Good morning and thank you for waiting. We would like to welcome everyone to Ambev's Third Quarter 2021 Results Conference Call. Today with us, we have Mr. Jean Jereissati, CEO for Ambev; and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder: A slide presentation is available for downloading on our website, ri.ambev.com.br; as well as through the webcast link of this call. We would like to inform you that this event is being recorded. [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 circumstance that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such forward-looking statements. I would also like to remind everyone that, as usual, the percentage changes that we'll be discussing during today's call are both organic and normalized in nature; and unless otherwise stated, percentage changes refer to comparatives with third quarter 2021 results. Normalized figures refers to performance measures before exceptional items which are either income or expenses that do not occur regularly as part of Ambev's normal activities. As normalized figures are non-GAAP measures, the company disclosed the consolidated profits, EPS, EBIT and EBITDA on a fully reported basis in the earnings release. Now I will turn the conference over to Mr. Jean Jereissati, CEO for Ambev. Mr. Jereissati, you may begin your conference.

Hello, everyone. Thanks for joining our third quarter earnings call. This is our last call of the year, so I would like to do things a little bit differently today. I will cover the highlights of the quarter in a moment, but I would like to begin talking about people. I have been very vocal about how Ambev is on a transformation journey. Transforming a company like ours, it's hard. It takes time. It's painful. There is a lot of skepticism and setbacks. In many respects, we are learning as we go, but we are doing this together as a team. A couple of weeks ago, something happened that personally meant a lot to me. Ambev was recognized by Great Place to Work as the fifth best large company in Brazil to work for. Just to give you an idea of how transformational this is: In 2020, we ranked 27. A lot of great people built this company, and we are a company of owners. Our people has been and will always be the heart and the soul of Ambev, so I'm very proud to see that my team has been humble enough to face the brutal facts of the last few years and learned from our mistakes; has shown enormous resilience in the face of COVID; made bold bets and delivered results consistently as we recover from the pandemic and, at the same time, has helped the society; has stayed committed to building a better, more collaborative, diverse, innovative and more sustainable company for the long term; and is happier and more engaged along the way. And this is true not only in Brazil but also across the other markets where we operate, so a big thank you to everyone that have been making this transformation happen on a…

Thanks, Jean. Good morning and good afternoon, everyone. I would also like to start by talking about transformation, so I will kick off with climate action, where we also took a transformational step in the right direction during the third quarter. Q3 was marked by the announcement of our first carbon-neutral brewery and malt plants in Brazil. Our Ponta Grossa Brewery in the state of Paraná and our malt plant in Passo Fundo in the state of Rio Grande do Sul delivered 90% reduction of CO2 emissions versus 2017 and had the remaining 10% emissions neutralized via carbon credits. This process began in 2012 when we built these plants designed to be low-carbon operations, and we're proud to see it come to life. To get here, we focused on 4 things: heat produced on site from biomass boilers; green energy produced on site from biogas of the effluent treatment system; energy consumption efficiency leading to more than 15% total purchased energy reduction; and 100% electricity purchased from renewable resources, in this case hydro. As next steps, we will implement electrical forklifts, starting in Q4 2021; and build on-site solar farms, starting next year. And these investments make total financial sense as well. Our decisions to move towards carbon neutrality has not only led to efficiency savings in terms of energy consumption but also allowed us to secure renewable energy sources at more attractive rates than before. Also this milestone is not an isolated event. We're developing a road map to have 100% of our production facilities become at least carbon neutral in the future, which we expect to be able to share in the coming months. Turning to our financial performance in the quarter. Overall, we saw a similar dynamic to the first half: EBITDA growth driven by top line…

[Operator Instructions] Our first question comes from Robert Ottenstein, Evercore.

Great. There's -- from what I can tell, there's really been a -- kind of an -- there's a lot of background noise there -- an unprecedented kind of change in some of the competitive dynamics in Brazil, particularly in terms of categories, with your leading competitor apparently abandoning a lot of their core value brands and just kind of totally restructuring their overall portfolio. Can you talk about what is going on in the Brazilian beer business in terms of pricing architecture, what the opportunities are as you look at that? You're obviously bringing in Spaten as kind of a core plus proposition, but what does it mean when you have such a dramatic change in the competitive landscape; and you have a whole portion of the business, economy or value beers, being walked away from by a major competitor?

