Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's fourth quarter 2018 results conference call. Today with us we have Mr. Bernardo Paiva, CEO for Ambev, and Mr. Fernando Tennenbaum, CFO and Investor Relations Officer. As a reminder, the slide presentation is available for downloading on our event website at ir.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 that 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 that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach an operator.
Before proceeding, let me mention that forward-looking statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 the future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect 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.
Unless otherwise stated, percentage changes refer to comparisons with fourth quarter 2017 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 the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis on the earnings release. Now, I would like to turn the conference over to Mr. Fernando Tennenbaum, CFO and Investor Relations Officer. Mr. Tennenbaum, you may begin your conference.
Thank you. Hello, everyone. Thank you for joining our 2018 fourth quarter earnings call. I will guide you through our financial highlights of Brazil, CAC, LAS and Canada, including our below-the-line items and cash flow. After that, Bernardo will give more details about our operations in Brazil. Beginning with the main highlights of our consolidated results. The fourth quarter was marked by different challenges across our regions, though we saw success from many of our initiatives, including innovation and continued premiumization. On a consolidated basis in the fourth quarter, top line was up 5.3% as volume dropped 3.8% was more than offset by the growth in net revenue per hectoliter of 9.4%.
In the full year, net revenue was up 6.9%, with volume declining 2.6% and net revenue per hectoliter growing 9.7%. EBITDA grew organically by 5.3%, reaching BRL 7.5 billion with an EBITDA margin of 46.7%, which organically was flat in relation to fourth quarter 2017. In the full year, EBITDA was up 9.4%, with margin expansion of a hundred basis points to 42%. Normalized net profit was BRL 3.7 billion, 17.3% lower than in Q4 2017. In the full year, normalized profit was BRL 11.6 billion, 5% lower than 2017.
Following the categorization of Argentina's accounting with a 3-year cumulative inflation rate greater than 100%, the country is considered highly inflationary in accordance with IFRS. This fourth quarter, we will continue to report the results of our operations in Argentina applying hyperinflation accounting. These quarter adjustments are the same, but with different impacts due to the peso appreciation in relation to the real. One, no monetary assets and liabilities had to be restated using an inflation index translating to higher cost of goods sold and depreciation values, but in this time, only for the past three months.
Second, the full year P&L, which used to be converted to Brazilian reais at the average exchange rate of the period, had to be adjusted for the cumulative inflation from January 1, 2018 on, and then converted using the end of the period exchange rate, which is the closing rate of December 31, 2018. The fourth quarter P&L is the difference between the full year and the nine months results reported in the last quarter. Given that the peso real appreciated in the quarter, we reported hyperinflation accounting positive impacts of BRL 685 million on net revenues and of BRL 220 million on normalized EBITDA, which contributed to a negative impact on the normalized profit attributed to equity holder of BRL 15 million.
In the full year, the impact was BRL 558 million negative on net revenue and BRL 363 million negative on normalized EBITDA, which contributed to a negative impact of BRL 291 million on the normalized profit attributable to equity shareholders. Having said that, I will now move to our divisional results and start with Brazil. In the quarter, Brazil EBITDA was down 7.4%, reaching BRL 4.1 billion with margin contraction of 360 basis points to 47.9%. In the full year, Brazil EBITDA grew 3.3% with margin expansion of 70 basis points to 43.9%.
In Beer Brazil, in the fourth quarter, top line was up 0.9%, supported by net revenue per hectoliter growth of 3.1%, which is slightly below inflation for the period as price increase was offset by geographic mix. Volume in the quarter was down 2.1%, outperforming the industry. In the full year, net revenue was up 2.2% with net revenue per hectoliter growing 5.4%. Volume was down 3.1%, slightly underperforming the beer industry. Bernardo will give you further comments on these matters. EBITDA for Beer Brazil was slightly down in the quarter with margin contraction of 80 basis points to 60.4%. In the full year, EBITDA was up by 3% with margin expansion of 40 basis points to 45%.
Regarding costs and expenses in the quarter, cash costs per hectoliter grew by 27.9%, mainly impacted by commodity prices, especially aluminum and barley, and by a hard comparable in 4Q17. Margin is offset by favorable FX. Cash SG&A was down 20%, mostly driven by phasing of bonus accruals, which was fully booked in the fourth quarter of 2017 and on this year was split between 3Q and 4Q, as well as projects related to non-working money expenses. In the full year, cash costs per hectoliter grew 8.2% and cash SG&A was down 3.2%. We expect the full year cash total costs per hectoliter in Brazil to increase by mid-teens in 2019 as we will face pressures from currency depreciation and commodity prices.
In AB Brazil, top line was down by 9.1% in the fourth quarter with net revenue per hectoliter growth of 0.8% driven by geographic mix. Volume declined by 9.8%, underperforming the industry. In the full year, top line was down 1% with net revenue per hectoliter growth of 8.4%, more than offset by volume decline of 8.7%. EBITDA in the quarter was down by 44.9% with margin contraction of approximately 2,100 basis points to 31.9%. In the full year, EBITDA was up by 5.1% with margin expansion of 210 basis points to 37.1%. In terms of costs and expenses, cash costs per hectoliter was up 31.9%.
