Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's Second Quarter of 2022 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 and all participants will be in a listen-only mode during the company's presentation. After Ambev's remarks are completed, there will be a question and answer section. At the time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator.
Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ambev's management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand the 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 will be discussed during today's call are both organic and normalized in nature, and unless otherwise stated, percentage changes refer to comparisons with first quarter of 2022 results.
Normalized figures refer 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 discloses that consolidated profit, 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.
Good morning and good afternoon, everyone. Thank you for joining our earnings call for the second quarter of 2022. During our last call, I mentioned that we started 2022 well-positioned and that I came out of Q1 encouraged with what we delivered. As I review Q2 results, I see even more evidence to be confident going forward, and here's why. This quarter provided a glimpse of consumption patterns in a post-COVID world. In several of our markets, reopening continues well underway, with services and on-premises businesses coming back. As this takes place, we have once again been able to meet the moment. Ambev grew 6% in volumes, reaching 42 million hectoliters, which is 15% higher than 2019 levels. It is the first time we reached more than 40 million hectoliters in a second quarter.
This led to a net revenue growth of almost 20%. In addition, organic EBITDA and cash flow grew over 17% compared to the same period of last year. Let's talk about Brazil. In Brazil, we witnessed more clearly the consumer comeback journey to the on-trade and overall out-of-home occasions, leading to another quarter of solid top-line performance. In beer, we estimate we gained market share versus last year and sequentially versus Q1 this year in both volumes and value. Volumes grew by 8.5% in the quarter and by 5.2% in the first half. To date, we grew 2.2 million hectoliters, leading the industry expansion, as we estimate that the industry grew almost 0.5 million hectoliters. In terms of segments, premium grew more than 20%, led by Original and Chopp da Brahma , which are more relevant in the on-trade channel.
In fact, this quarter, Chopp da Brahma achieved its highest volume in a second quarter, with 40% more buyers than the pre-pandemic levels. While our core portfolio sustained its momentum, increasing volumes low-teens, and we continue to invest behind developing our core plus brands, Brahma Duplo Malte and Spaten. Net revenue grew 23%, with net revenue per hectoliter growing about 13%. Finally, EBITDA in Brazil beer grew 27.5% organically, with margins expanding by 80 basis points. Talking about NABs in Brazil, we delivered another great performance this quarter. Volumes grew 16%, driven by healthy brands, especially in the out-of-home occasions, supported by BEES. We estimate we gained market share again this quarter.
In CSD, Pepsi brand grew more than 20%, driven by the great success of Pepsi Black, which almost doubled its weight within our Pepsi brand. Net revenue per hectoliter grew 22%, driven by revenue management initiatives, the premium mix and package mix as single serve packaging grew 37% this quarter. EBITDA grew organically 92%, expanding margins versus last year by 500 basis points. Regarding our technology platforms, over 86% of our revenues are coming through BEES. On the marketplace, in June, we announced a partnership with Grupo Pão de Açúcar, who will offer a vast range of products on our platform via a 3P model, just like BRF, delivering an even better assortment and service level for our clients. Zé Delivery fulfilled 15 million orders, 2% below the previous year, mostly impacted by the rise of out of home occasions.
GMV grew by 7% compared with last year, and we kept four million monthly active users in the delivery. We continue to invest behind adding more features to our app and delivering a better user experience to our consumers. BEES Bank grew TPV quarter-over-quarter by almost 40% and now reaches about 300,000 customers. Turning to our international operations. In LAS, overall volumes grew by 1.5%, led by Bolivia, which benefited by the reopening. In Argentina, we remain cautious about the impact of rising inflation on consumption despite flattish overall volumes in the quarter. In Chile and Paraguay, premium and core plus continued to gain weight among our brands. LAS net revenue per hectoliter grew 38%. In CAC, overall glass supply constraints remained, coupled with a tougher short-term competitive environment in Panama.
This all contributed to a 10% decline in volumes and a flattish net revenue in CAC. Talking about Canada, despite the reopening that took place, industry is still sluggish. We estimate that beyond beer industry declined by almost 9% in the quarter. Talking about beer, we estimate to have gained market share led by core and value brands. Now, I would like to talk about brand building. During our investor days, we explained our framework based on three pillars: mind, mouth and heart. This is a quarter to be proud of how much we have evolved in the last few years in brand building. This evolution is no longer going unnoticed. Last year, we were awarded seven prizes in Cannes Lions International Festival of Creativity, and this year, 12. Ambev was the most awarded Brazilian company in the festival with Lions for all of our beverages categories.
Brahma and Budweiser were awarded in beer, Guaraná in NABs and Mike's in Beyond Beer. Talking about our framework, starting with mind, we strongly believe that being creative is the best way to not only capture consumers' attention, but also engage with them in a meaningful way. Brahma brought home its first ever Golden Lion and seven lions in total, which is an absolute record. It was the most awarded brand in the world in the social media category with our Foamy Haircut campaign. The results of all this creative effort helps Brahma continued growth in brand health KPIs. Now moving to mouth. Key recent innovations continue to grow as we keep launching products to delight all Brazilian tastes.
