Earnings Call: Q2 2021

Jul 29, 2021

Earnings release

Good morning, and thank you for joining Beclay's 2nd Quarter Unaudited Financial Results Call. During this call, you may hear certain forward looking statements. These statements may relate to our future prospects, developments and business strategies and may be identified by our use of terms and phrases such as anticipate, believe, could, estimate, Expect, intend, may, plan, predict, project, will, goals, target, strategy and similar terms and phrases and may include references to assumptions. Forward looking statements based on our current expectations and assumptions regarding our business, the economy and the future conditions. Because Forward looking statements relate to the future by their nature. They are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward looking statements. For all the foregoing reasons, you are cautioned against relying on such forward looking statements. We undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Now I will welcome Fernando Suarez, Chief Financial Officer. Fernando, you are now on the line. Good morning, everyone. Thank you for joining us to discuss the unaudited financial results for the Q2 ended June 30, 2021 of Beclay, commercially known as Jose Cuervo. I am joined today by Juan Domingo Beckman, Chief Executive Officer, Michael Keyes, President and CEO of Proximo Spirits Victor Chavez, VP of Commercial Strategy for Proximo Luis Felix, Managing Director of Mexico and LatAm and Gordon Ron, Managing Director of EMEA and APAC. Before we begin, I would like to remind you that the figures discussed on this call were prepared in accordance with International Financial Reporting Standards, or IFRS and published on the Mexican Stock Exchange. This information for the Q2 of 2021 is preliminary And is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats. At this time, I would like to remind participants that your lines will be in listen only mode Until the question and answer session. Now, I will pass the call on to Beclay's CEO, Mr. Juan Domingo Beckman. Good morning. Thank you for joining us today to discuss Beclay's Q2 2021 results. I hope you and your families are all keeping safe and well and starting to enjoy some more freedom in many regions. As you know, we had a very strong 2020, adapting well to the pandemic conditions and benefiting from our long term investment in our diversified set of brands. The Q2 of 2021, Our tequila and other spirits portfolios continue to perform well across our different regions. However, as we move on from the pandemic, We are seeing growth normalizing to levels closer to the one seen in 2019 as comparisons become tougher Due to the unprecedented growth seen in the Q2 of 2020, this resulted in net sales Increasing by 9.7% in the quarter and 20.2% in the first half of twenty twenty one compared to the same periods in 2020, Drilling by volume growth and higher premium brand mix, volumes for the Q2 of the year were up 2.7% And by 17% for the first half compared to the same periods in 2020, reflecting the resilience of our brands. This more moderate growth compared to the Q2 of 2020 is due to a normalization in the off premise channel sales and consumption As the on premise channel reopened. Considering everything I just mentioned, Beclay was still able to deliver gross profit Year on year increase of 9.8 percent and 10 basis points increase in gross margin. As you have also seen in our earnings release, our A and P spend was up during the quarter as we made strong strategic investments In our brands, taking advantage of opportunities that presented themselves during the quarter as some of our rivals pulled back. This included forming long term strategic partnerships. We believe these investments will bring long term benefits to the company even if they impacted the margin in the quarter. Some of these A and P costs in the Q2 of 2021 are nonrecurring, As Fernando will explain further, with the reopening of the on premise, We expect to see our own trade sales continue to increase to offset the reduction in the off trade consumption. We believe that the strength of our portfolio and the growth of our premium brands across the globe will enable us to generating value for our shareholders. On the management front, I would like to mention that Mike Keyes has decided to retire from Proximo. He will be with us until the end of the year, after which he looks forward to spending more time with his family back in Kentucky. We wish Mike all the best in his new endeavors. And on behalf of the Board of Directors as well as Becla's and Proximo employees, Thank him for his service at Proximo, clearly contributing to build a stronger organization. Chris Felix We'll be taking over as Proximo's CEO, CEO, in an orderly and seamless transition. We wish Luis success His new role at Proximo and are confident he will also contribute to build the organization further. Ms. Isolga Limon will be returning to the company And we'll be taking over Luis Felix's responsibilities in the Mexico and LatAm region. Now let me turn the call over to Mike Keyes to Thank you and good morning everyone. We're pleased with our commercial performance in the United in Canada during the second quarter and for the first half of twenty twenty one. Given the significant impact of COVID-nineteen on our 2020 results, We've been looking at our business results on both the prior year and versus a 2 year stack. For example, Nielsen consumer takeaway for our brands