Good morning, everyone, and welcome to Alsea's fourth quarter, and full year 2022 earnings video conference. Today, our Chief Executive Officer, Armando Torrado, our Chief Financial Officer, Rafael Contreras, and myself as the company's IRO, will be presenting the results of the 4th quarter and full year. Now, I would like to hand over to Armando for his initial remarks. Please, Armando.
Thank you, Salvador. Good morning, everyone, thanks for joining our 4th quarter and full year 2022 earnings video conference. I'm excited to talk about our results, our regional and brand performance, and other strategic developments. For the full year, we are pleased to report an increase in total sales of 28.9% for a record high of MXN 68.8 billion, which was MXN 15.5 billion above 2021. Same-store sales for the full year increased by 34.8% compared to 2021. EBITDA post IFRS 16 was MXN 14 billion for the year, up 14.1% compared to 2021, leading to an EBITDA margin of 20.4%. Operation cash generation was healthy at MXN 6.1 billion, allowing us to continue to deleverage and invest in projects.
Net sales, excluding the hyperinflation effect from Argentina for the 4th quarter of 2022, were up 12.2% year-over-year to a record high of MXN 18.4 billion. Same-store sales for the same period were up 21.5%, while pre-IFRS 16 EBITDA was up 3.4%, reaching MXN 2.5 billion. Before I get into post-IFRS numbers for the quarter, I would like to make a few comments about IFRS 16, which impacted our 4th quarter EBITDA margin. First, as you well know, IFRS impacts how we account for our leasing contracts. It has purely non-cash effects that we don't consider internally for our metrics. We prepare this as an accounted market requirement. During the COVID pandemic, we obtained reductions on our rent payments.
We have been working on many of our leases to be set to variable rates, depending on our sales. Since our sales have increased, so have our variable lease payments were up. In addition, measuring against the difficult comparative base from the 4th quarter of 2021, where post-IFRS results were especially favorable. Rafael will get more in details regarding this topic later on. That said, post-IFRS 16 net sales for the 4th quarter were up 14.4% year-over-year to a record high of MXN 19.1 billion. Due to the aforementioned factors, EBITDA was down 18.4% to MXN 3.5 billion versus the MXN 4.5 billion reported in 4Q 2021. Our record sales in the quarter and full year show a strong demand for our brands.
Down in underlying profitability is also solid despite post-IFRS effects, which are largely non-cash. All of this despite the backdrop of challenging macroeconomics condition, especially that we lived in Europe. In the 2nd half of 2022, we were impacted by significant energy expenses increase in Europe. Since at the end of June, our fixed price energy contract expired. In the 2nd quarter of 2022, energy cost represents 2.3% of sales in Europe, rising to 6.8% in the 3rd quarter and falling to 4.3% in the 4th quarter of 2022. Regarding electricity, the highest price point we witnessed in the year was EUR 308 per MWh in the 3rd quarter, which was 580% higher than the historical cost of the month of August.
Since then, electricity prices have been gradually falling, which was continued into 2023. This year, we are expecting to pay in the range of EUR 90 to 100 per MWh . We have been watching the market for long-term electricity hedging contracts. Given the current market conditions and the uncertainty of the situation in Europe, we prefer to be cautious and not close to a long-term deal now. In the short term, we are implementing a strategy of partial electricity hedges in Europe on a month-to-month basis. In the 4th quarter, we added 74 new corporate restaurants and 12 sub-franchisees across all regions. Totally 147 net corporate units and 38 net sub-franchisees for the full year. Since we restarted our openings process a bit later than initially expected, we are not able to open all the projects units within the year.
We are constantly reevaluating every aspect of potential openings to reflect our focus in profitability. Among our openings this year, in France, we opened 17 Starbucks locations in the year. We see a potential for further growth in this market, where we estimate to open between 400 to 500 stores in the future. In Uruguay, we have opened our first Domino's Pizza store, currently we have three more under construction. The entry of Domino's in this market has been very successful, we have been observing twice the demand we initially forecasted. We ended the quarter passing a 1,000 franchisee mark. We also have more than 4,400 total stores, over 75,000 team members.