Our most recent project is Brahma Duplo Malte Escura or Brahma Double Malt Black, a special limited edition which is brewed with two types of malt to create a darker and even creamier beer. We continue to collect awards for our innovations. In June, we were listed one of the 20 most innovative companies in Brazil by the MIT Technology Review, a study that evaluated innovation capabilities in more than 1,000 companies in the country. Finally, going to our third pillar, the heart, here is all about being relevant in consumers' lives and connecting through their passion points. After the two-year gap due to COVID-19, our brands continue to be a fantastic platform for cheering together. Brahma helped to bring back São João festivities in the Northeast of Brazil, one of the largest and most traditional celebrations in the country.
Budweiser presented the NBA House 2022, a space where more than 40,000 people had the opportunity to watch the season's playoffs. Beck's created the Urbecks Festival, an urban music and art circuit that helped to awaken different areas in the main urban centers of Brazil. We will keep consistently focusing on mind, mouth, and heart to make sure we are relevant, innovative, and loved by our consumers, which will make stronger brands in the long term and help our organic growth trajectory. To conclude, our performance in Q2 accelerated in Brazil even more than we expected, more than offsetting some headwinds we had in our international operations.
It was a great H1, and we will work to deliver an even stronger H2 in terms of both top and bottom line, despite facing a tough comp in Brazil beer volumes in the third quarter and the continued volatility and inflationary pressures. We are not making any changes to our guidance for the year relating to Brazil beer cash COGS per hectoliter growth between 16% and 19%, excluding the sale of non-Ambev marketplace products. Moreover, we remain on track in terms of our main ambitions for the year. That is, to get Brazil back to bottom line growth, to have a consolidated Ambev organic EBITDA growth ahead of the organic growth that we had in 2021, and to improve our return over invested capital.
Lastly, I would like once again to thank the entire team for the ownership mindset in delivering results and transforming the company, and a special shout out to the marketing team. Congratulations for the amazing performance at Cannes. Thank you for your time, and now I will hand over back to Lucas.
Thank you, Jean, and hello, everyone. Our financial performance in Q2 was fairly consistent with the first quarter in terms of what should be the same and what should change in 2022. What would not change? First, top-line growth remains key. We delivered nearly 20% net revenue growth overall, with Brazil once again being the main highlight. Second, input cost pressure remains a sticking point. Cash COGS per hectoliter grew nearly 18% at the consolidated level, while for Beer Brazil, it grew almost 14%, excluding non-Ambev marketplace products. Third, we would continue to focus on value creation drivers. The name of the game here continues to be improving our return on invested capital, building on our progress in 2021.
In terms of what would change, first, net revenue performance more driven by net revenue per hectoliter than volumes as we adapt to a higher inflationary environment. Net revenue per hectoliter grew almost 13% and volumes grew around 6% in the quarter. Second, cost headwinds would come mostly from commodity inflation rather than FX. Commodity inflation was more explained by the increase in Brazil beer cash COGS per hectoliter, driven mostly by aluminum and barley, which was partially offset by better RGB mix. Third, SG&A growth should improve. Cash SG&A grew about 15% in the quarter, with sales and marketing growing almost 22%, thanks to continued investment behind our brands and innovation. Distribution growing 18%, mainly due to rising diesel prices, and admin expenses growing just around 2%, given lower variable compensation accrual once again.
Fourth, tax credit one-offs in Brazil that positively impacted our EBITDA, financial results, and effective tax rate in Q2 of last year would be a factor this quarter. It was a factor, but for a different reason than we originally anticipated. We recognized in the quarter about BRL 1.2 billion in tax credits, of which a little over BRL 900 million in other operating income and approximately BRL 300 million in our financial results. This gain also relates to the inclusion of the ICMS state tax in the taxable basis of the PIS and the COFINS federal taxes, which was declared unconstitutional.
As I have mentioned in prior calls, there is still pending litigation in this matter, and during the quarter, we concluded, together with counsel and external advisors, both the legal viability assessment as well as the quantification of this additional portion of tax credits for the PIS and the COFINS that we overpaid over the years. As a reminder, these tax credits are technically part of our normalized results from an accounting standpoint, but we disregard them for purposes of calculating our organic performance, treating them as a scope change. Please refer to our financial statements for further details. Given our performance in the quarter, we are well on track to deliver a better organic EBITDA growth in 2022 than the 10.9% organic growth we delivered in 2021.
Brazil's recovery this year is turning out to be stronger than expected, which is more than offsetting the declines in CAC and Canada year to date. As for LAS, year to date, Argentina is delivering EBITDA growth slightly ahead of local inflation, while the other LAS countries delivered EBITDA growth in H1, driven mainly by Bolivia, which is finally recovering from COVID. In putting this quarter's performance into perspective, since Q3 2020, we've managed to deliver net revenue growth above 13% quarter after quarter. This was true again in Q2. The growth is there despite all the headwinds we faced. The good news is that in Q2, we finally managed to deliver growth and profitability in Brazil, which had been lagging for a while. Brazil beer expanded EBITDA margins by 80 basis points, while Brazil NAB expanded EBITDA margin by 500 basis points.
No doubt, there's still work to do on the gross margin side and in terms of consistency, but it's a start. Speaking of profitability, as I've mentioned in prior calls, we've also looked at profitability in terms of working to consistently improve returns on invested capital year after year. Here, we're also happy with the progress we've made so far this year as first, we continue to look at ways to optimize our business through financial discipline on the cost and expense side, as well as improved resource allocation across our businesses and markets. Second, improve return on invested capital as we look to digitize and monetize our assets. Here, the scale-up of the technology platforms such as BEES and Zé Delivery are helping us improve not only NOPAT growth, NOPAT margin, but also asset turnover.