and the off For the 3 month period ended June 19, 2021, over a 2 year stack grew by 38%, Outpacing the total distilled spirits industry, which grew by 28% for the same period. Our tequila portfolio was up 42%, RTDs were up 47% and our whiskeys were up 30%. Versus 2020, Consumer takeaway in the off premise for our brands in the United States as measured by Nielsen was down 16% for the 3 month period ended June 19, 2021. This compares to an industry contraction of 8 As we lapped our exceptional gains in 2020, which resulted from significant changes in consumer behavior due to the global pandemic, Particularly during the Q2 of 2020, when our Nielsen takeaway was up 66%. Proximus wholesale depletions were down 11% for the quarter, lapping the Q2 of 2020, where depletions were up 40%. When compared to the Q2 of 2019, however, depletions were up 26%. On a year to date basis, Depletions were flat compared to 2020 versus a growth rate of 31% for the same period a year ago versus 2019 year to date, Depletions are up 29%. Our tequila portfolio was down 3% for the 2nd quarter. However, it's up 5% year to date, driven by continued strength in our super premium tequilas, offsetting in part industry wide production Resulting from material and common carrier shortages. We are working closely with our supply chain team to ensure continuity of key products And to actively mitigate impacts to the broader portfolio as the U. S. Logistics and transportation industries normalize. Our ready to drink margarita category depletions are down 13% for the quarter, but are up 3% on a year to date basis. The quarter is lapping a 2nd quarter in 2020 in which depletions for our RTD brands were up an unprecedented 71%. When compared to the Q2 of 2019, depletions were up 50%. Our whiskey portfolio grew 1% during the quarter And we're up 10% on a year to date basis. Our alcohol free margarita mix depletions declined 31% for quarter and are down 26% year to date. And this is mostly driven by our focus on allocating constrained resources to deliver premium categories ahead of other product lines. The quarter, while experiencing volume contraction of 5 percent versus the exceptionally strong 2020 off premise business resulted in net sales growth over the same period of 11.3% on a constant currency basis. This was offset by the 14.2% appreciation of the Mexico peso, resulting in a quarter over quarter reduction of 3.8%. On a year to date basis, however, Volume increased 14% over 2020, resulting in 23% net sales growth in the region. This again shows the positive impact Focusing on our highly profitable premium brands as well as the effect of a May consumer price increase on most SKUs within our tequila portfolio. This was partly offset by the 6.6% Appreciation of the Mexican peso, resulting in a year to date net sales gain of 12.4%. Regarding production constraints, we continue to monitor the ongoing issues affecting the U. S. Supply chain. As you've heard from other companies, global supply chains are stressed, leading to shortages of raw materials such as glass and cans that are used to package our Products. These shortages are affecting the industry as a whole and have led us to prioritize our most profitable products. There have also been shipping delays due to high demand and lower levels of inventories, leading to extended logistic issues derived from the pandemic. These constraints primarily affected our tequila portfolio and our non alcoholic margarita mix. We are working hard to solve these issues and expect the branch to recover when the U. S. Transportation and logistics industry Return to pre pandemic levels of service. Moving on to marketing activities, this quarter we activated numerous We've grown our sponsorship and marketing partnerships on a national and on a local level, and we remain committed to making investments that create enduring connections with our consumers. We continue to monitor the ongoing shifts in consumer behavior and consumption patterns as we adapt to this changing business environment. We are actively working to optimize our supply chain and we are working with our distributors to meet consumer demand for our products as we continue to address the ongoing effects of COVID-nineteen on our industry. I will now turn the call over to Luis Felix to discuss Mexico and Latin America results. Thank you, Mike, and good morning, everyone. The Mexican market recovered in the Q2 compared to the Q1 of the year as restrictions were eased and businesses were reopened as many states moved Into the green color status. Volume increased 14.7% versus the Q2 of 2020. And if we exclude the Boost Energy Drink, our volume grew 31% versus previous year. Our net sales for the Q2 increased 69.7% compared to the same period of 2020. Price increases, coupled with a better mix, helped to achieve these very positive results. Tequila performed well, Growing 51% versus Q2 of 2020, again, led by our premium brands. Pantelis Sales in Mexico have recovered promisingly. However, the recent growth in COVID cases and the appearance of the Delta variant Again, put at risk to possible recovery in the high season sales. Tequila category is growing its share in the Representing now 43% of the total market in value. Depositions are positive in both channels since the month of March. Moving into Latin America. We saw a significant increase of 2 92% in volumes quarter over quarter. This growth is mainly driven by Colombia and markets such as Peru and Bolivia, where we have virtually no