As we already anticipated, there would be volatility between quarters. In the full year, cash costs per hectoliter was down 1.1%. Cash SG&A in the quarter was up 0.5% also due to phasing of bonus accruals and the savings related to non-working money expenses. In the full year, cash SG&A was up by 2.2%. Moving now to Central America and the Caribbean. In the quarter, net revenue in Central America and Caribbean rose 9.6% as a result of strong volume of 7.9% coupled with a net revenue per hectoliter increase of 1.5%. In the full year, top line increased 12.6% with volume growing 8.3% and net revenues per hectoliter growing 4%.
EBITDA in the quarter reached BRL 712 million, increasing organically by 12.4% with margin expansion of 110 basis points to 41.5%. In the full year, EBITDA was BRL 2.3 billion, up 14.1% with margin expansion of 50 basis points to 39.4%. Cash costs per hectoliter increased 8.6%, negatively affected by Panama, where the strong volume evolution since 2017 has driven additional temporary costs in order to supply the market with no disruption. In the full year, cash costs per hectoliter was up by 6.6%. Further, cash SG&A in the region was down 18.8%, supported by lower SG&A expenses, mainly due to savings to non-working marketing expenses and savings of bonus accruals.
In the full year, cash SG&A was up 0.3%. Despite short-term cost pressures, our commercial strategy in CAC remained on track, supporting the health volume performance in virtually all countries in which we operate. In the core segment, we continue to invest in our trade programs, strengthening our connection with our consumers through commercial platforms to further enhance the Presidente brand in the Dominican Republic. In Panama, we keep investing in our main brands, Atlas Golden Light, by creating experiences through proprietary events. We also continue developing our premiumization strategy in the region by investing in our brands, Corona, Stella Artois, and Budweiser, through a customized execution both for the on-premise and off-premise channels.
It is important to point out that premium accounts for less than 5% of the beer industry volume in CAC, representing a great opportunity for the future. I'd like to take this occasion to say that we're very excited about our business development and strong volume performance in Central America and Caribbean, reinforcing our positive outlook for the region moving forward. Switching now to Latin America South. Net revenue in Latin America South grew organically by 21.8% in the quarter, with net revenue per hectoliter increasing 30.3%. Volume was down 7.3%, mostly driven by Argentina, where volume declined by low double digits as a consequence of a challenging macro environment. In the full year, top line was up by 21.5%, with net revenue per hectoliter increasing 22.1% and volume was down 0.8%.
EBITDA for the quarter was up 38.9% with margin expansion of 700 basis points to 61.4%. In the full year, the EBITDA reached BRL 4.9 billion with margin expansion of 310 basis points to 45.5%. Cash COGS per hectoliter in the quarter went up 9.1%, mostly driven by favorable effects, while cash FCNA increased by 16.8%. In the full year, cash COGS per hectoliter and cash FCNA were below inflation, increasing 10.8% and 22.2% respectively. Despite the macroeconomic volatility throughout the region, we remained focused on what we can control in our business and had positive development. In Argentina, we maintained the strategy of differentiating the core brands Quilmes, our classic lager, and Brahma, our easy drinking lager.
In addition, we launched the Brahma 269 ml easy can, a product for the summer season, reinforcing our single serve strategy. Regarding the core plus segment, Budweiser continued to embrace the music platform. BUDX hosted the main parties in the quarter, sponsoring several DJs. We also launched a limited edition IPA from this origin, which was presented for the first time in the most important gastronomic festival in Mendoza. Our premiumization strategy has also shown promising results in LAS with our premium portfolio outpacing the industry across all countries in which we operate. Looking ahead at 2019, it will be a divided year for Argentina. In the first half, consumer environment will be challenging, but costs will not be significantly impacted by effects due to our 12-month rolling hedge policy.
In the second half, we will face FX headwinds resetting our 12-month hedging policy and the significant devaluation of the peso starting in May 2019. At this point, we believe consumer environment is likely to be in a better shape. Going forward, while cautious with Argentina in the short term, we have positive medium- to long-term perspective in the country and remain confident in our ability to deliver solid top line and EBITDA in the whole region, supported by strong brands. Turning now to Canada. In the fourth quarter, top line in Canada was down 2.2%, a combination of net revenue per hectoliter increase of 1.5% and a volume decline of 3.6%, which was mostly driven by a slowdown in the beer industry.
In the full year, top line was down 0.9%, which is explained by volume decline of 1.9% and a net revenue per hectoliter growth of 1%. EBITDA reached BRL 575 million, which is 3.4% lower than in the fourth quarter of 2017. In the full year, EBITDA was down by 8.1% to BRL 2.2 billion with margin contraction of 260 basis points. In the quarter, cash COGS per hectoliter grew 1.4%, mainly due to higher commodity prices, especially aluminum. In the full year, cash COGS per hectoliter increased 9.6%. Cash FCNA declined by 2.5% in the quarter, driven by lower administrative costs that benefited from savings initiatives and lower variable compensation accruals.
In the full year, cash FCNA declined 2%. Despite industry challenges, we had good achievements with our portfolio during the quarter. In the core segment, Bud Light kept its momentum, supported by strong commercial and trade activations, and Michelob Ultra has continued its fast start, accelerating growth in the quarter. In the premium segment, Stella Artois and Corona volume ramped up, enabling us to sustain our leadership position in the country. Moreover, the craft portfolio continued to perform well, growing by double digits, already accounting for approximately 5% of our beer volume in the country. Now back to consolidated figures below EBITDA. In the fourth quarter, our net financial result totaled an expense of BRL 1.6 billion, 29.8% higher than in Q4 2017.