We continue to be in a strong position to take advantage of the market opportunities with our core brands in the market that we currently operate in. We will sharing our strategic plan and along with further guidance for the year at our upcoming Investor Day on March 30th in New York City at Citi corporate offices. Finally, I would like to give a quick overview of our main achievements in ESG Matters. In 2022, we launched our goals for 2030, and made the following progress during this year. We were able to help over 1.8 million people by delivering more than MXN 38.6 million, and in kind donations of more than 70 tons of food.
During the year, Alsea Foundation, in association with World Vision Mexico, created a Premio Alsea and awarded for food and nutrition related to research. 69 projects from Argentina, Colombia, Chile, Spain, and Mexico participated. We gave a $150,000 prize to the winning research project. In Mexico, we achieved 72% clean energy consumption. In our four manufacturer centers, we were recertified a Safe Quality Food. In all our regions, we are doing a baseline survey of the current state of our supplies regarding ESG issues. At the end of 2022, Alsea remained the fifth position out of 95 companies that were evaluated in the restaurant category of the S&P Global Corporate Sustainability Assessment of the Dow Jones Sustainability Index.
Regarding advancements in gender equality and social inclusion, we were pleased to announce in January 2023, our newest board members, Christine Kenna and Gabriela Garza. Alsea Board has a total of three woman members, and woman make up to 25% of the total Board and 43 of the independent Board members. Christine Kenna has over 22 years of experience as a technology investor, identifying innovation trends, managing complex fundraising and M&A transactions, and driving global corporate strategy. Christine Kenna is a partner in IGNIA Venture Capital, and has previous held leadership position at Google, EF Education First, and iRobot. Gabriela Garza is a director of a family office and a strategic executive advisor. She's the co-author of the first and second edition of Women Matter MX, and is an expert in gender diversity and inclusion. Gabriela Garza was a former consultant in McKinsey & Company.
In addition, 872 members of our global workforce come from disadvantaged groups, 23% of our management position are held by women. We know that much remains to be done regarding ESG to meet expectations and need of all our stakeholders. We are working on our plans to achieve key milestones and ultimately our 2030 goals. I will pass it back to Salvador for him to give you a more detailed overview of our sales.
Perfect. Thank you, Armando. Well, as Armando mentioned, sales increased 14.4% for the quarter and 28.9% for the full year. We continue to see improved performance compared to pre-pandemic levels. Excluding foreign exchange effects, sales increased close to 22.6% for the quarter and 35.6% for the full year. Our solid business model and the strategic decisions made over these past couple of years have proven to be effective. Customers have returned to dining in as pandemic related restrictions have been removed across all our regions. Despite this, and even as sales continue to increase, food delivery as a percentage of sales hasn't wavered. In the 4th quarter, it remained sequentially favored at 17% of total sales.
We served over 12 million orders by home delivery in the quarter, which represent an increase of 13.2% compared to the 4th quarter of 2021. Looking at the full year, delivery was up 13.8% compared to 2021, reaching MXN 12.3 billion, which is over 46.6 million orders, and represented 17.8% of Alsea's consolidated sales. Our digital channels and technology-based solutions continue to be fundamental pillars of our long-term growth strategy. We are currently working on an innovative digital solutions for our Starbucks, Domino's, and Burger King brands that will be rolled out over the next few quarters. In Starbucks, for example, the all-encompassing digital platform called Starbucks Digital Solutions, which was already put in place in Europe. We'll expand e-commerce, delivery, loyalty programs, and payment methods.
At Domino's Pizza and Burger King, we're developing advanced in-store digital displays to help our customers better explore our menu options, boost conversion, and improve ticket size. Especially as labor costs have risen, we have seen the increased utility of these digital solutions. Regarding our core brands, the 4th quarter same store sales growth year-over-year of Starbucks in Spain and France was in the low 20s range. Chile and Mexico were in the mid to high 20s. For the full year, all of those regions had same store sales growth over 30%, with France reaching more than 50%. In 2022, out of the Starbucks units that we opened, 40% were drive-thru locations which reported outstanding results.