shipments in Q2 of last year. Depletions are significantly higher than 2020 and growing double digits over 2019, which give us A good sign to continue this positive trend. We remain optimistic for both regions. Marketing and promotional activities are ready to be implemented in the second half of the year, yet we remain cautious on the recovery of the on premise channel towards the second half of the year due to the pandemic third wave. And now I will turn the call over to Gordon Brunn, Managing Thank you, Louis Felix, and good afternoon from Europe. The early signs of recovery from the pandemic in the EMEA and APAC regions during the Q1 have continued during the Q2 The European markets in particular have started to ease out of lockdowns through the gradual reopening of the on trade between mid April June. This created significant demand, both because the on trade required restocking and due to the pent up consumer demand as customers went back to bars. In Asia, the situation remains challenging with many of our key tequila markets remaining closed, such as Korea, Japan, India, Philippines and Vietnam, as vaccination penetration in the region remains very low. Overall, there was a mid-forty percent volume increase versus quarter 2 2020 And value increased significantly more driven by price increases, favorable product mix and a positive exchange rate. Growth was generated across the portfolio, but was particularly strong in premium tequila, Irish whiskey and rum. Overall, our first half twenty twenty one performance Has increased by almost a third in volume versus first half of twenty twenty and there are even larger increases in value. Chela shipments in the APAC region remained solid, but did slow a little after the very strong quarter 1, reflecting the higher inventory of distributors As the markets are still being impacted by trade closures, this impacted Cuervo most notably. However, the H1 performance remains strong, with the region recording a double digit increase over the first half of twenty twenty. Depletions, while very much in line with our phased expectations, Improved versus the same period last year despite the challenges that persist given the on trade closures in key Asian tequila markets. In EMEA, after a slower quarter 1, tequila shipments accelerated in the 2nd quarter, delivering a 2 thirds increase versus 2020, ending the first half 13% ahead of the first half in twenty twenty. Depletions in May June were well ahead of expectations, reflecting the trade restocking and consumer demand. Our Irish 50 portfolio led by Bush Mills and Proper 12 Continued to accelerate, reflecting strong off trade demand with these brands benefiting from their off trade bias. First half twenty twenty, the one finished with these brands at almost double the first half of last year. Net sales continue to grow strongly, Posting growth slightly higher than volume, again driven by volume, positive mix and favorable exchange rates. Our whiskey portfolio is growing across both EMEA and APAC regions. However, most of the sales remain within EMEA. The run category, which has traditionally been a more even split between off trade and on trade, surged back into high growth during the 2nd quarter And finished the first half almost 50% ahead of the same period in 2020. This reflects the reopening of the entree within EMEA. In APAC, the category recovered well during the Q2, but still remained behind last year as at the end of the first half, reflecting the slowdown in the overall consumer sales in Australia. As the pandemic continues to ease, We feel confident about the recovery of our business during 2021. I will now hand over to Fernando to talk you through our financial results Thank you again. And let me walk you through the Q2 financial results. During the Q2, the company reported a 9.7% increase in consolidated net sales to ARS9.531 billion. As Juan Domingo mentioned, the slowdown versus 2020 growth Was due to the very difficult comps against last year and was more in line with the still robust growth we were seeing in 2019. During the Q2, gross profit increased 9.8 percent to MXN5.0 billion and Gross margin increased to 53.2 percent in Q2 'twenty one from 53.1% for the Q2 of 2020. This was particularly due to the price increases carried out so far in 2021 in various regions And a better category and product mix, while agave prices remained largely stable And was partly offset by the appreciation of the Mexican peso against the U. S. Dollar. A and P expenses normalized for the Irreborn Spirits expenses, which include a nonrecurring Our one off A and P accrual of ARS373 1,000,000 resulting from the Illyborne Spirits acquisition in April, As a percentage of net sales increased to 20.8% from 15.8% in the 2nd quarter of 2020. This was mainly due to the establishment of new strategic partnerships, particularly related to sporting events and the implementation of new advertising campaigns across our brands and regions. Distribution expenses increased 60.6 percent to ARS461 1,000,000, mainly driven by higher volume And increased logistics costs to which Mike Kies alluded to earlier. As a percentage of net sales, Distribution expenses increased to 4.8% from 3.3% in 2020. However, SG and A expenses increased only 1.2% year on year during the Q2, representing 8.4% of net sales Compared to 9.1% in the Q2 of 2020. This was mainly driven by firm cost control And supported by an acceleration in sales. Pro form a operating income decreased 17.1% And the pro form a operating