Main items in the financial expense in the quarter were, first, interest income of BRL 162 million driven by our cash balance. Second, interest expense of BRL 345 million that also included interest income in connection with the Brazilian tax regularization program, as well as non-cash accrual of approximately BRL 60 million related to the put option associated to our investment in the Dominican Republic business. Third, BRL 586 million of losses on derivative instruments, which were up year-over-year, explained by equity swap losses and the increasing of carry cost of FX hedges linked to our COGS and CapEx exposure in Argentina. Fourth, losses on non-derivative instruments in an amount of BRL 360 million reais, mainly related to an adjustment in the fair value of the put option in the Dominican Republic.
Fifth, taxes on financial transactions on the amount of BRL 103 million. Six, BRL 265 million of other financial expenses, partially explained by intercompany transactions. Seven, BRL 179 million of exceptional financial expenses related to non-cash expenses due to foreign exchange variations on intercompany loans. Finally, eight, BRL 67 million of financial income related to non-cash incomes resulting from the adoption of hyperinflation accounts in Argentina. The normalized effective tax rate was 24.6% in the quarter, lower than in Q4 2017. In the full year, the normalized effective tax rate was 13.6% versus 17.7% in the full year of 2017.
Cash generated from operating activities in Q4 2018 was BRL 8.8 billion, which is 1.3% lower than last year. In the full year, the cash generated from operating activities was BRL 17.9 billion, which is 0.2% higher than 2017. CapEx reached BRL 1.4 billion in the quarter and BRL 3.6 billion in the full year, increasing 11.5% versus the full year of 2017. Finally, during 2018, we announced approximately BRL 8.6 billion to equity holders in dividends, BRL 7.5 billion of which related to 2018 net profit, and BRL 1.1 billion related to 2017 net profit. Thank you very much.
Bernardo will now share some initiatives and thoughts on the Brazilian market before going to Q&A.
Thank you, Fernando. Hello, everyone. As mentioned by Fernando, during this fourth quarter, we saw success from many of our initiatives, with highlights for innovation and continued premiumization. Before detailing the fourth quarter, let's recap how was 2018 in Brazil, which was a year marked by external volatility. In the first four months, we had a tough industry affected by bad weather across the country in an earlier carnival. The good consumption momentum of June and July were offset by the trucker strike in May. From August to October, we had a price increase and the uncertainty around election, which led to a challenged consumption environment. This fourth quarter was a divided quarter. In October, the industry was still impacted by low consumer confidence. In November and December, we started to see some better trends.
To illustrate that, the better segment that had peaked, it started to reduce its share of the industry throughout the quarter, and also the industry was gradually reducing its declining pace. As a result, in this quarter, our Ambev Brazil volume declined 2.1%, which was better than the industry. In the full year, our market share declined 0.4 percentage points after 0.6 percentage points gain in 2017 according to our estimates. Now, let's talk about this year's performance. We made structural investments in our portfolio with innovation in new liquids and new packages. As owners, we always focus on sustainable value creation. As we've been saying, we are leaving this crisis in Brazil in a much better shape than we got in and ready to fully benefit from the economic recovery going forward. Starting with the premium segment.
Premiumization is a continuous trend, and it's always important to reinforce that our strength in the segment is a great portfolio of brands, combining global and domestic brands. We are certain that the premium market is a portfolio gain, as you can see in many mature markets, and that we are in a very strong competitive position to continue to gain share in the segment. Each of our premium brands maintain its own territory, brand position and price point, reaching different consumers and occasions. Our premium portfolio combined is growing in a solid way and is gaining share in the past several months. Our global brands comprise of Budweiser, Stella, and Corona grew more than 35% in the quarter, with robust expansion of our client base. In the full year, the growth represents way more than 1 million hectoliters.
Budweiser is our largest global brand and the leading trade up alternative for consumers entering in the premium segment. Budweiser is an easy drinking lager which stands for authenticity and inspires people to follow their own values. It has been part of the pop culture worldwide, exploring the nightlife, rock, pop concerts, and great moments of consumers' lives, and it continues to grow double-digit quarter after quarter. Stella Artois is the reference of premium beer quality in Brazil. A classic Belgian lager with distinctive taste that experienced accelerated growth from the second semester on. In 2018, we expanded the brand presence in gastronomic and cultural events, with highlights of Bar Stella Artois, a proprietary event successfully deployed during this quarter in Rio de Janeiro, one of the main cities for Stella in Brazil.
Stella Artois volume grew more than 50% in the fourth quarter. This amazing result was also supported by the expansion of new pack formats, such as the sharing size bottles and the new cans that offer to Stella Black consumers new options to take Stella in different occasions and venues. Corona is a jewel of our global brands portfolio, a brand that invites to disconnect from routine and reconnect with our essential nature. After a few years of careful introduction in Brazil, it is now ready to leave its potential, and in the fourth quarter, more than double its volume. Corona has an unmatchable live ritual, and it's part of the International Surf Community sponsoring the World Surf League. Since this quarter, we're also proudly supporting our Brazilian world champion, Gabriel Medina.
Corona is strongly connected to the beach, surrounded by the ocean, and has teamed with Parley for the Oceans to clean 20 Brazilian beaches in 2019. Since Brazilians are also proud of our traditions and values, our premium portfolio is also structured by the domestic brands, Original and Serra Malte. Our domestic premium portfolio also had important results in the quarter, with Serra Malte growing more than 50%, mainly driven by recently launched cans. Now, let's talk about the core segment.