Even though these units are on average 30% more expensive than other formats, they have achieved more than 50% higher sales and 30% more orders than traditional stores. We plan to keep on developing this strategy by opening around 60% of all Starbucks units with drive-thru capabilities. Domino's Pizza in Spain and Mexico had 11% and 7% comparable sales storage during the quarter, respectively. Domino's in Colombia reported a mid-single digit decrease in its same store sales compared to the 4th quarter of 2021, mainly due to a re-menu restructure and cutting out some aggressive promotions which impacted orders but improved margins. Burger King posted increases in Chile, Spain, and Mexico of 10%, 7%, and 6% respectively during this quarter. I'm also pleased to announce that VIPS Mexico has now recovered to pre-pandemic 2019 levels.
In the 4th quarter, same store sales were up 15% year-over-year and 34% for the full year versus 2021. VIPS in Spain in the 4th quarter also reported strong same store sales increase of 20.8% versus the same period, and 40% growth on a full year figure. Despite cost increases, mainly due to inflationary pressures in raw materials and non-recurring benefits related to agreements negotiated with some of our strategic partners in the 4th quarter of 2021, our pre-IFRS 16 EBITDA in the 4th quarter 2022 grew 3.4%, reaching MXN 2.5 billion with a margin of 13.7%. Excluding the exchange rate effect, the EBITDA increased 11.4%.
For the full year, pre-IFRS 16 EBITDA in 2023 grew by 33.3%, reaching MXN 8.7 billion with a margin of 12.9%. In the 4th quarter, cost as a percentage of sales rose 260 basis points year-over-year, reaching 33.3%. For the full year, cost represented 32.7% of sales, increasing 130 basis points. Given the ongoing inflationary pressures, we have demonstrated our cost control strategies such as inventory planning, negotiating long-term agreements with suppliers, and eliminating aggressive promotions are working. As we mentioned earlier, we're constantly monitoring input prices and evaluating potential overstocking agreements. Throughout the year, we worked on carefully studied price increases and using our dynamic display menus and apps to guide customers towards higher margin offerings.
Looking to results by geography, Mexico's quarterly sales increased 19.1% year-over-year with adjusted EBITDA falling MXN 153 million - MXN 2.5 billion. Mexico's annual sales increased 28.6% year-over-year with adjusted EBITDA growing MXN 1.7 billion to MXN 9.8 billion. We're pleased with Mexico's continued demand performance in the face of rising inflation and declining purchasing power in real terms. Sales in Europe grew 2.1%. However, d ue to increased costs and expenses, adjusted EBITDA was MXN 596 million lower for the quarter at MXN 1.4 billion. For the full year, sales grew 19.3%, for the same reasons, adjusted EBITDA was MXN 487 million lower at MXN 5.4 billion.
In the continued face of increased inflation and energy expenses, the sales numbers in this region showed resilient demand and consumer preference for our brands and products. The contraction in adjusted EBITDA margins in the European region was also explained by the end of non-recurring benefits from the previous year related to agreements with our strategic partners, both on the cost side and in royalties, in addition to the foreign exchange effects. In 2022, our tourism was lower than usual due to China's COVID-19 restrictions, especially in France. We expect a positive impact this summer from tourism now that Chinese citizens are traveling again. On a normal basis, tourism accounts for approximately 25% of Alsea sales in Europe.
Finally, in South America, we posted a strong 25% sales increase for the quarter with adjusted EBITDA at MXN 899 million, representing a MXN 70 million increase year-over-year. For the full year, sales increased 49%, adjusted EBITDA was MXN 3 billion, representing MXN 937 million increase. South America's positive results were driven by strong demand, decreasing SG&A, successful product innovation, and digital strategies. I will leave you with Rafael to give you a more detailed overview of our results and balance sheet. Rafa, please go ahead.
Thank you, Salvador. First of all, I would like to explain the main impacts regarding IFRS 16 and our results. We had rents negotiation related to the pandemic, where we paid less rent than what we had on the contracts. According to pre IFRS 16, you have to register the paid amount on rents, while on the post IFRS 16, you discount the full amount of the rent under the contract. For example, in Europe, during the quarter 2021, we paid rents for MXN 423 million. With the IFRS 16 methodology, we discounted MXN 608 million. Less benefit in 2022. Another effect is a change in our leases contract from fixed to variable rents and the corresponding increase in sales reported. For example, in Mexico, during the quarter, we paid rent for MXN 718 million.