Thank you very much for the question, Robert. The Brazilian market has always been very competitive in general, and it will continue to be for a while, but I mentioned at some point in time that -- just when I arrived, that I would foresee the competitive landscape more with the trends on our side. Since that, we have been working a lot on our plan, learning consumer trends, understanding the competitive landscape. And we are very excited about what we have been accomplishing. The numbers of volumes that we had this quarter, they show that. If you look at the numbers, it is not just about competition. We are really expanding our reach, expanding the number of consumers [indiscernible] transaction in our brands, so we are really very excited about our plan. Innovation already represents more than 20% of our net revenue, so we are picking the right products in the right places. So we have been talking a lot about this -- the Brahma Duplo Malte that really came to be the leader of the core plus segment that was a segment that was very underdeveloped in Brazil and has a big potential. So we have been growing new brands consistently [indiscernible] year-to-date, our high end is growing 20%. Consumers are more and more electing one of our brands as the #1 brand they love. So we have 3 million more consumers that we had in 2019's; all this transformation, technology, the reach, the convenience that BEES and Zé Delivery are bringing for consumers and customers. So really about -- the performance is really about our plan. 100% of the volumes expanded in the industry came from our brands. And on top of that, we are seeing competitors really moving in some direction that it's hard to really figure out exactly what's going on. So when we look at production numbers of [indiscernible] of the industry and of competitors, in the end, competitors, they are producing less than 2019 levels, so this is something that we are much ahead of that. And I'm not sure if that's really -- if -- a decision is really something that we are selling, and we are getting it right. We are getting the consumers. And it looks like somehow consumers are more -- and customers more towards our brand. So we're going to keep looking an eye on competitors. I think it's a big opportunity for us, anything that happen on the competitive side, but we are really excited about how we are bonding with our consumers, how we are all-time-high relation with our customers in Net Promoter Score and how we have been able really to drive industry expansion.

Our next question comes from Marcella Recchia, Crédit Suisse.

Jean, Lucas, congrats on the results. I have 2 questions on Brazil Beer. First is about loading. I would like to understand better if, after announcing the second price increase in mid-September, you saw any signs of mismatch between sell-in and sell-out late in the quarter that could have given an extra boost to the 3Q volume performance. That would be my first question. And secondly, it's about packaging supply. We have seen constraints for both glass bottles and aluminum cans globally. And ahead of the fourth quarter, which is a seasonal peaking period for the industry, yes, I would like to see if you are seeing already any signs of constraints at the packaging industry in Brazil or even if it could become a risk going forward.

Thank you for the question, Marcella. So we brought that graphic that were -- of the rolling 12-month performance of our volumes in Brazil and Ambev because I think that graphic is really -- on a yearly rolling 12-month basis, it really mitigates any type of inventory change in levels, so I think that it was a good graphic for us to talk about. I am very excited about the Q3 volumes because they happened amid a sequential improvement on our net revenue per hectoliter. So when we compare net revenue per hectoliter of Q3 compared with Q2: There were a lot of efforts in the Q3 to really keep that up with an inflationary scenario that we are living in Brazil that picked very fast, faster than we expected. And then we -- it was announced, the price increase, in October. I really don't -- I really feel that, the sell-in and sell-out, they are pretty much in-line in the inventories in the market. They are really -- we didn't see any movement on that. We have been controlling that in a very sharp way because we know that summer is coming. And heading to your second question, what we are seeing in the supply chain is that supply chain have been under pressure since the pandemic. We were able to keep it up with cans and resolved the availability of canes -- of cans, where we see a more normalized supply chain. When we come to glass, industry is more pressured. We expected to see some normalization more in 2022 on the glass side, but somehow this type of disruptions are in a much lesser extent that we had in 2020.

And then just to add there, Jean. This is Lucas, Marcella. I think, when it comes to glass bottles, one thing to keep in mind is that we have vertical, right, bottle production capacity in countries like Brazil. So that also gives us, right, a very reliable source and -- of supply for bottles and more flexibility to adapt to pressure in the supply chain overall, in addition to our long-term relationships with suppliers.