Brahma, our classic lager beer, continues to grow way above the industry quarter after quarter, reinforcing the brand's beer expertise across all consumers touch points, such as, first, a complete portfolio of seven different liquids with united quality and tradition that go from Brahma Chopp, the loved best-selling classic lager, to Brahma Extra, a pure malt alternative, up to Chopp Brahma, the best experience with draft beer. Second, Brahma's quality message in communication through activations and brand experience. The brand had a strong commercial plan and calendar activations in 2018. Japanese and soccer events were boosted by FIFA World Cup in the first semester, a major occasion and key selling moment for Brahma.
In addition, Brahma 130 years celebration campaign in the second half of 2018 reinforced the brand's tradition and Brahma's beer knowledge, while interacting real-time with consumers, increasing even further the brand relevance. Now moving to Skol. Our main highlight of the year were the line extensions of Skol. Now I will take time to tell you about the journey of a single liquid that goes down well to becoming a family of liquids that go down well. Launched nationally in the end of third quarter, Skol Hops opened the way to new easy drinking territories. Skol Hops is inspired by the IPA beers. It is an innovative beer brewed with exclusive aromatic hops that provide a unique combination of lightness, freshness, and slightly bitter flavor. It provides relevant drink credentials to the Skol brand.
With summer approaching, easy drinking brands become more evident in the market, and so we invested in the new modern visual brand identity of Skol, highlighting its liquid, aggregating more quality perception to the brand. The Skol brand communication in the fourth quarter was, "The wheel never stops turning," not only in the reference of the new visual brand identity, but also preparing the market for another Skol innovation, the Skol Puro Malte. Skol Puro Malte is a pure malt beer which maintains the unique lightness associated with Skol brand and also bring the signature flavor of a pure malt beer. It's a 100% natural process with no additives and no preserving agents, like all of our beers. The distinct balance between drinkability and flavor is a result of years of research and development. The result is a pioneer easy drinking pure malt beer.
Skol Puro Malte is the only pure malt beer that really goes down round. Early results of the launch are very, very promising. I will now spend some time to talk about the smart affordability initiatives. To tackle affordability in the core segment, we have developed in the past several initiatives related to packaging, such as the 1-liter bottle, the 300 ml RGB, and more recently, the 18-can pack. We are already boosting these affordable packs to make them available to all around the country, with price accessible to every consumer in the brands they like most. When it comes to the value segment, it is always important to highlight that although the segment is somewhat relevant in terms of volume, its share of the industry profit pool is insignificant.
It's also important to remind that it is a segment marked by the unimportance of brand equity, and we believe that when disposable income begins to improve, consumers will trade up. We have seen that happening in other markets in the world. By the way, we've been seeing a contraction of the value segment in the short term as the economy shows signs of recovery. When it comes to value segment brands, our strategy is to launch brands with regional connection, but always looking to healthy margins, as we did with Nossa, cassava-based beer launched in the third quarter that already posted strong growth in Pernambuco, reaching five percentage points of market share in the state. Following this successful initiative, we launched in December the beer Magnífica in the state of Maranhão.
Magnífica replicates the same successful strategy and is also brewed with cassava from local farmers and connects with local culture while delivering affordability to consumers. Regarding our strategy to shape at home and boost out of home, on the on-premise side, Passinho on Bez is one of the largest e-commerce in the country and has reached approximately 100,000 clients. On the off-trade channel, we are doing several initiatives guided by the idea that consumers should always be able to have our products close, cold, and at the right price. We've been putting great efforts to assure a high service level both in the on-premise and the off-premise. We have been stepping up our go-to-market across the country via several different initiatives, always focused on excellence in client service.
Regarding my division, we continue to invest in the premiumization with brands such as Lipton, H2OH, Do Bem, Tônica, and Gatorade. Premium accounts for more than 13% of our total volume. We also continue to do important investments in our main brand, Guaraná Antarctica. To conclude, it's important to highlight how we evolved on sustainability in 2018. Sustainability is an important platform to pursue the dream of building a better world and also enhance Ambev's reputation. We already took some relevant steps towards these achievements. We completed the test phase of the first Volkswagen electric truck, powered 100% by clean energy, which was integrated into the fleet that serves our brewery. Our plan is to have 1,600 trucks by 2023.
In the water pillar, there is also AMA, our mineral water, which 100% of its profit goes to projects that facilitate the access to drinking water in the semi-arid region of Brazil. AMA has just reached the mark of BRL 3 million converted to this social cause, benefiting 26,000 people. Another highlight is our program, VOA, created to help NGOs to optimize their processes, budgets, and also manage people and careers. We are proud to help by doing what we do best. The project has impacted socially over 2 million people with 185 NGOs and 200 company volunteers. Finally, we also highlight the 100+ Accelerator, which focus on boosting startups that develop solutions to foster sustainability. Only in Brazil, we had more than 400 projects interested in being part of it. Let's talk about the outlook for 2019.
In the past few years, we've implemented transformation initiatives in our business, which put us in a strong position to compete in each of the segments of the Brazilian beer market and to fully benefit from the rebound of the economy. We see plenty of opportunities ahead of us, and we are confident that we have a strong portfolio to capitalize on such opportunities. We have a solid premium portfolio and strongly believe in the portfolio gain strategy. We will keep investing and increasing it. For the core segment, we have the best-selling, strong, loved brands that we will continue to innovate and renovate. We will also continue to deliver smart affordability and play regionally with healthy margin. Finally, we are optimistic about Brazil this year, confident in our strategy. The initial signs of the year show we are in the right path.
We can now move to the Q&A. Thank you.