margin decreased to 18.9% compared to 25.0% in the same prior year period. Pro form a EBITDA for the 2nd quarter decreased 14.9% Quarter over quarter to ARS2.004 billion With a pro form a EBITDA margin up 21.0 percent. Net financial results for the quarter were a loss of ARS234,000,000, mainly derived from the exchange rate loss Given the year over year appreciation of the Mexican peso and net interest expenses, 2nd quarter pro form a consolidated net income decreased 19.4 percent to ARS 1,200,000,000 And the pro form a net margin was 12.3% compared to 16.7% in the Q2 of 2020. Earnings per share on a pro form a basis were 0.33 dollars per share for the quarter. As of June 30, 2021 cash and cash equivalents were MXN7.0 billion and total debt was MXN12.8 billion. We continue to maintain a strong balance sheet with conservative financial leverage and ample liquidity to execute our long term growth strategy. As announced in the company's capital allocation program during the annual general ordinary shareholders meeting Held on April 27, 2021, a cash dividend payment will be made on August 5, 2021, In an amount of ARS0.43039 for each outstanding share representing the capital stock of Beclay. The company has also summoned for an extraordinary general shareholders meeting To be held on August 2, in order to amend Article 2 of the bylaws referring to The corporate purpose as a result of the implementation of the Mexican labor reform. Now I will turn the call back to the operator for questions and answers. Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Andrea Teixeira with JPMorgan. Proceed with your questions. Hello. Thank you. Good morning. So you took pricing back in May in the U. S. In tequila. So did you see any pre buy at all As happened in the past, and if so, our inventories worked through in a normalized level. So how has been the elasticity, sorry, that you've seen so far against historical levels? And then if you can also Kind of elaborate a little bit on the RTDs. Obviously, hard seltzers have been seen a material deceleration in the U. S. And as off premise, kind of like as a beneficiary has been obviously decelerating. So can you talk about your thoughts in spirits based RTD? And are you seeing the same similar dynamic playing out Not only in the U. S, but also globally. So if you can help us kind of bridge that. Thank you very much. Yes. Hi Andrea. This is Mike. Thank you. The first question, There is always a limited buy in before any price increase. And there was a or so buy in, free price increase, but most of that took place in the last quarter. And so I think we're fairly normalized now. And Victor, I don't know if you want to comment more specifically on that. And then I can maybe address some of the other questions. Yes, I would echo that sentiment. I would say that the impact of that anticipated buying, which as we have We're expected mainly impacted our Q1 because of the timing and is mitigated within the impact of the second quarter at this point. We haven't seen any particular effects of that. And then So you feel like it's been yes, sorry. You feel like just as a follow-up, you feel like inventories at the trade now you're shipping according to consumption? Mike, I can address that real quick. I would say that right now, we're seeing shipments Marginally lagging the depletion trends, and that's mainly a result of the supply chain limitations that we've had over the last Quarter, which as you have heard from not just our company, but others I'm sure are industry wide. I think the strength of our depletions is obviously demonstrated by the performance even against the Q2 of 2020, which was tremendous in growth and our shipments are lagging what we would target as the days on hand inventory in the trade, But we're working with our supply chain team to basically make sure that we have our core SKUs available And obviously mitigate the impact to the broader portfolio. Yes. And Andrea, I think the second question had Do with RTDs and what do we see with RTDs? RTDs are probably one of the most dynamic Areas in the alcohol beverage industry right now, and as you know, it started with seltzer and now it's included Wine based, malt based and spirit based RTDs, we are the largest spirit based We are continuing to grow our business. The second quarter was rough just because the comps were so high. So I think our performance It's largely what we call comps and comp, right? So we're going up against a big comp. And I read an article. I don't know it to be factual, so you guys can check it, but that there's been 220 new RTDs introduced in the last few years. And so I do believe, as the leader that we'll We continue to invest and we've got some new brands like Playomar. We'll continue to support those brands. And I believe there's going to be a shakeout at sometime potentially in the not too distant future. And obviously, as the leader, we want to be very Strong in that category when that happens. That sounds great. And thank you again for all the patience and for teaching us all about Our next question comes from the line of Fernando Alvaro with Bank of America. Please proceed with your question. Hi, good morning, everyone, and thanks for taking my questions. I have 2 if I may. The first one is related to the U. S. Can you comment how the unplanned channel behaved during the quarter given the reopening of bars and restaurants? And how far is from returning to pre COVID levels? Also, if you can comment what is your outlook on this