And we are leveraging our global footprint too on that.

Our next question comes from Ricardo Alves, Morgan Stanley.

Impressive numbers indeed. I had a couple of questions, one follow-up on the competition side. You alluded to this, Jean, but -- on the main competitor. I think that the first question was one of the main competitor, but when you look at your numbers and we look at the industry numbers that we can track, I mean, your performance is significantly above even -- you're significantly outperforming other smaller players as well. Could you just shed a light on how you're performing relative to them? Are there any perhaps specific categories where you're outperforming or specific regions where you think you're performing better than your smaller competitors? We've seen from the Coke system, for example, different regions performing very differently, so I don't know if that could be part of the story. That's my first question.

Okay. So let me try to elaborate more on that. So if you put our numbers together, you're going to see that we are gaining a lot of market share. It's not just a little. It's a lot of market share, and this is based on our plan. I think, the core plus segment, it was a bet that we did 2 years ago that is really paying off. The innovation -- there is a lot of innovation there. Brahma Duplo Malte has come -- Spaten has come in very well too. So we had this strategy of helping the on trade to transform itself during the pandemic; and have takeaway initiatives with the small format, very affordable, of 300 ml bottles. This is performing very well too. These brought to us -- from pre-pandemic levels, we had 750,000 customers. Now we are reaching 1 billion -- 1 million customers in Q4. So our plan is really structural. I think it's really working. And when we look at competitors, both of them, the two, producing less than they have produced already below 2019 levels, it doesn't seem to me that it's a supply restriction. It really is not because you have a plant that you can sell. So consumers has to buy. The customers should be in your hands. So I really feel that our commercial strategy is really acquiring more customers and like seducing more consumers. We have 3 million more consumers, so I feel that our strategy is going -- is doing okay. So we did the right investments on capacity in the last 2 years to be prepared for this type of volumes. And I just feel that, competitors, they have not been able to really get the transaction right and really to sell. And even this…

Super helpful, Jean. One final question, a very quick one on the revenue per hectoliter, also in Brazil Beer: When you're thinking about the fourth quarter, just wondering what your latest thoughts are because of the price increase. I don't know if there are any major mix of category or mix of channels that we should have in mind when we're thinking about the unit revenue. But even more interested on the price increases, how they've been accepted, so far, so if you're able to share any color on how October is performing on that front, that would be helpful.

Okay. So in the end, we don't disclosure that much and do forecasts on the [indiscernible]. It was public that we did it in the beginning of October. So what we are seeing is that -- so it's in the market. So the numbers are in the market, and it's pretty much around the same shape that we have been doing for a while. What I can tell you that is really -- is exciting me, it is that the on-premise recovery has been stronger than we anticipated. We are seeing -- because, at some point in time, we help the bars to transform. And then they became platforms to takeaway and deliveries. Zé Delivery helped them a lot, but now we are seeing the social out-of-home occasion getting traction again. So there is pretty much when you get with your friends and go to the bars and really drink in the bar. So we are seeing this occasion really picking up faster than we expected. And looks like this will help us on this occasion. This is occasion that is very profitable for us, that we have been always designed for it. And it's really coming back strongly. And we foresee it. For example, the RGB bottles and the RGB mix, really they are growing sequentially more than we expect. And we foresee in 2022 they're above 2019 levels.

Our next question comes from Thiago Duarte, BTG Pactual.

I have 2 questions. I will stick with the Brazil Beer discussion here. The first one is a question on how should we think of Ambev's brands' fair market share in Brazil Beer right now, particularly in terms of the price point relative to the actual market share that you have achieved. It looks like you're capturing a lot of market share, as Jean said just now. Pricing is evolving, but it continues to lag the overall beer inflation and despite the premiumization of the mix and margins and not even relative to basis points. But even in unitary terms, margins are not much higher in nominal terms than they were several years ago. So Jean, you mentioned in the opening remarks the -- a healthier portfolio, better service level. You mentioned you're reaching 3 million more people, consumers, relative to 2019, so I wonder what -- how that should translate into your -- into the discussion between your actual market share, your fair market share and the price point that you see for your most relevant brands today. I mean, if we look historically, this is a point in time where you guys would probably be capturing a lot more pricing power than we have seen, so far. So that's the broad discussion I was looking to have. And the second question is on the industry. I mean, even putting the market share discussion aside, I think, ABI, in their conference call they mentioned being gaining share of throat in many markets, including Brazil, but it still for us is striking to see the -- how the aggregate beer industry volumes are growing and in spite of the very tough comps from last year. So if you could comment on how the category growth is sustainable, in your view, relative to other alcoholic beverages. And of course, in terms of per capita consumption relative to where we were before and into the future would be nice to hear as well.