It's still relatively early days for these platforms, so we definitely see more upside going forward. Now let's turn to our cash flow and our financial performance below EBITDA, and I will close with some words on ESG. Cash flow from operating activities totaled about BRL 2.2 billion in the quarter, which represents an increase of about 17%. Normalized profit grew a little over 4% in the quarter, given EBITDA growth and a lower effective tax rate, partially offset by higher net finance expenses versus Q2 2021 of around BRL 200 million. Net finance expenses were mainly impacted by the continued increase in the carry cost associated with our FX and commodity hedges in Brazil and Argentina, which should continue to be an issue going forward.
Our interest expense grew mainly due to fair value adjustments of payables under IFRS 13, but it was fully offset by higher interest income resulting from the Brazilian tax credits we recorded in the quarter. Before I wrap up, I want to briefly highlight our progress in terms of some important sustainability milestones. On the environmental side, we announced three more carbon neutral plants in Brazil. Arosuco Aromas in the state of Amazonas, Juatuba in the state of Minas Gerais, and Curitiba the state of Paraná. Together, they represent an emission reduction of over 5,000 tons of greenhouse gases per year, and we intend to deliver an additional four carbon neutral operations by year-end.
On the social side, our people that volunteer within the Voa Social Transformation program have recently joined Gerando Falcões, a Brazilian NGO of social development, in an initiative to mentor social leaders of Brazilian favelas that are graduating at the NGO's Falcões University. We plan to hold our ESG day during Q3, and we hope you can engage with us in this dialogue. To wrap up, a few final messages. First, we delivered a stronger H1 than we expected, which gives us more confidence going into H2, particularly in Brazil. Second, our guard remains high since challenges and short-term volatility remain a reality, particularly in countries like Argentina, Panama, and Chile. Third, we remain focused on delivering continuous and consistent improvement in our results as we progress on Ambev's transformation journey. Now let me turn it back to the operator so we can go to Q&A.
Ladies and gentlemen, we'll now begin the question and answer session. If you would like to ask a question, please press star one. If at any point your question has been answered, you may remove your question from the queue by pressing star two. Please wait while we gather the query requests. The first question comes from Marcella Recchia with Credit Suisse.
Hi, Lucas. Hi, Jean. Thank you for taking my questions and congrats on results. I have two questions. First, on price. Based on conversations with industry participants, we heard that Ambev implemented an off-cycle price increase in the second quarter. Just would like to confirm that, and if so, at which channel and pack and by how much? On top of that, based on third quarter hard counts, can we expect the usual price increase to come, or could you increase discounts or reduce price in order to push volumes? Let me wait, the answer of that before asking the second question.
Okay, Marcella, thank you very much for your question. As you know, we are really focusing on finding the right elasticity in the sustainable balance between volumes and net revenue per hectoliter, always with mid- to long-term pricing strategy unchanged.
Prioritizing to do not lag inflation, but really work on a favorable brand back in channel mix. This is a strategy pretty much does not change. Since 2018, we have been growing volumes while improving pricing performance. We continue to monitor the environment moving forward, but in a flexible way, watching inflation, disposable income, really working on elasticities to make the decisions on revenue management. Okay. Having said that, we did a more tactical price increase in May. It was a small one. It was granular in some packs by channel, some regions, that it was around 2.5%, both on off-trade and on on-trade, right? Usually we see in Q2 net revenue per hectoliter going down sequentially.
This is more of an effect on mix on the north and northeast regions gaining weight, and then we get the winter coming in the southeast. This quarter, what surprised us, it was really that the actions that we took in the channel mix, in the pack mix, during the COVID and the reopening of bars, mainly seeing RGB 600 mL bottles, Original Chopp da Brahma really getting traction. This is helping us to somehow mitigate this usual net revenue per hectoliter decline that we have Q2 to Q1. H2, I can't really comment on the competitive. It's competitively sensitive on pricing decisions moving forward.
Perfect. That's very helpful. Yeah. The second question, very quickly, is about the core plus segment, which was the only segment you did not mention how much volumes grew in the quarter. It would be nice to hear from you how the segment performed in the second quarter, and also if you can give us some color on how has been the rollout and acceptance of Spaten. Thank you.
Okay. That's a good question. Let me give a step back to talk about the dynamics that we saw in this Q2, and then we talk about the segments. What we see, Marcella, during this doing a deep study on the previous two years, is that we developed a lot of actions really to fulfill the in-home occasion, right? Since the pandemic arrived, we designed it ourselves to get this in-home occasion right, and we went deep on that, right? You see that we Zé Delivery was it exploded. Brahma Duplo Malte, it was a brand on the core plus segment, designed in a sleek 350 ml cans to the in-home occasion. We changed it. We expanded the 300 ml bottles focused on the traditional trade to get inside homes.
It was really a strategy that we are very happy with it. It really step change our volumes.
Mm.
If you combine all these things, it's really something that really led our 10 billion hectoliters change in the company. What we are seeing in Q2 is that there is a lot of residual of this in-home actions, but consumers traveled back to our strength that it was the bars. We see everything around this social out of home occasion really shining and a lot of residual on the in-home, but really shining the out of home occasion. Because of that, we see high-end very strong with Original, Chopp da Brahma, that they were waiting for the comeback, right? They suffered a lot, and they came back.