We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Antonio Gonzalez with Credit Suisse. Please go ahead with your question.
Hello, Bernardo and Fernando. Thank you for taking my question. Just two quick ones, please. The first one is, Brito at ABI's conference call, gave a pretty detailed presentation on the high end, and, he qualified it as the single largest opportunity for the company in the next few years. I just wanted to ask, even if you cannot quantify at the Ambev level, just conceptually, do you see this as your largest opportunity as well? Or, because obviously we've seen a down trading from mainstream to value and the Brazilian industry, arguably is in a different stage compared to the rest of the ABI portfolio.
I just wanted to ask if you can mention qualitatively whether you see a more balanced growth, or more skewed versus premium or mainstream in the very specific case of Brazil. Secondly, Bernardo, you seem very bullish about innovation at Skol, right? This is perhaps the second iteration, the pure malt variant. I wanted to ask if you have an early reading of how much is genuine growth, how much is cannibalization of the mother brand, and is the mother brand starting to grow, sort of as a halo effect from the line extensions that you are putting in the market? Thank you.
Thanks, Antonio, for the question. I think just one in premium, we really think that premium will grow in the future in Brazil. It has been growing even with the crisis, and we've been gaining share in this segment in the past several months. It's a strong portfolio brand that meets multiple consumer needs and occasions. There isn't a market in the world that the premium segment is dominated by a single brand. It's a portfolio strategy, and it's a portfolio game. As we said, I mean, we're in, I mean, very good shape to win this game. By the way, again, we are gaining share in the last several months with this portfolio of international brands and domestic brands.
I mean, for the premium segment overall, there's a strong preference for premium beers in Brazil. The segment is still not growing at the pace that we've seen compared to the other markets. Just to give an example, in Paraguay, the weight of the segment is 20%. In Brazil, it's around 10 plus. With the rebound of the economy, for sure, the premium segment, as far as we're reading, will grow. I think that the execution and the go-to-market and excellence in how to execute better our brands in the trade, I mean, have been evolving a lot. Not only with the message of the brands that I mentioned in my speech, but in the way that we build those brands in the market.
Yes, we think that the premium segment will continue to grow and in a faster pace in Brazil. Yes, we think that we continue to gain share in the segment because it's a portfolio game. You can check in all the information. It's very hard for one single brand in the premium segment in a mature market to have more than 15-17% of the market. So it's a portfolio game, and we're building a portfolio in stages. I mean, seeing the brand Corona in the past, in the last three years, and then we go to Stella and then Budweiser was there to really win this game via a portfolio approach. The second question is linked to the Skol family.
I think it was very, very important for the Skol, or really the Brahma, to bring, I would say, all the beer knowledge to the brand. We'll start to talk even more about the Skol family. Then based on all the research that we've done, not only Skol Hops, but Skol Puro Malte is like creatives. Not only helps the mother brand, in terms of equity, but really help us to expand the industry, and to gain share with Skol. Again, the initial signs that we have, they're encouraging for Skol Puro Malte, but as I said in my speech, are promising. That's what I can say to you that I could say to you. It would be a family game for Skol as well that was with Brahma, in the past.
I think that all the research that we have shows that we are in the right path with this approach.
All right. Thank you so much, Fernando.
Thanks, Antoine.
Our next question comes from Luca Cipiccia with Goldman Sachs. Please go ahead.
Hi. Good morning, Fernando Tenenbaum, Bernardo Paiva. Thanks for taking my question. I actually wanted to ask about the guidance. I think the wording and the structure have changed a little bit over the last few years, you know, one year from the other. I think this time around, I was a little surprised that even a lot of the consideration that you made earlier about, you know, the fourth quarter having improved sequentially in November and December, the relatively comfortable comps that you're gonna face in Q1, and to some extent also in the second quarter, you know, the macro environment in Brazil getting better, you know, some of the qualitative comments that you made, you didn't really mention or commented much about, you know, the top line that you expect in 2019.
I don't expect you to do that now, but I was wondering if you could maybe elaborate a little bit more and explain why that is the case. Also more generally, do you expect the industry to grow? You know, at least even, if you could make some comments on that point. Also on the guidance, I think your message is that EBITDA growth should be faster than in 2018. I would assume that refers to the comparable of organic EBITDA growth that we had in 2018 of 9.4%. Just wanna confirm that that's the right way to interpret the guidance. 2019 organically should grow for more than 9.4% that it did in 2018.
That would be my questions. Thank you.
Hi, Luca. I'm gonna start with the second one. Just to clarify, the EBITDA growth should be for Brazil. That should be faster than 2018. We are not giving any guidance. We are just providing an outlook. The only guidance that we're providing is the guidance on cost of goods sold. That should be growing for Brazil, should be growing mid-teens% for next year. On the outlook, what we are saying, this is not a guidance, is that we are optimistic about Brazil. We are excited about what we've been seeing so far, but we cannot say much more than that. Luca, I think that. Thanks for the question.
I mean, your question about the fourth quarter and some of the comments about the fourth quarter, what we have been saying is that we've been doing structural change in our evolution in our business in the last years during the crisis to be ready to fully benefit when the economy of the country, Brazil rebounds. What I said is that, I mean, the fourth quarter was a kind of mixed feelings. October was a tough month in terms of the industry. I mean, the economic environment was not good and the industry was very bad. After the election, we started to see gradually a better, I would say, industry and a better consumer confidence. That's why it was a mixed quarter.