Okay, let me see if I can get this right, Duarte. So yes -- so Duarte, it's true. We are with a market share gaining -- when we put all the numbers together, better than we expected, better than we anticipated. So this Q3, when we compare with what competitors are doing, there is a lot of market share gains over there based on our strategy. We have been building the high end in the core plus segment. If you remember, at the beginning of the year, we gave a guidance of our [VIC] in Beer Brazil growing in the low 20s. So we knew that this was coming. It -- so a big part of it, it was because that -- our hedging policies and the impact of the currencies that we had in the hedges this year. And we are -- really put in our pricing strategy based on the consumer side what consumers can really pay and, yes, to -- maintained our volumes health; and then based on that, on top of that, really work on the mix of innovation, the mix on channels; and overdelivered based on that mix. I think we have been able to -- we kept our guidance in our [VIC] numbers. So we are really working on that even though lots of things happening on the commodity side, but this year, we are really maintaining our guidance. And then we have the consumer ability to pay that -- what happened in Brazil with -- was that the inflation picked up very fast. And that is the reference to -- on our pricing decisions, to really guarantee that the beer in the basket is competitive for us to continue to develop share of throat and continue to develop per capita. And with that…

Our next question comes from Isabella Simonato, Bank of America.

Jean, Lucas, I have 2 questions. First of all, thinking about 2022, right, I understand that you guys will release the guidance on costs in the beginning of the year, but if you could give us a color on where you're seeing cost pressures and especially your FX hedges given the recent depreciation of the BRL, that would be helpful to understand how to think about next year. And second of all, Lucas, you mentioned in the presentation, right, about protecting liquidity and the balance sheet. And in the same time, we have a potential tax reform in Brazil. How are you guys thinking about returning cash to shareholders, not only in terms of timing but if we could expect an increase in this year versus 2020?

Isabella, thank you for the question. Starting with 2022 cost outlook, I think the first important message here is that the scenario, right, for input costs remains, all right, fairly volatile, as I'm sure you've all been following, particularly in Brazil and Argentina. And there's still some hedging to do before the end of the year, right? We continue to work under our hedging policy to give us the predictability, right, going forward. And it will give us time to prepare, adapt as need be from time to time, but what we can say at this point is that, although, 2021, the main headwind was FX, followed by commodities, in 2022 what we're seeing as of today is that FX should be less of an issue, okay, because of the hedge and happening kind of on a rolling basis and how the BRL especially kind of evolved throughout the year as hedging was underway. So we see less pressure, going into 2022, from FX and more pressure coming from commodities. And again as I said, there's still some hedging to be done, okay? And last but not least, one of the things that has helped us in 2021 and we hope that could also play a role favorably going into 2022 is the mix, all right? As I mentioned in my opening remarks, one of the things that has contributed to our better-than-expected performance is the mix starting to work in our favor. And in case of the COGS impact of the mix evolving better than expected, it -- the mix has helped us offset our unhedged commodity exposure. That picked up, right, in Q2; picked up again in Q3, so I think the mix -- to the extent that the team continues to do a good job on the commercial side as the on-premise recovers, as returnable glass bottles, all right, continue to come back in a healthy way, hopefully, mix will also once again play in our favor. And then as you said, we hope to be in a position to provide more visibility with respect to what to expect in 2022 at the end of February when we announce the full year results. As for the second question, in terms of returning excess cash to shareholders over time. This is a year-end decision. So we continue to work, as I mentioned in my remarks, under the same paradigm in terms of how we think about capital allocation in the company. So priority #1, all right, remains to reinvest in growth, be it organically, be it nonorganically. So that hasn't changed. And then in addition, we will continue to return excess cash to shareholders over time, but that's a -- that's more of a year-end conversation that we will have with the Ambev Board.