We've seen somehow the core in 600 ml bottles, in liter bottles coming back, that they were really growing more on the 300 ml bottle. In the core plus strategy, it continues. Bohemia, we kind of unplugged or with marketing initiatives. We are really focusing on Spaten and Brahma Duplo Malte on that segment. If you see the combination of these two brands, Spaten, it was designed more on the 600 ml bottles, Brahma Duplo Malte more on the in-home occasion. If you get these two to combine it, we are growing double digits in this quarter, but with Bohemia, with negative volumes.
Excellent. Thank you so much, and congrats again.
The next question comes from Isabella Simonato with Bank of America.
Thank you. Good morning, Jean and Lucas. Good morning, everyone. Just to follow up, two questions. Just first of all, a follow-up on the volume discussion in Brazil. It's interesting when you mention, right, based on the remarks, pretty much all the main segments, right, grew double digits this year, while when we look at the printed volume, right, at 8.5%, looks below the average of those segments. So if you just give a little bit more color per segment or what exactly brings the average a little bit down, I think that would be helpful. And the second question is, when we think about the performance, right, of the first half, and you guys mentioned it has been a positive surprise. However, you didn't change guidance, right?
I don't know if you think there is more room for positive surprise, or if you guys are seeing a more challenging second half. If that's the case, what would be those challenges, right? It is in the international market, given what's going on in Argentina or a tough comp in Brazil. Just to get a little bit more color how you guys think the second half. Thank you.
Okay. Let me get the first one and then Lucas get the second one. Isabella, volumes wise, we are very excited about. 8% volume, it's a great volume in the quarter. In the end, to look quarter by quarter sometimes is misleading because consumer is moving so, and from one occasion to another. It was really, if you look back to 2019, we are 20% above our volumes in 2019. Okay? We've seen a structural, brands in the high end doing well consistently in this period. Then we landed in above 20s in the high-end brands with like Original and Chopp da Brahma, as I mentioned, really leading more than that.
Somehow, I mentioned that Core Plus, so Brahma Duplo Malte plus Spaten, they are double digits. The mainstream is around that too, okay, so it's low teens too. What really went down, it was the value brands that we really unplugged, brands like Antarctica Subzero, some regional brands that we have like Serrana. They were brands that really took the hit, overall. We see somehow Core and Core Plus taking Bohemia out in the same pace and then high end ahead of the portfolio. Our specialty brands, they are doing very well, too. Okay? The craft, Patagonia doing very well too. Specialty. This is one thing.
Talking about the guidance, I will hand over to Lucas, but just to mention, just to guarantee that he put the right words here on the call. Somehow, we are excited. We mentioned that Q1, we had that strange January, that it was a one-off hit on with Omicron in many markets. We had this Q2, when we look at H1, it's more something like what we was expecting in Q1, if it was not Omicron. It's a place that we are better than we were in Q1. What I mentioned in my initial statement is that we believe that H2 will be strong.
We are confident that we will be better in top line and bottom line, H2, when we compare with H1. Somehow, if you put the numbers, we are confident. I will get to Lucas kind of.
Sure
Round it up.
Sure. Thank you, Jean. Hi, Isabella. Thanks for the question. Starting with the guidance. The guidance that we gave for the year was related to cash COGS per hectoliter in Brazil beer, excluding non-marketplace products, right? Ambev products. Non-Ambev marketplace products. That was the guidance that we gave right in Q4 when we announced the full year results and announced our expectations for the year. That guidance stand year to date, the cash COGS per hectoliter in Brazil beer, excluding non-Ambev marketplace products, is trending at 14.5%. Below the range, which is good. Again, given that not 100% of our costs, right, are hedgable, right?
We still see merit in keeping the 16%-19% outlook for the year, okay, as our official guidance. On top of that, when you think of our ambitions for the year, just to add on to what Jean mentioned. When we look at our H1 performance, our view is that we come out of H1 more confident on our ability to deliver our ambition of growing ahead of 10.9% organically at a consolidated level, which is what we delivered in 2021. When we shared this ambition on one of our prior calls, I remember I got the question on why we believed, right, growing ahead of 10.9% was feasible.
The answer then was that if we manage to deliver a Brazil bottom line coming back to growth, that in and of itself, right, would be a significant tailwind in our ability to deliver this ambition. If you look at our results in H1, right? There was a step up in Q2 in terms of our overall performance, and that made an enormous difference on our total EBITDA growth for Ambev in the first half, which was around 15%, I believe, 14%-15%. With an H1 at 15% and Brazil stronger than we expected, right? We think that if we manage to do a better job in CAC and Canada, and LAS continues to deliver good performance and mindful of the challenges in Argentina.
Outside of Argentina, LAS in Q2, the other countries Bolivia, Paraguay, Chile and Uruguay, they grew double digits in Q2. Okay? Just for instance, just another data point for you to have. If we manage to have Brazil continuing momentum in H2, LAS continuing to deliver, that can be helpful in offsetting potential headwinds in CAC and Canada. Again, we still have work to do there, and we're still gonna pursue better results in Canada and in CAC in H2. Okay?
No, that is super clear, Jean. Just one minor confirmation. When Jean says second half could be better on top line and bottom line than half one is in nominal terms or growth, just to double-check that?
In organic growth.
In organic growth.
Yeah.
Okay. Perfect. Thank you.