This is exactly what I said to you. Another short-term sign that we saw in November and December, we saw the value segment that had peaked. That was a big headline for us because we know our participation in the value segment is not relevant. I mean, we are doing lots of things and new brands like Nossa and the other things, but still below our fair share. The market, the value segment has peaked, but in the short term it started to contract. That's another sign that the economy, at least in the fourth quarter, was better in November and the end of the year. That is just a quick follow-up.
I would assume that trajectory should have continued in 2019. I mean, we only have two months into the year, but it's already something. I wouldn't think there's anything to suggest that those trends would have inverted or if they did, that would be somewhat surprising. Is that correct? What I said in my speech, Luca, is that the initial signs of 2019 show that we're on the right path. That's what to consider. Just repeating what I said in my speech. All right. Thank you. Thank you very much. Thank you.
The next question comes from Thiago Duarte with BTG. Please go ahead.
Hi. Good afternoon, everybody. Thanks for the question. Yeah, two questions on my side. First, I would like to go back to the discussion on premiumization. It's clear from the ABI call and even from your initial remarks, Bernardo, that it looks like I believe that you guys are doubling down on the strategy even more than you used to, which was a lot already. If you could please elaborate a little bit on how we should think of premiumization in the numbers.
I mean, you look at the quarter, what we saw in Beer Brazil, for instance, even though it looks like your premium portfolio grew even faster than it was growing in the previous quarter, we still saw revenue per hectoliter growing, somewhat in line with the general beer inflation we've been seeing around, right? So if you could elaborate a little bit more on why net revenue has failed to capture some of that, or what were the effects that are offsetting what we believe is the positive impact from premiumization in your average pricing. I think that would be very helpful. The second question is regarding government grants. ABI in their release, they said something about the phasing of the government grants.
If you look in Brazil, we saw that as a percentage of revenues going down substantially in the fourth quarter, particularly in the non-alcoholic segment. Just if you could guide us through a little bit of where we should think of that number going forward, if it was something specific for the fourth quarter. Because actually, with the growth of brands like Nossa and Magnífica, I would expect the government grants to start growing again as a percentage of revenue. It would be nice to hear from that as well. Thank you.
Hi, Thiago. This is Fernando. Thanks for your question. Let me start by the last one, the government grants. At the end of the day, the government grants they are a function of volume. Since volume was down in the quarter, this is a headwind, if you could say so, in government grants, and it's also on your volume mix, depends on the state. I don't think there is any structural change here. It's much more a function of volume mix, and then actually overall volume. You mentioned specifically Nossa and Magnífica. It's fair to say I think these brands they carry a very healthy margin on the value segment. I wouldn't boil all that down to government grants.
I think they have much more than that. I think since we work with the local communities, the cost of goods sold, the liquid is actually cheaper. Since you have a much more local marketing and then selling expenses, you end up costing less. We focus on the most profitable packages, mostly the 600 ml, and this helps a lot profitability. I wouldn't be thinking that it's all to do with government grants, but there is a lot of other factors that impact the profitability, and actually sometimes they're even more relevant. On your question on premiumization on net revenue, there is an effect. The problem is that sometimes, given package mix and other things, you end up not seeing that very clearly.
It's definitely, and then we're not breaking down to the outer world, but I can say that definitely there is a benefit both on top line and in margins. I think, Duarte, the trend is saying a lot. Now, if the economy of Brazil depends on the region, I mean, we could have or everyone could have overall rebounds. The trade up will happen.
I would say if the last 3-4 years, if the economy were better, for sure, based on every mature market that we know, evolution, many markets, the weight of the premium segment would be higher. If you think that Brazil will be in a better shape in terms of the macroeconomic, I mean, CPI's or whatever, the trade will happen, based on all the markets that we know. We always know as well that's a portfolio game. That's why I have been building a portfolio in stage to be the right way in the last years. It's not a one-trick pony winning, I would say, plan. It's a portfolio one.
Then we will see a trade drop as well, based on what I saw in other markets from value to core. By the way, in the short term, we saw a contraction in the value segment. We should think that the economy of Brazil will be in a better shape. As we have been saying, I mean, to you a lot and I mean, to everyone, we are in a much better shape in the portfolio as a company, that like it compared to what years ago, to fully benefit of that rebound of the economy.
Thank you. Very helpful. Just to follow up on Fernando's comments on the tax grants and specifically for Nossa and Magnífica, I appreciate the comments that you made on the cost and the profitability of the presentations that you're using and so on. Would you say it's fair to say that the amount of tax grant as a percentage of revenues for these particular brands that you're launching in the value segment and so on, it's still higher than the rest of the portfolio? I think it's fair to say that, or am I wrong?
We don't go into these details, Thiago. We don't disclose to the external world. As I mentioned, it's not only tax incentives, there are a lot of other components that make the case for these brands to be, at the same time affordable and quite profitable to us. It's kind of a win-win-win. You help the community, you deliver an affordable product to the consumer, and you also have a very healthy margin. All the link of the local culture is very important to us as well.
I mean, the regional approach have been structuring our marketing to be more regional as well with regional structures more digital, and I think that in the end is a good thing for the SG&A, the expense that we do in the marketing connect much better with the local people there. It's much more than an affordable product. It's that as well, but it's really built a brand with a regional emotional link with the people in those specific regions.
Appreciate. Thank you both.
Thank you.
Our next question comes from Daniela Cachich with Bank of America. Please go ahead with your question.