With the IFRS 16 methodology, we discounted MXN 398 million, which correspond to the fixed part of the rent. Higher effect than last year. As a result of the USD bond issuance, we were required by banks to terminate a sale and leaseback agreement related to equipment on our operation center of approximately MXN 350 million. This transaction positively impacted the paid interest of financial leases in Alsea Mexico in the post IFRS 16 figures for 2022. Yet another impact, mostly in LatAm, are the changes in lease contrast conditions before their maturity, impacting other income expenses lying in post IFRS 16 figures. Our net income pre IFRS for the full quarter increased 12.2% to MXN 771 million.
This increase was mainly due to a MXN 152 million increase in operating income resulting from the continuous positive trend in sales, commercial strategies, product innovation, developments in digital applications, as well as improved cost and expense control efficiencies. For the full year, pre IFRS 16 net income increased 222% and post IFRS 16 100% achieving a MXN 1.7 billion. We have been able to keep up the strong recovery trends in the 1st quarter of the year, achieving a pre IFRS 16 earnings per share of MXN 2.17, including IFRS 16 our EPS rose to MXN 1.96 per share versus the MXN 0.94 in 2021.
In January 2023, the general shareholders meeting approved the cancellation of 18.5 million ordinary shares that had been repurchased in market transaction during the year, representing 2.2% of the outstanding total shares. As of December 31st, 2022, we paid MXN 2.3 billion of amortizations during the year. Our gross debt pre IFRS decreased MXN 3.9 billion year-over-year, closing at MXN 27.8 billion. This reduction in debt corresponds mainly to the devaluation of the euro against the Mexican peso and debt amortizations that I already mentioned. Regarding our covenants, in 4th quarter 2022, our minimum liquidity and CapEx covenants were removed, with banks seeing our positive financial results. Looking to our pre IFRS 16 gross debt to EBITDA ratio, we ended the quarter at 3.2 x and EBITDA to interest paid at 3 x.
Regarding liquidity, we posted a solid MXN 6.1 billion in cash at the end of the year. The debt structure at the end of the year was 95% long-term, with 64% in Mexican pesos and 36% in euros. We expect to deleverage going forward and meet all of our debt covenants thanks to our healthy and ongoing cash generation. Our full year CapEx for 2022 was MXN 4.2 billion, of which 35.8% was allocated to maintenance, 51% went to store openings and remodeling, and 13.2% for IT and some other strategic projects. We made solid and responsible investments through the year in profitable projects and locations. Out of the 179 corporate store openings in the year, 58% were Starbucks and 23% Domino's Pizza.
We are pleased with the 2022 full year and 4th quarter results. We achieved record sales with a strong underlying profit and continued to expand strategically, all in the face of a challenging macro environment.
Thank for your interest in Alsea. I will now hand to call back to the operator to the Q&A session. Thank you.
We will now start the Q&A session. If you have a question, please press the question button in the browser. The first question is from Rodrigo Alcántara from UBS. Please go ahead.
Hi. Hi. Good morning, Armando, Salva, Rafa. Thanks for taking my question. I mean, I guess on the top line and brands, not much to say that. Very impressive, the results. Just curious here, on the leases contracts. I mean, if you can clarify right now where do we stand in. I mean, talking about averages, right? What proportion is. I mean, change from fixed to variable, and how this compares versus, let's say a year ago or before these changes procure the accounting impact on IFRS 16. The second question would be on labor expenses. I mean, it appears to be that Mexico is getting more like in a structural thing.
We have regulation in holidays, also increasing labor minimum wage, et cetera, et cetera. Just curious to hear your thoughts, Armando, Rafa, on compare, you know, labor in 2023 versus how it was like five years ago. How much more expensive it has turned for you guys? Maybe if you can share that as a percentage of sales or something like that would be useful. Thank you very much.