The next question comes from Lucas Ferreira with JP Morgan.
Hi, everybody. Thanks for the space to ask questions. The first one is regarding SG&A. If you can, since we're discussing second half, how to look, how to think about SG&A. You have some important events ahead, such as the World Cup, potentially provisioning for bonus. Again, it's gonna be a strong year. So how to think about that? There was already kind of heavy SG&A this first half, so should we see similar trends into second half or that should seem somewhat alleviate to help you deliver this growing expectations you're talking about? The second question, Lucas, last year you guys had some issues with sort of unhedged position because I guess the company ended up selling much more beer than you expected, right?
How to think about that this year? You're also probably performing a bit better than expected. Are you guys having sort of unhedged positions to do as well? Would those come maybe now at a lower cost given the falling commodity prices or you cannot say that yet? Thank you.
Sure. Hi. Hi, Lucas. Thanks for the question. Let me start with the second one on the hedges. Okay? Everything that's hedgeable for 2022 has been done, right? It has been done for quite some time now. The issue is not around hedging per se, okay, looking into H2. The issue is more on the unhedgeable side of our cost base. You're right, that was an issue last year. There was an increase in the second half of the year on the unhedged portion of our costs. This year there has been some impact, not enough, right, to compromise, right, the guidance that we gave in Brazil Beer.
That remains a risk for H2, and that's one of the reasons why, right, we're not updating, we're not making any changes to our guidance of 16-19 in Brazil Beer, as I mentioned in my prior answer. Okay? Again, the issue is not the hedging side. That's done for 2022. The issue is more on the unhedgeable portion of our costs. Again, we are living in higher inflationary environments overall. That applies to costs, that apply to expenses. That's a good segue to try and answer your first question around the SG&A.
What we anticipated directionally for SG&A in 2022 was a lower growth of SG&A year-over-year as compared to, right, 2021 to 2022, because of the lower accrual for variable compensation, right? As you will recall, Lucas, last year, one of the main factors that led to a higher SG&A growth year-over-year versus 2020 was precisely the fact that the recovery was much stronger than we expected, and 2020 was a no bonus year, right? That created a double whammy effect, if you will, on the admin side through higher bonus accruals. That's not the case this year so far. Obviously, H2 will depend on how we do versus our budget, and then we will accrue accordingly, right?
With admin expenses growing at a lower rate because of lower year-over-year bonus accruals, that should help us, right, for the year deliver a better SG&A growth. On the sales and marketing side, I think the point to call out is really Q4 and Q3 as we prepare for the World Cup, right? There is sales and marketing investment for an event of that proportion, right? It's a great opportunity that we have coming up in Q4 to really leverage not only our brand portfolio, but also our technology platforms, right? To really meet the moment, serve clients better, serve consumers better during such an important event for markets like ours.
Yes, there is a calendarization that's different this year, because of the event that we have coming forward. In terms of distribution, I think the watch-out is really what happens to diesel, right? I mean, diesel has been a factor on our distribution expenses, not only in Q1 but also in Q2, it was a factor. I think the glass half full side of the equation in terms of sales and marketing and in terms of distribution is that year to date, it's growing below net revenue growth, right? I think that's good news. That's something that we always do that sense check.
In addition to that, right, we're applying our typical financial discipline, making sure that we are as focused as possible on being strict on the non-working money side of our business, right? Which is everything that consumers don't touch, feel, see, right? To release funds to be able to invest more in things like sales and marketing that are gonna continue to develop the health of our brands going forward. Okay.
Perfect. Super clear. Thank you.
The next question comes from Thiago Bortoluci with Goldman Sachs.
Yeah. Hi, Jean, Lucas. Good morning, everyone. Thanks for taking the questions. I have two. The first one, a follow-up on the cash cost guidance. Obviously, that there are a lot of different moving parts here, and we understand that you have an average policy of hedging part of your commodity needs on a 12-month forward basis. But you might also be kind of opportunistic on aluminum prices, right? I'm just curious to hear from you if we should see the impact from lower commodity prices just 12 months from now, or you could have decided to go for a more opportunistic view, and we could see some part of this reflecting early on over the next quarter. This is the first question. The second one is regarding the World Cup and the outlook for the fourth quarter, right?
Obviously, that there is also a lot of different moving parts, the Auxílio Brasil, the election. Typically, we know that this event is very positive for volumes, right? I'd just like to explain and hear a little bit from you how much of an opportunity do you see for the fourth quarter and beyond that, if you believe this volume should be really incremental as we head into 2023, or this might create an overhang for volumes next year. Those are the questions. Thanks.
Thanks, Thiago. This is Lucas. Let me take the first one, and I'll hand it over to Jean to talk about the preparations for the World Cup on the commercial side. In terms of the exposure to aluminum specifically, right? I think this is more of a 2023 issue than a 2022 issue. The good news is that, of course, it's still early to give any sort of specific outlook for 2023. We still have a good portion of hedging to do right through the end of the year. The good news is that so far, aluminum is no longer a tailwind. It is no longer a headwind as it has been over the last two, three years.
On the currency side, the BRL hedge versus the US dollar is also a tailwind for a change, right? It has been a headwind for the last two and three years as well. That's the good news so far, right? Again, still a lot of hedging to do through the end of the year. On the glass half empty side of the hedge for 2023, so far, our hedges with respect to barley are continuing to be a headwind, but to a lower extent than the levels that we saw in 2022. The Argentine peso FX hedges should continue to be a headwind, at least that's what we've seen so far this year. Okay?