Our next question comes from Thiago Bortoluci, Goldman Sachs.

Congrats for the results. Just trying to add up your revenue per hectoliter growth in Brazil in a bit more details. You guys mentioned earlier in the call the positive impacts of the on-trade mix into your average prices, right. However, when I see net revenue per hectoliter in Brazil Beer, it is still up but sequentially decelerating. Can you please break up in more details what were the drivers for the sequential deceleration there? And in terms of overall trends, I know we don't have a guidance for the quarter, but what should we expect for the fourth quarter, bearing in mind that cash COGS per hectoliter should sequentially accelerate?

Yes. So in the end -- when we started the year, we have always been mentioning that our revenue management strategy will be very agile, nimble for us really to get the best opportunities in the market, to learn with regions. And we have everything. And to be very honest, this June -- yes. So this decision -- or so the inflation picked up very fast, and we were trying to catch up as we move. So that was something that -- it was not planned in the beginning of the year. And somehow, we were very happy to -- in this context to see the Q3 net revenue per hectoliter really like peaking. So it was better than Q2. And when we look that -- if it's accelerating or not, you have the last year basis where we have to compare. What I can tell you, it is that, this elasticity that we saw in Q3, when we compared with H1 and Q2, of the price moving with this type of volumes, it really surprised us. And this equation was an equation that come above our expectations, which suggests that our brands are stronger. We had more volumes to the net revenue per hectoliter increase, so we are very happy with this type -- or with that algorithm and with that type of equation. So having said that -- so what was really planned in the beginning of the year for us is to do right, to do accordingly. It was really the October move that we announced. It was public, yes. We made it happen. It's in the market. And I think this is -- it's more substantial.

That's clear. If I may, just a follow-up on the delivery. You reported volumes essentially flattish quarter-on-quarter, right? Any early signs of some change in mix or cannibalization with the reopening thus far?

Okay. So let me get your question to talk about the technology platforms. I will talk about Zé and then I will jump into BEES and Donus. So Zé Delivery is on the right path. It's really -- yes, we are very excited about it. So we have -- so we stopped a little bit the city expansion for us really to get all the -- all our strategy right. So we [ spanned ] less cities than we expected. We did not see that much change on the project, on the plan that we have with Zé Delivery, but Zé Delivery is really thinking more and more to be more omnichannel to really think about not just the convenience piece but all the journey of our consumers. We are starting back the expansion on the cities. And we are working a lot on the last-mile efficiencies. So these are the 3 things, major things, that we are doing on Zé Delivery. And Zé Delivery, it will -- it's really a success and it will continue to grow a lot, but we have these 3 fronts that we are working, omnichannel, expansion city by city and then last-mile efficiency. That is something that -- to have the business sustainable in the long term. And one information that -- just for you to know: So we were able to get Zé Delivery already that is pretty much focusing, focused on the in-home occasion with the same RGB mix that we have in the average of the company. And that's really something that it happened ahead of time. So 40% of the mix of Zé Delivery is already coming from returnable bottles -- because, the motorbike, it takes the bottles and get it back. So this machine is really working, so we…

This concludes today's Q&A session. I would like to turn the floor over to Mr. Jereissati for his closing remarks.

So I would like to thank my team again, once again for this quarter. I would -- also want to thank all the analysts and everyone who joined the call, for time and attention. And to wrap up. In the full year, despite the anticipated tough comps in Q4, we'll continue to work to maintain our commercial momentum, delivering a healthy top line recovery. Also we will not lose sight of the long term and return on the investments that we are doing now. And we will continue to invest in our portfolio and the transformation through the tech ventures, which continue to grow and become more sizable. Cash generation remains solid even in a year that we invested on the ventures. We invested on capacity. We invested on tech as part of our transformation journey. And I'm very excited about the relationship and the bonding that we are having with our consumers. Not just here in Brazil that we talked a lot, but I'm seeing brand equity and I'm seeing consumers really towards our portfolio in all the countries that we operate. So thank you very much. See you next year. And have a great day.

That does conclude Ambev's conference call for today. Thank you very much for your participation, and have a good day.