I will take the first question. About the lease, the leasing agreement that we have. We had before the pandemic, lower than 50% of our contracts as a fixed or variable rents. Right now, we try to have more variable leasing contracts. Right now, it's higher than 60%. As you know, we have more than 4,400 contracts, and we have many different issues in each one of the contracts, no? For example, some things that impact us is when we remodel a unit, and we will try to have five more years in our contract. That hit us also in the IFRS 16 numbers.
If we're, if we end a contract or we close a unit, also that impact us in the IFRS 16. I tried to explain the most significant impacts that we have last year and when we compare with the 2021 numbers.
No, that helps. Thanks. About the labor, Rafa.
Oh, yeah. I mean, regarding the labor, yes, we are up to date what been happening in the first four years with this government regarding a 20% increase of the minimum wage. Fortunately, not all our employees, all our partners, all our team members are in minimum wage. There's only a percentage that are there. Anyway, we, with Achievers ESG we are above that minimum wage. It do has an impact. Also the, as you said, as you mentioned, there's 20 days of vacations now, and before there was.
Right now, it's 12 days.
12 days.
It was six days.
It was six days. That also have an impact. I would tell you, we've been fortunately to have these wins and increase sales and that. You told me what is exactly gonna be that cost that represents. I will see about 0.3 points of our cost, no? We are running around 16%, 16.3%. More I will see in 0.3 points of our P&L this year. I think that's gonna be getting down. I mean, we need to get better sales in order to decrease that percentage as the of a whole base, no? I'm not worried about that situation.
Still we are focusing. There's some regions in the country that has more problems of hiring people, there is what we are doing a little bit better and surgery work to get better results in our labor cost.
That makes sense. Thanks. I guess that some of it also can be diminished, right, by digitalization. Thank you very much, Armando, for the clarification there. See you in the next few days. Bye.
Thanks.
Thank you very much for your question. Our next question is from Antonio Hernandez from Barclays. Please go ahead.
Hi, good morning, Armando, Rafael, Salvador. Thanks for taking my question. This is regarding Europe. Have you seen? Well, you talked about the cost pressure that you've been facing, energy and so on, and how that is gradually improving, but what about consumption? How are consumption trends? Are you seeing any type of further slowdown of people going to your restaurants or maybe some improvement expected 2nd half of the year? What are the consumption trends in Europe? Thanks.
We maintain of course, we are comparison the last year, the first eight weeks, we were affected by Omicron as much in Europe, not even in Mexico. In Europe, it was a little bit harder. Since we are almost closing this February, we are not seeing a reduction in consumption. It's just a punctual details, no? In the Domino's sector, all the... We are seeing so much low trends, but we've been achieving some other commercial strategies and promotions that has been doing the well in the consumption. We are not seeing any downsize. I will not say in Europe. We are not seeing it in Europe, we're not seeing it in Mexico, we are not seeing it in LatAm.
Our sales still are quite strong all the way to the last week. That is week number eight for us in sales, no? So.
Yeah. For this two months, same store sales in Europe, it's mid-twenties.
Yeah. Mid-twenties.
Same store sales.
Mexico is strong too. All the way, to last week, that we've been seeing a solid demand in 23 until now.
Just to add, I can give you a little bit more color in some of the formats. Just to clarify the same store sales figure, year- to- date, what we're seeing in Europe, especially in casual dining, it's been quite solid. Foster's Hollywood with around 20% same store sales growth. We have VIPS in Spain with mid-twenties, like Rafael mentioned. Ginos is the same, mid-twenties. Starbucks is still quite strong as well. Talking about probably low thirties in Spain. In France it's even close to 30%. Far we haven't seen any major slowdown in consumption.
Perfect. Thanks. Thanks for the color and see you in some weeks. Thanks.
Thank you very much for your question. As a reminder, if you have a question, please press the question button in the browser. Please make sure you are not in full screen mode to see the button. Our next question is from Alvaro Garcia from BTG Pactual. Please go ahead.