Aluminum, more of a 2023 issue, and kind of that's where we are so far this year. Let's see how things unfold on the hedging for commodities and FX through the remainder of the year. Over to you, Jean.
Okay. Let me talk about the World Cup here, right? The question that we are for you to get the information, yesterday, we had a World Cup day, okay? We put, like, 50 people in a room from inside the company, outside, to have the best insights of what could we do in this World Cup, and we learned a lot yesterday. The question that we did for ourselves is the statement. The briefing of the day is, what can we do in this World Cup that will make us better in 2023? That was the statement that we did to 50 people, to outside, to people from agencies, consultants.
It was a day that we learned a lot, and we went out with great plans on that. Opportunity to resolve problems, to make this World Cup more inclusive, to make, in the end, the young people more interested. To make soccer something that can be enjoyed by women. We are really thinking about how can we solve problems with our brands, with this World Cup, strengthening the brands. We are connecting Zé Delivery. How can we acquire users during the World Cup that they will stay? How can we touch the hearts of the Brazilian? The sentiment that we find with the survey is that everybody is waiting for this World Cup as a breath.
Everybody knows that, the next three, four months, it will be about politics, polarization. Looks like the World Cup is a moment that Brazil can come together again. It will be a very important moment. We are very into it. We are prepared on the logistics side. We are prepared on the marketing side. We believe that it will. It's the first time that we have a World Cup in the summer, in this context, after one year of pandemic. For sure it will help us this year. The big question is what are the structural things with brands and digital products that we can do to get together with the Brazilian and to make it resilient for 2023. We are very excited about the World Cup.
Very interesting. Thank you, Jean and Lucas.
The next question comes from Thiago Duarte with BTG Pactual.
Hello. Thank you. Hello, Jean, Lucas and everybody. Yeah, three questions from my side. The first one, it's clear at this point that you're positively surprised by the performance in Brazil relative to when you provided the guidance or when you even said that the momentum was strong in the end of the first quarter. But it's not clear to me what exactly is the biggest source of surprise. I think Jean could comment a bit on that. If it's the demand, the consumer demand or how strong the consumers are going back to on-premise. Is it the evolution of RGB?
Is it the cost side, which is on the favorable side in terms of your guidance. If you could elaborate a little bit on what you would say are the biggest sources of positive surprise for the performance that the company had in the second quarter and the first half in Brazil, that would be great. The second question is going back to the pricing in Brazil beer. Jean, you mentioned a small price increase in the second quarter.
If you could elaborate a little bit more when we look at the 11.2% revenue per hectoliter growth for Brazil beer, excluding Marketplace, how mix and particularly packaging with the incremental RGB is driving that number, that would be very helpful as well. A third question would be on working capital. It's not only on the Q2, but also in the entire first half. There was some significant working capital consumption, which is not very common considering that you guys are growing volumes and that beer is gaining share, and I presume beer is positive for the working capital of the company, as you guys mentioned before.
If you could elaborate a little bit on what's driving that working capital consumption ahead of the second half, it'll be nice as well. Thank you.
I'll get the first and the second, Duarte, and then Lucas jumps into the third one. Okay, what surprised us in Brazil in Q2? It was. The moving pieces we knew, okay? Surprises are that we continued to gain market share, okay? Sequentially, we gained in market share. The strength of the bars reopening, it was something that came on the top of our range of expectations, okay? Somehow, there was this discussion about when the bars really fully reopen, and it's not just the bars, and the social out-of-home occasion gets at full potential. What's the size of it and what's the residual volumes of the in-home initiatives and the occasion that it was created during the pandemic? This mathematics surprised us.
We at some point in time believe that in-home could go down more for the on-trade to go, to be reopened or the on-trade was not that strong. It was the combination of this equation, the residual of the in-home with the strength of the out-of-home that surprises us. Then, 8.5% in terms of volumes, it was above this math. Talking about revenue management, you know that we are very granular now on the revenue management. You know that we have a strategy that we have been very inclusive and really maintaining beer competitive in the basket of the Brazilian consumers. What we liked about this quarter is that we really challenged the elasticity generally.
Okay, it was like good net revenue per actual liter with good volumes. It was about the carryovers of the previous year, the tactical things we did, as I mentioned here in May. A big part of it was the 600 ml bottles and the high-end, the brand mix helping us, and the value brands going down too. The combination of brand mix and 600 ml bottles coming back, that made this number that you see in our Q2. Okay, so working capital with Lucas.
Sure. Hi, Thiago. Thanks for the question. I think in terms of working capital, I would say that the bigger issue was actually Q1 on the payable side. Okay? I mean, like, if we recall our conversation last quarter, right? Our payables in Q1 had an issue around the payment of the variable compensation, right? And also there was a higher level of payments to suppliers given the calendarization of our CapEx. So, CapEx that was booked right in H2 of 2020 ended up being paid in Q1, right? So that double effect created a bigger gap in terms of working capital in Q1. In terms of Q2, and that's by far kind of the biggest factor year to date.