Channel in coming quarters would be great. And I have a second question. Yes. Fernando, I'm sorry, You kind of broke up. Was the question about on versus off? Well, basically, on premise. I mean, what was the performance of endpoints and how far is from returning to pre COVID levels? And what is your outlook In coming quarters. Yes, thank you. I think it's different on the U. S, we tend to look as 1 homogenized market. And as you know, With our laws and the 3 tier system, I don't think you can look at it as one picture. But in general, I would say it is returning At least as of now, to pre pandemic levels. And I don't think we're quite to the level that we were Pre pandemic, but I think we're getting closer every day. I find myself talking sometimes About pre pandemic, pandemic and post pandemic. And lately, I've been catching myself because I don't know what post pandemic is, right? I don't know that we're through the ups and downs of this crisis and we're going to have to wait and see. But I think as of now, The bars and restaurants are returning. If they're having issues, sometimes the issues are the same issues that we were talking about with regard to Supply chain, just getting enough people to work and to drive those businesses. We are seeing Obviously, more leader business. We're seeing a little bit in the mix, a little bit less of the $175,000,000 which tells us That is in fact taking place. And we're seeing some of our really strong on premise brands Growing very, very nicely. Great. Thank you. And my second question related to Mexico. How did you expect consumption to behave also in coming quarters, the different channels given the unfortunate increase of COVID cases, Right. Although, mobility restrictions seem not to be tightening as it happened at the beginning of the pandemic. Thank you. Thank you, Fernando. This is Luis. I think what we're seeing in consumption, there are 2 things. We're seeing more consumption of premium products, and it's clearly in the tequila category, where the comparison against last year, The tequila volume is declining, but the growth in value is more than 6%. So it's clearly and we have seen in our brands that tequila Premium tequila is coming back. During the pandemic, there was more trend on Low priced products, and I think that is changing. And that is a consequence of the reopening of the on premise, Clearly. The concern is that with the new third wave that we have seen now yesterday in Jalisco, There were some closures on bars and Antros, so that will certainly affect. But I think overall, we're seeing a better much better trend right now than last year at this time. Great. Thank you so much. Our next question comes from the line of Ben Theurer with Barclays, please proceed with your question. Hey, good morning, everyone, and thanks for taking my question. Also, Mike, congrats on the retirement. I Quick question, it's mainly related around the AMP and the extraordinary part and what All got with it, those close to Ps. 400,000,000. And if you could elaborate a little bit on where you're targeting right now, the investments. I mean, Clearly seen an increase and I understand it's about positioning the brands, but it would be great to get a little bit of a breakdown from a regional Where you're focusing on and what's your main focus right now on promoting AMP and I assume we're going to be back in the low 20s as So this is Mike, Ben. I'll start with just The U. S. Commentary on a quarter versus quarter, 'twenty one versus 'twenty, we are spending much more money But it's as much a story of what we didn't spend or what wasn't available to us last year as it is about what we're Spending this year. If you look at the history of Proxima, we've always invested behind our brands, if not the highest, one of the highest On a percentage of net sales value versus others in our industry, Proximo and Beclay are known Brand building companies, and that's the case here. So the story is, to me, a little bit less about the increase in 2021 over 2020 and more about the opportunity. And we're investing those dollars, many of those dollars behind our premium, premium plus And we saw great opportunity as others were getting out of some really Enduring consumer partnerships, we saw the opportunity to get in. And I would say a lot of that money is Against our Premium Plus Tequilas and against our Premium Plus Whiskey brands. And just in a broad stroke, I mean, we're invested against major sporting leagues And local sporting teams probably drive a great deal of that increased investment. Okay. That makes sense. And I guess in another region, it's similar, right? Ben, let me follow-up on Mike on the Specific one time A and P accrual. This ARS 373,000,000 A and P expense It's a nonrecurring one off or extraordinary accrual related to promotional activities already rendered in connection With the acquired intellectual property as part of the Erieborn Spirits acquisition back in April of this year. We do encourage you to consider this accrual as a nonrecurring or one off item and have already observed That many of you have adjusted for this in your pro form a figures or numbers, which we fully agree with. Thank you, Ben. And then just one follow-up, maybe you have a little more commentary around What you're seeing in the agave markets, you've now multiple quarters talked about stabilization on the prices. Has that been really the case also on a sequential basis at this elevated level? And are you in the future seeing prices maybe