be able to see cost growing above inflation this year or are you seeing inflation as your target? Thank you.

Okay. So, I'll get the last one first and then we go back to SG&A and a little bit of the COGS. So, as you know, we have been much more flexible, nimble and agile in implementing revenue initiatives and to approach market conditions to pursue healthy revenue. In the end, that's the objective, healthy revenue, combined with sustainable volumes. And with this approach, our net revenue per hectoliter growth of 8% in Brazil beer in Q4, it was something that was based on this new strategy. And it can be broken down in three parts. So, we really started to taking price to recover inflation in Q3, end of Q3, in this process, it was rolled out through Q4 faced by 10 regions and packs. So, this is something that it was an ongoing process during Q4. We believe that by the end of Q4, the relativities were pretty much on the historical range. But this process was something that we are really getting it phased in and nimble and flexible and agile. On top of that, we had a smarter way to do promotional activities. It was – we used a lot this new – this concept of occasion based activations, cross promotions for consumers in different channels, and we are very happy because it was really effective in our Q4. And finally, we have – so this Q4, we had improved brand mix that it was really driven by, first, the sustained resilience of our core brands. So that's something that we have to talk about. It is – so when you – we look like [Lasko] to end up the year with flat volumes, it's really something that it was a drag in the past and it's really helped us when you stabilize the core. We…

Thank you, Jean.

Our next question comes from Rob Ottenstein, Evercore.

Great, thank you very much. Couple of things. One, I wonder if you can give us a little bit more detail on how your premium portfolio is evolving and the strategy there and your ability to maintain or gain share in premium? And then the second, you talked a little bit about how you're helping your customers digitally, but I'm also wondering, a lot of the bars, restaurants, obviously, have been hurt badly because of COVID. Are there things that you've done in terms of perhaps temporarily loosening up terms, working capital, assistance, any other assistance of a sort of a financial sense to perhaps strengthen your relationships and create greater degrees of loyalty? Thank you.

Thank you, Robert. So first of all, premium is really a long-term strategy in which we have to be patient – have to have patience really to build brands and to invest on brand power, brand equity, and we are taking a view, a strategy of a portfolio to do this as an important revenue stream for the future. In this full-year, our global brands, 2020, continue to – with a very good momentum. It was a double-digit growth. It was a growth that we are comfortable in good, if we really make it for some years on that type of growth. So, there is a combination of global brands here. If I would take out, for example, Corona, that it was a brand that we are, for a while investing that we were a little bit concerned because of the pandemic and the name and everything is really resilient and growing much ahead of our average of global brands. Beck’s is really something that's doing very well, tripling and we had a lot of adoption on a lot of acceptation. So, I really am excited with our strategy. Colorado is another brand that's doing very well to – if we take out the impact of the Colorado bar, so the brand is growing very well, very fast as a national craft that we have leader on the craft on the super premium side. So, we had an issue this year pretty much on the domestic premium brands, pretty much Sertanejo, Original, that the brand Skol Puro Malte, really towards these brands – their own trade occasion really connected it suffered a little bit more on that. But in the end, we are very excited about the consistency, the long-term view and the portfolio strategy approach that we are having…

Thank you very much.

And Robert jus to go back to the – Robert, sorry, just before you go. On your first question, if we just expand beyond Brazil, I also think it's worth kind of noting that our premium brands and the portfolio word approach that we're developing in other markets, right, also had a very good year in 2020. So, if you go to places like Canada, right, where Corona and Stella Artois had a very solid performance on the brand power side and on the market share side. If you go to Central America and the Caribbean, where you have Corona, Modelo Especial in some markets, Michelob Ultra also playing an important role of allowing consumers to trade up and increase the weight of premium volumes, right, as part of our total business in these markets. So, it's – obviously, Brazil is key to our business. But the focus behind our above core, core plus and premium, is not limited to that. And I think the good news is that over the course of 2020, we managed to also build momentum in premium in other markets where Ambev is present.

Great. Thank you.

Get one or two more questions and we can go. Two more questions and it’s over. Two more.

Our next question comes from Olivier Nicolai, Goldman Sachs.

Good morning Jean, Lucas. Thanks for taking the questions. Two questions, please. After the very strong volume score that you have in Brazil beer in H2 and also the strong start that you have indicated for Q1. Could you please give us an update on your capacity utilization in Brazil? And then just [Technical Difficulty]

Olivier, you line is open. You may continue.

Hello can you hear me now.

Olivier, excuse, you may continue. Your line is open.

[Indiscernible]

Okay. We lost connection with Olivier. Our next question comes from João Soarian, Citi Bank. João Soarian: Hi everybody. Can you hear me okay?

Yes. João Soarian : Okay. Great. Just a very quick one on my side. Jean, Lucas, when I look into the cash COGS per hectoliter guidance that you gave, the 20%, 23%, I just wanted to understand how conservative that is in the sense that we should expect that a mix shift back towards the RGDs. And if I recall correctly, the third quarter, you mentioned a very big impact, right, double-digit impact alone just from the mix shift. So, I understand if there is any upside that cash COGS and could it be smaller depending on the way that the mix shift behaves? And another question linked to that. I remember that you talked about launching more RGBs into the off-trade and trying to kind of change the mix of the off-trade with innovation, with product launches in a way that you have been doing in your overall strategy. So, just trying to understand those two points.

[Indiscernible] the second one? So the first one, it is that – so yes, in terms of transparency, we decided to give a guidance that's a guidance that through everybody kind of put that on the models. And is the best number that we have. When we look today moving forward, it's true that is more related with FX and commodities. And of course, if depending on the change in the recovery in the mixed channel, this can be better or worse. But we believe that this is the best forecast that we can do right now with the available information that we have. So, having said that, so we are working big time on – if you think about, first of all, we are working big time to maintain our bar customers alive to transform them into a – in platforms that can be much more than the physical place. And they can deliver through them, they can have their to-go strategies, take away strategy. And we have a big plan for returnable bottles in the half 3Q on the – what we can call small of trade or moms and pops that has this occasion that is something that we are betting that it should continue to gain traction throughout the year. So, that's what I can mention about the mix and the [indiscernible]. João Soarian: Great. That’s great. Thanks guys. Thank you.

The question-and-answer session is now finished. Now I'll turn the conference over to Mr. Jean Jereissati for final remarks. Please, sir.

Okay. Thank you very much to be with us today. To wrap up, I just want to say that I'm very confident about our future. And I could mention three things, three reasons. Although transformations take time and the environment remains challenging, our 2020 performance shows how fast we can adapt and our agility to get things done in the middle of a transformation. So, I was very excited. So, it was a year that we kind of did three years in six months. Our portfolio is in a much better place. We have momentum. So brand power of our portfolio is healthy and growing. Innovation pipeline is strong. And our route to market is in a different place in terms of transformation, digitalization. So this is – it will be – continue to be a competitive advantage edge that we want to continue to bet really digitalizing the platforms and really scaling all these digital efforts in a very quick way. Another thing it is that cash generation remains strong, even though with all the ecosystem collaboration in all the – so the help that we did with suppliers and customers at some point in time during the pandemic. But in the end, our cash generation remains very strong, and we remain committed to do the right things on the transformation with financial discipline to transform Ambev a better company in the future. So that was pretty much it. Thank you very much to you all, and have a good day.

Ambev's conference call is now finished. Thank you for your participation, and have a good day. Thank you.