Good morning, guys. Thanks. Thanks for the space. A couple questions on my end. Firstly, on rents for Rafa. Given the increased proportion of variable rents, would it make sense to see higher cash rents into next year in 2024 on a pre-IFRS 16 basis? If I were just to look at your P&L on a pre-IFRS 16 basis, would it make sense to see that rent as a percentage of sales climb higher given what's going on? Is it solely a post-IFRS 16 accounting effect?
Yeah. I think we're in terms of percentage of variable rents, I think we are already done the agreements with the landlords. For example, in Mexico that sales increased 19% and around 60% is variable rent. That increase of sales in the 60% of our rents will hit us in IFRS 16 figures. Because.
That's-
We took out only the fixed rent, no? The variable rental stays as expense in IFRS 16.
Yeah. Yeah. Into 2023 and 2024, it should be a similar level probably as a % of sales.
Exactly.
Would that make sense?
Yeah.
Okay. Okay. You mentioned, on the energy front in Europe, 90-100 MW, roughly EUR 90-100 per MWh . You mentioned obviously it was way lower than what you paid at some point in 2022. How might that number compare to 2019?
It was around 40.
Yeah.
Okay.
We had a contract for five years signed, and it was.
Forty.
40. In between 35 and 40 MWh .
Uh-huh.
We still... I mean, and the range of a 90 and a 100 is still...
Pretty high.
Pretty high, no?
Better than EUR 300. Better than EUR 300.
Better.
For sure.
Lastly, on Domino's, you mentioned some slow trends in Europe. Obviously, Domino's has been in the news a lot. They didn't report that great of a quarter at the global level, I was wondering if maybe you could talk about how Domino's in your markets, in Mexico specifically, are sort of maybe seeing different trends or how you think your Domino's portfolio is maybe more resilient to what we're seeing globally.
Our Domino's portfolio is pretty healthy. I mean, we, in the same store sales, we are positive to week eight of this year still. That was the segment that was hit most because of three things, for her of cheese, of course, flour. No? Those two goods were really high impact by the inflation. I mean, managing a well digital platform and well digitalized strategic of our marketing, we've been able to achieve a positive sales for us, no. We are not seeing the problem that other companies that are in the Domino's business sector, and I know where you're talking about, are seeing and slowdown, no.
Possibly we've been very cautious about it, thus we're putting big attention on how we win the pizza war that we have a lot of competitors there, I think we have the best round of all and some technology things that are gonna go through the Cloud POS strategy that we are doing of like I said last quarter of GPS and DCS, there's Piece of the Pie. It's a loyalty program that we are also launching our, as the app, native app and native web. I think some other new products that we are launching, we are keeping up with that with a good pace in regarding the increase of sales.
Great. Thank you very much.
Thank you, Alvaro.
Thank you very much for your question. Our next question is from Yahirin Unabule from Barings. Please go ahead.
Hello there. Thanks, guys for taking my question. I have a few questions. The first one is, if you could just explain the reason why you're seeing very strong same store sales growth in Europe and in the rest of the regions. That's the first question. The second one is on price increases. Have you been able to increase prices in Q4 or in Q1 so far, and if so, by what magnitude? Also, if you could talk about your input costs as well. I think last year you were saying that you were buying cheese and chicken wings in advance. Just trying to understand how much worth of inventory do you have in advance, and what are you seeing in terms of the prices of this input costs? If you could give guidance for your EBITDA margins, CapEx leverage for 2023. Thank you.
There's five questions there. Let's see how... What do you want first, Salvador?
Well, first, related to the guidance, I guess we're gonna be going full mode into more detail during our investor day. That is gonna be 30th of March. So probably we're gonna be waiting until then to fully put out our, the 2023 year guidance overall. Regarding same store sales performance, I guess it's just been pretty much part of the resilience and the good operating company that we are, that we're seeing customers preferring our products versus the competition, and we are still taking advantage of some of the market opportunities that we're seeing since a lot of players are not there anymore post-pandemic.