Hi. Thank you for taking my question. Actually, my first question is regarding the guidance on EBITDA acceleration in the business operations. If you could just elaborate a little bit further on the drivers for this acceleration? Should it be pricing or what is the influence of this acceleration? And on the last results, actually, I wanted to understand a little bit better on the strong results there. What was the hedge effects on the quarter, and how can we expect these effects coming in the next quarters? Also, I don't know if you can disclose that, but what was the effects on your COGS for the quarter? Finally, if you could just answer a third one and quick one.
Just regarding the strong decline on SG&A in Brazil, could you just explain what were the main drivers of this decline in Q4 and if they are sustainable? Thank you.
Hi, Daniela. Fernando here. You asked me to elaborate a little bit more in terms of our guidance to accelerate the Brazil EBITDA growth compared to this year. We don't want to go too much into details because I think we are seeing EBITDA at the end of the day. Probably what we are trying to look is probably some sort of view on margins. What I can say is that whenever I look at individual lines in our income statements, there are always opportunities to be more efficient, to dilute fixed costs with volume, to improve profits and as a consequence, improve margins. Of course, there is always effects of commodity volatility during quarters, years, which might make such improvement harder or easier on a given year.
On top of what we've been doing, there are incremental opportunities to our business. One good example is serving more remote areas that could come with a very good additional margin, but not necessarily the same margin levels. As long as they also help profitability and help us to expand in those industry, bring incremental profits, we start also exploring it. My EBITDA growth is gonna be a combination of all these different factors, going to 2019. As a summary, I think we still have opportunities to grow margin, but not necessarily we're gonna be focusing on a specific number. Above all, we are committed to consistent EBITDA growth. I think definitely we can achieve that in 2019.
More important, the thing about accelerating EBITDA growth is not a guidance, but it's something that we always strive to accomplish year-over-year. On the hedge effect, I think it was important to give some guidance, especially because in the fourth quarter we saw a meaningful increase in the costs, and this was down to commodities going up, specifically aluminum and barley. What we had in the other prior quarters in Brazil, where FX was also a huge tailwind, didn't happen because FX was a little help, but almost flattish. When we go into next year, I think it was important to give a guidance to set the right expectations and then expect our costs throughout the year for Brazil as a whole to grow by mid-teens%.
Okay, thanks. Just on the, actually, the cost and the hedge effect, I was mentioning about LAS operations. Just to understand there, what was the impact?
Okay. On LAS operations, our hedging is always a rolling twelve-month hedge. If you look, if you want to understand what are the costs for a given year, you need to look twelve months back and see what the currency was. Since the depreciation in Argentina happened in May 2018, you expect that until May, I have a much better cost of goods sold than after May. I think that's the message. You saw a lot of margin expansion in Argentina throughout the fourth quarter. This has a lot to do that my cost of goods sold is still one year before, while on the top line, we have the benefit of inflation, which also increased prices, but your costs didn't follow suit.
Eventually, they will follow suit with a year delay. For 2019, you could expect a better FX in the first half until more or less May. Then throughout the second half of the year, you should expect a tougher FX. This is a consequence of our rolling twelve-month hedging policy.
That's perfect. Thank you.
Our next question comes from Robert Ottenstein with Evercore. Please go ahead with your question.
Great. Thank you very much. I wanna circle back to Skol and the challenge which I'm getting from talking to some of the players down in Brazil and throughout the supply chain is that Heineken's actually been doing a very good job at a kind of core plus level with brands like Amstel and Eisenbahn. The question is kinda three part on Skol. One, the brand health of the brand, how are the brand health indicators? Two, I know you're seeing some good signs from spreading out the brand a little bit, that you think it's got broad shoulders.
How do we have comfort that that's not gonna be a, at the end of the day, dilutive to brand equity? Three, what about bringing in a brand like Beck's if it appears that there is a strong interest in Brazil for you know more European type beers? Thank you very much.
Robert, very good question. I think let's talk a little bit about the core and core plus segment. I think that the brand that really goes to the core and core plus with more liquid and so on initially was Brahma. Brahma is Brahma Extra. That has been growing a lot. Brahma is a huge success, growing quarter after quarter the last three years. Brahma really is a big winning brand. I would say in the market in the core core plus segment. For specifically the core plus, we have been growing a lot with Bohemia. Bohemia is really, I mean, it's amazing the kind of growth that I've been having with this brand. It's very important to highlight that.
We can, I mean, I can expand a little bit about Skol. What we saw, I mean, the brand power, I mean, if you have all the indications from your world brands, the leading brand in Brazil in terms of brand power, it is Skol. Second is Brahma. Almost, I mean, 50% of the brand power of those brands, you have the third one in the market. I think that. Skol is the leader brand on that. We thought that was important to bring the concept of a family of beers that goes down well for Skol, to bring more attributes of beer knowledge for this brand because people are very emotionally linked to this brand. It's the leading brand in Brazil with an amazing brand power.
That's what we have been doing. Why we're launching Skol Hops first as a premium? Not exactly because of the volume, the good volume, it's the size of Brahma Extra, but because Skol Hops really bring all the beer knowledge. I mean, including won a prize of the best hop lager in a liquid that's completely different. It's fresh, it's light, but with this kind of slightly bitter flavor that the aromatic hops bring. It was very, very good. When we researched that, Skol Hops helped the mother brand, the equity of the mother brand, and this happened. Then after that, we saw opportunity in the Brazilian markets to launch the only pure malt beer really with a drinkable liquid.