Come down a little bit, so we could potentially assume some COGS pressure easing. Ben, in connection with the agave pricing market, we continue to see on a quarter over quarter basis Stable agave pricing. And going forward, again, it is too early for us to assess or represent Any change to that agave pricing environment at this stage. Okay, perfect. Thank you, concretes. Our next question comes from the line of Felipe Hugos with Scotiabank. Please proceed with your question. Thank you. Good morning, Juan Domingo, Fernando and team. Thanks for the space for questions. Maybe my first one is on EBS. You exercised another option on EBS ownership. So a few questions on those. What percentage ownership are you on that right now? And then as a follow-up to that, I know you haven't shared a lot of information on the investment because obviously when in the past you It didn't have enough ownership and you didn't want to affect the transactions. But just curious if you're in a position now where you can share A bit more color on how EBS is performing. Thanks. Yes, Felipe, let me take the first part of the question and then I'll ask Mike to comment very qualitatively on the rest. But what we can say on the increase in the Equity stake in Airborne Spirits, we cannot disclose The exact percentage that we increased, we can only say that we went above the 49%, hence consolidating the results. And we can say as well that the celebrity Conor McGregor will continue To be engaged with actively promoting the brand. That's as far as we can disclose on the transaction, unfortunately. And this is Mike, Felipe. With regard to performance, as you can see from Nielsen and It is the fastest growing, best performing whiskey in the Irish Thanks. And if I could do a follow-up, just wanted to see if you guys had any commentaries about The amount of new ventures that are that have been coming up in tequila, it seems that every day that we wake up there's a new tequila brand and then you start Backing the brand. So just wondering what your thoughts are about that and whether you're starting to see a shakeup of those brands in Mexico or not? Thanks. Can you repeat what type of brands are you referring to? Startup brands in tequila and in general in agave products. This is Mike from a U. S. Canada perspective. It isn't just tequila. As we just chatted, the RTD business Also going through a tremendous amount of innovation and consolidation as well. I think anytime you have Incredibly successful category, people try to figure out how to become a part of it. And my feeling always with celebrity brands In any category, it's directly proportional to how good the product is and to how hard The celebrity is willing to work to help get that message out there. And so I think a lot of it remains to be seen. So I would take it from that comment, Mike, that you're still not seeing a shakeout, and I'm talking particularly about tequila innovation. Yes. I'm not seeing a shakeout. I mean, just like you, I can see how the products are doing. Some of them seem to not yet be gaining momentum, but I haven't seen a shakeout, I wouldn't say. Okay. Thanks for the color. This is Luis Felix. In Mexico, we haven't seen any Significant growth of celebrity tequilas in our market. Our next question comes from the line of Ricardo Alves with Morgan Stanley. Please proceed with your question. Good morning, everyone. Thanks for the call. I wanted to take the opportunity also to thank you, Mike, for the insightful color and all the interaction So just a quick Question on U. S. Pricing, quite impressive unit revenue this quarter. Can you just go Into a little bit more details on the pricing effect specifically just sort of separate a little bit from the mix issue. When we go back to the pandemic, we appreciate all the brand equity story and the market share gains and So forth, but when you look today, considering the price increase you implemented, and Do you actually see a more benign pricing backdrop in the marketplace when you look at your peers? I don't know, maybe reflecting an inflated cost in the industry or capacity constraints. So any thoughts on the competitive landscapepricing in the U. S? Yes. Well, As I said, we took price across most of our tequila SKUs in May. And we do that when we see an opportunity And we measure that against the consumer. We have the ability and is it in our best interest to do so. As the leader In tequila, we do it when we think that the consumer is ready To yes, to offset costs and to premiumize our business. And so we've done it and some competitors Also look like they have taken a little and it seems like more in the $15 to 20 Dollar categories and people have taken some price, doesn't look like in the 20 plus category that other Then our brands that many people have taken price. And then, it's really confusing when you get to the super premium, ultra premium. In any given month, it looks like maybe they did and then the next month, it looks like, well, maybe they went the other way. So I think You see it the most right now in that $15 to $20 segment. Got it. Appreciate the color. Thanks, Mike. Thank you. Thank you. We have no further questions at this time. Mr. Domingo, I'd now like to turn the floor back over to you for closing comments. I would like to thank you again for your continued interest in Beclay. We remain extremely confident in our family of brands and our prospects for long term growth. Have a great day. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.