I think Q2, the outlier here is more on the receivable side, and it relates to the tax credits that we recognized. Unlike last year, when we recognized the tax credits but did not immediately monetize. This year, the monetization was faster than last year, and that has an impact on our receivables. In terms of inventories, no major change in terms of inventory building. There was some more inventory building in Q2 this year than last year, but again, it's more of a calendarization effect. Then on the payable side in Q2 also, no big major change other than just a different calendarization of our CapEx spend and when the payments are falling.
I think it's better to look at working capital more on a yearly view, because on a quarterly view, you will have from time to time these swings related to specific events like the bonus, like calendarization of CapEx, like the tax credits.
That's clear. Thank you so much.
The next question comes from Alan Alanis with Santander.
Hi, everyone. Thank you so much for taking my question, and congrats on the result, Jean and Lucas. My question has to do with the competitive dynamics and the connection between soft drinks and beer. I mean, I understand how you've been gaining market share on beer. I think that there are reasons also among your competitors, the separation of the distribution of Heineken from the Coca-Cola system. I think that. Well, congratulations, you're doing a lot of things right and taking advantage of that and gaining market and value share. What's a bit of a surprise for me is to see that you're also gaining a lot of market and value share in soft drinks after the Coca-Cola Company release, which they acknowledged that they're losing share there.
What are you seeing, and what are you doing differently in soft drinks in order to be gaining market share, and how sustainable is this going forward?
Thank you, Alan Alanis, for the question. In reality, soft drinks was really the star of this quarter, right? We are very proud of the performance of soft drinks. Somehow, I've been mentioning for a while now that we've been transforming ourselves into more of a platform. In the past, we were like a beverage company. Now we are a platform. This is something that people do not understand somehow. We did a huge structural change inside the company in terms of breaking the silos, in terms of having the marketing areas as a marketing as a service, have my frontline team working for the whole portfolio. In the past, I had siloed teams.
We did a big change to prepare the company to really unlock its potential of top-line growth. On top of that, we focused our efforts on soft drinks, on brands of the future. Somehow the PepsiCo partnership is stronger than ever. The launch of Pepsi Black, it was just a surprise for us how the product is getting into the taste of the cities and the places that we are launching. Somehow with this strategic view, with the good partnership of Pepsi and BEES rising, where we had in the past a sales rep that somehow was a funnel in terms of number of SKUs that they could offer. The combination of these three things really put NABs on fire. We estimated we are gaining market share.
Pepsi brand, there is a whole ocean of colas that we never tackled in reality. It's really accelerating and gaining market share. Business really allowing us to do much more things that we would do in the past. It's important avenue of growth for us that we are really into it. Okay. I think this is structural.
Got it. No, that's useful. You're pushing more toward the total beverage, and you are deleveraging your power, your scale of beer to
Yeah.
to move more soft drinks. Thank you so much. Again, congrats on the results.
The next question comes from Carlos Laboy with HSBC.
Good afternoon, everyone. Jean, it's nice that the creative team's winning awards, and I was thinking it's a landmark really that you can celebrate your marketers and their growing importance, but can you speak to the proof points to evidence that lasting brand rehabilitation and renovation is happening? Maybe you can expand on the Brahma case, or on any other incremental proof points that you have that your core brand build strategy and renovation strategy are working here.
Okay. Thank you for the question, Laboy. Yes. I could mention, I think Brahma is really one brand that is really on fire, as a family, with Chopp da Brahma appearing a long time that we don't talk about it as the reference of beer in Brazil when the reopening of bars like so on fire, Chopp da Brahma with the Brahma Fusão, Brahma brand doing very well and Brahma Duplo Malte coming in the middle of all this family, making an architecture of brand and family that it's really. It's really getting consumers. If you add up, it's really the brand most valuable of Brazil is really Brahma that has more lovers. It's really the overall brand of Brahma doing very well.
It was not like that like two or three years ago. We rejuvenated Brahma with Brahma Duplo Malte and we stepped up again the quality cues of the brand with Chopp da Brahma coming back in as it came in this stage in the Q2. I think somehow is a combination of mind, mouth and heart that we were able to tackle in the right way these three things of with the Brahma brand for example. Another brand that is doing very well. We are somehow biased this quarter that Original just exploded through. It's a brand that is about the traditional roots of the Brazilians, about the bars.
The bars were closed at the occasion, so everybody's coming to our Original brand, Antarctica Original. This is one thing, another way that we can mention. I'm very excited about Beck's. That is a brand that we are cooking in a very low temperature. Like, I don't know how we say this in English, but we are cooking it slowly. It's really about getting the palate right and the edginess of the urban centers. It's on fire, too. It's the brand that everybody's talking about, the edge of the palate, European, trendy, moving the boundaries. You know, we showed you Laboy, isn't it?
That brand architecture that we have and their archetypes and somehow, I think that our focus brands are doing just amazing. You're seeing the numbers. Our pricing was very resilient this quarter. This just means that the channels are right. This means that the consumers are paying. This is a combination of renovation and innovation. I don't know if I really answered your question, but the last thing that I could mention is that
Pre-pandemic levels and today levels, we have 1.5 million people that saying to us that they love one of our brands. Pre-pandemic level to now, 1.5-2 million consumers that elects one of our brands as their loved brand. I think that that's it.
Thank you, JJ. Cash COGS are for hedge funds, but this brand renovation is the real lasting stuff of a turnaround. Congratulations.
Thank you.
The next question comes from Sergio Matsumoto with Citigroup.