Overall, I would say that we have, you know, the back office processes, we have the operating know-how of each of the markets, and we know exactly how to do and where to do it in each of our brands. That's pretty much talking about the resilience that we've been seeing so far. Even though we've been hearing from, you know, investors, economists, that there's just gonna be a slowdown coming for sure, at least probably since the 2nd quarter of 2022, so far we haven't seen it, and it's been quite a positive surprise that our brands are performing amazingly well. Regarding price increase, I don't know.
No. Just I wanna say, I mean, all. I mean, look at the numbers right now to week, number 9 to last week, all our geographies and all our brands are positive sales. More, like Salvador said, some are in the 20, low 20s, in the high 20s. We have one in the 10s. Everything is just for us is positive there in sales. Regarding the inputs from the raw materials that you said, we are not seeing. We already have a good agreement with suppliers regarding dough. We have a big consumption in dough for the Domino's Pizza brand. We are steady there. We have overstock on cheese for Mexico all the way to May 2023. It's also quoting dollars.
You know, we are seeing. Right now the dollar is quoting $18.3. That's also a headwind for us. We are also, regarding coffee, as we know, we rely on Starbucks' hedging and sourcing policies, but even though the coffee is right now running at $187.
Per pound.
A pound in Chicago Mercantile Exchange. We are seeing a decrease in coffee that fortunately will come to us in the 2nd half of the year regarding our alignment with Starbucks Corporation. Also in the beef, pork, poultry, we see, I mean, there is an increase right now in poultry, but it's low, in the low double digit, in a low digit. Certainly we don't see the inflation part of the problem that we had last year, you know, that is positive.
In terms of the overstock that we have, with cheese and some other products, it's around 10 days of inventory, but it's around MXN 600 million of inventory with this, with these products, no?
Regarding the price increases questions, I guess we've been able still to pretty much do business as usual. You know, we're being really careful in not hurting as much demand, but taking prices on the high marginality products on more on the innovation side rather than the enterprise core products where you're gonna be feeling it more if you put additional pressure to for example, the everyday coffee of Starbucks, you're probably not gonna mess with that. You can go for the higher marginality products and and/or the new products that you're gonna be launching, and there you don't have any reference, price reference as a customer and therefore we get a higher profitability.
Thank you for that. I guess, all I just wanted to understand is when we're going to stop seeing the margin pressure that we're seeing as a result of the input costs, and also as a result of the change in the rent structure.
In terms of the rent structure, as I mentioned, we already finished all the agreements with landlords changing the fixed cost to variable cost. As I mentioned, the only impact that we will have for next quarters will be the increase in sales and the increase in payment of the variable rent. As I mentioned, if we have an average 60% of our contracts with variable rent, the 60% of that increase in terms of sales will hit us, no, in terms of the IFRS 16 figures.
We are talking about how we're seeing pressure. I think the worst part of the pressure of cost and inflation, I think is done, no? The only uncertainty that we don't have is the energy cost, no, Rafael?
Si.
The energy cost in Europe. That's the only thing that we do not have that control over it.
Exactly.
I think the rest, we already seen what happened in Spain with a minimum wage. It was a 7% increase. We already have the Mexican. We already have in Chile what is that. Regarding labor, we already know all the details, how it's gonna come. Regarding all of our suppliers, we do have a close relationship with them. Sitting down at the table to see what is gonna be happen for the full year, I think we already are very clear with that. The only uncertainty is the energy in Europe. As you know, we are entering to March, I think with all the weather there, it's not gonna probably. You know, the gas also is in the lows.
The lowest price.
It's in the lowest price of the curve. Fortunately, if we don't have anything else in Europe with energy costs, the margins will have to get established where we were before in the years before the pandemic happened.
Thank you very much.
Thank you.
Thank you very much for your questions. As a reminder, if you have a question, please press the question button in the browser. Please make sure you are not in full screen mode to see the button. That was the last question. I will now hand over to Mr. Armando Torrado for final comments.
Well, thank you very much for attending our quarterly review conference. I hope to see you all in the investor date that we held on March 30th at the company's corporate office in New York. We will have more details about these questions that you gave us and another interesting points of our company. Thanks again. Have a great day and we'll see you the 30th in New York. Thank you.
Thank you very much.
Thank you.
I would like to thank you for participating in today's video conference. You may now disconnect.