Yes. Good morning, and thanks for taking my question. I wanted to circle back on the ROIC improvement of the new metric as discussed in the Ambev Day. With the recent improvement in the top line, and the recent decreases in the spot prices of the commodities, I'm wondering if perhaps we can see some changes in how the composition of that return on investment capital might improve over the coming years. You had mentioned investment capital turnover as the first phase and then transitioning into more of a NOPAT path to margin improvement. Would you say that that transition might occur faster than expected than a few months ago?
Yeah. Hi. Hi, Sergio. Thanks for the question. This is Lucas speaking. Sergio, in all honesty, I think it's very hard to speculate at this point to what extent our longer term perspective on the two drivers for improving our return on invested capital could change in view of the latest movements in Q2? The reason I say that is in Q1, the picture was strikingly different because commodities were on the rise in Q1. To me, I would be speculating here if I gave you any indication of what change this can imply longer term.
I think we have to really wait and see how commodities behave going forward, how currencies move going forward. I think what's important for us on the commodity side and on the currency side is the discipline that we have in following our hedging policy, right? That's key to give us predictability. That's key to give us time to react as headwinds may arise. That discipline remains intact and we will continue to focus on that. Having said that, if we continue to deliver top-line growth, right, as we have in the last two years, that's obviously helpful for the margin recovery. Let's see how things progress on the top-line side.
As we've mentioned time and time again, top-line growth remains a priority for us. Some quarters, some years, it may be more volume than price. It may be the other way around, like we're seeing in 2022. We remain kind of steadfast in continuing the momentum that we've built on the top-line growth side. On top of that, we have the better asset turnover potential given the platforms such as BEES with Marketplace and D2C and Fintech. As these scale up, we see opportunity to have a better asset turnover profile than in the past. We have to deliver. Let's see.
Understood. Thank you very much.
The next question comes from Leandro Fontanesi with Bradesco BBI.
Hi, everyone. One question or one discussion that we have with investors is regarding Argentina, right? Recently the depreciation of the Argentine peso at the black market was much stronger relative to the official rate, right, than it was in previous quarters. There's a concern that, you know, the net income that you're generating in Argentina, you may have issues to take that money out of Argentina, especially relative to what you report in your accounting numbers, right? They use the official rate. To help us address or to help us understand the risk, if you could, like, provide us with some information such as what percentage of your total EBITDA comes from Argentina. Also how you are addressing that risk going forward.
Actually, I understand that you report how much you have in cash in Argentina and Cuba, which I think is like BRL 600 million. It does not look relevant, but it has been reducing in previous quarters. That means you are burning cash in Argentina and then generating the majority of your cash outside of this operation. To understand if you could potentially allocate some of your costs from other operations in that country. That way you don't need to depend that much on taking that money out of the country. Thank you.
Yeah. Hi. Hi, Leandro. Thanks for the question. This is Lucas speaking. Regarding Argentina, I think, first there is a lot of short-term, right, volatility in the country. The good news is that on the operational side, the business continues to perform relatively well when you think of top line, when you think of the portfolio and the health of the portfolio and how that's translating into our performance, not only in core but in above core segments such as core plus and premium brands, with good brand health indicators, market share, in line with what we expected, so on and so forth. However, on the macro side, we are once again seeing more volatility coming out of Argentina.
That's a fact. The last time we faced something similar was 2019, and there have been other instances in the past 10, 15 years where there have been years of more volatility and currency devaluation and so on and so forth. I think for us here, the way we approach it is stay focused on the micro and the commercial performance because it's a sizable market, it's a growing market, it's a profitable market for us, so that remains a priority, number one. Number two, protect what we can protect, what we control on the cost side, so that's where the hedging policy, right, comes in.
We continue to adhere to our on average 12 months hedging for the Argentinian peso and for the commodities, right, as they apply to the Argentinian business. Okay. And that helps us protect our costs in Argentina, okay, and the EBITDA performance in Argentina. We're constantly looking into, right, cash management, how we manage counterparty risk in Argentina, between local banks, international banks, and so there's a lot of tracking and monitoring of the situation on the ground to make sure that we're very disciplined and diligent in terms of our cash management so the operation can keep running, right. We can continue to work with our clients, work with our suppliers.
We want to keep things running in as seamless a way as possible. Okay? Then on the taking money out of the country side, I think the point here is more that there are restrictions in place for operating in foreign exchange markets. Our focus is more on accessing foreign exchange markets in Argentina to keep the operation running. The level of imports is fairly low, but we want to make sure that we still have access to keep the operation running. Thus, that's the bigger priority. In terms of cash generation, historically the cash generation in Argentina is more skewed towards the second half of the year than in the first half of the year. Hope this helps.
Yes. Thank you, Lucas.
The Q&A session is over. I would like to turn the floor over to Mr. Jean Jereissati for his final remarks.
Thank you all analysts, everyone who joined today's call for your time and attention. To wrap up, I like to look at H1 better than Q2. I think it was a great H1 for Ambev, for Brazil, and we are confident that we can deliver an even stronger H2. Okay. We remain on track in terms of our main ambitions for the year to get Brazil back to bottom-line growth, to have consolidated Ambev organic EBITDA growth ahead of the organic growth that we had in 2021, and to improve our ROIC. We will continue vigilant on the short-term volatility and cost pressures. Thank you very much. See you in October, and have a great day.
This concludes Ambev's conference call. Thank you for your participation, and have a good day.