A drinkable liquid, but still with the signature of a pure malt beer. It's not easy to do. I mean, that's why all the pure malt beers in the market, or they are bitter, or they have a kind of, I know, a flavor that not goes down well. We have a patent process to really brew a liquid, that really fresh, really light in this sense, drinkable, but with this signature. We tested a lot. We learned in terms of the liquid design a lot in the last years. All the research that we've done, that's not only volume accretive for the brand, expand the industry, gain share for the brand, and help the mother brand, like the variants of Brahma did with Brahma.
In my reading, based on the research and the initial, I'll say, results that we have, for the family of Skol and for Skol Puro Malte, we're very excited about this concept of the family of beer that goes down well, and excited about the launch of Skol Puro Malte and the latest variant that just launched in the market. By the way, the carnival of this year will be a great opportunity for the Brazilians to try Skol Puro Malte. That's really amazing liquid. If you come here to Brazil, I invite you to drink, and you understand what I'm saying. Drinkable, light, but with the signature in terms of the flavor of a pure malt. The only one in the market that has that.
Thank you very much.
Yeah. Thank you.
Okay. Thank you.
Our next question comes from Alexander Robarts with Citi. Please go ahead with your question.
Hi, everybody. Thanks a lot for taking the question. It really is just around your big picture thoughts on innovation. You know, we've seen now in the last six months four launches, right, in Beer Brazil, and a couple responding to the value segment growth, a couple to this flavor malt hops concept that you're just describing. It's an unprecedented amount of innovation when we think about the history of your company. The question is twofold. Are we kind of at the point where you're feeling comfortable with the portfolio? Are we in midstream of a spurt of innovation?
Just kind of getting your sense on the kind of phasing of this year. Then the benefits clearly you're describing to us, you know, volume uplift, consumer preference and alignment and such. What about if you could comment on the cost side or the expense cost side of this innovation? You know, you've told us in the past that there's room for efficiencies in OpEx. I would assume these small batch type of productions in the northern states are costlier, more malt and more hops are costlier than rice and corn.
I guess just do you feel comfortable on the cost side and expense side that there is not expected to be an incremental change in this year in Beer Brazil? Any comments around that would be great. Thanks so much.
Alex, thanks for the question. Yes, yes. I mean go back and I mean talk again about the long-term plan that we have and the pillars of the top line growth and EBITDA growth that we in terms of growing volumes and revenue. First thing is to accelerate things. Second one being talked is really the core. The third one is driving affordability. Innovation is part of all of those things. It's part of the DNA of the company. We have been investing a lot, not only in process, but I mean training our team, investments in terms of trying to find the best liquids. For instance, 2 years ago, we launched a new innovation center in Rio de Janeiro.
That is an amazing place with technology, with the best brew masters of the world, really to test liquids. We have been working on that in the last three years, so big time. Sometimes the process is not so, you know, two plus two is four. You know, sometimes you find a liquid in there that's not the perfect one because you are talking about big brands. You need to really, I mean, do it right. You know, sometimes, I mean, we could launch Skol Puro Malte in July, but we thought that was important to go to Skol Hops first to bring this knowledge, the quality, I mean, knowledge of beer that Skol is a great beer and use it.
Therefore, let's go to Skol Hops, even knowing that the volume will not be amazing for Skol because, you know, it's a hop lager. It's slightly bitter, drinkable. To really assure that we would launch Skol Hops during the summer, during the carnival. That's what we're doing. We don't manage the innovation process that we have, I mean, quarter by quarter to come here in the call and, I mean, pace ourselves and all the analysts. I mean, we think long term, and we really make the calls to do the right things. Yeah, maybe, I mean, given all of the things that have been feeding in all of those years, last year was a year that lots of innovation were ready to go.
With the beer route to market our execution, system here to deal with them, we are doing very well. I think that will always be part of our DNA. We continue to innovate for the future. Yeah, I'm very happy with the portfolio that we have. Premium, it's amazing, it's growing, gaining share, is a portfolio gain, you know. We continue to gain share. I can see not only the numbers of market share, but I can see when I go to the street, talk to people. I mean, people will drink premium brands in different occasions, and the portfolio is there. I think Robert's talk about that, maybe.
You know, we are studying because the portfolio is really good to offer that. Then you have the two most important brands in Brazil, the brand power that Skol and Brahma, and I think innovation is part of that. The variants are doing well, and they don't have all the initiatives of smarter affordability there. I mean, it's just coming north and the others that could come as well. In terms of the cost of the liquids and stuff like that, I think that we know, I mean, we have this culture of owners to be efficient, really to try to find the money with better process, the technology helping us to really make sure that our cost base is low.
We will never, like we never in the past, compromise the quality of our liquids. Everything starts from the liquid that's in a bottle, in a can. This is, I mean, always been a part, even more a mantra. We have the best liquids in the market, and we will not compromise the quality. I mean, never in terms of cost. We could find the cost elsewhere. Then we have the ZBB, we have all the stuff. Make sure that the liquid is the best liquid. We have the best quality in all of our brands. I'm really confident and happy with the portfolio that we have nowadays.
I mean, pushing the team to continue to innovate because this is a market that will continue to change, and I need to be ready for the next five years. Currently happy with the portfolio.
Very clear. Thank you very much.
Thank you.
Our next question comes from Leonardo Alencar with Bradesco. Please go ahead with your question.
Hi, good morning, and thanks for the opportunity. I also have two questions. The first one is, we have been seeing bottle makers in Brazil reporting that they are at a high capacity utilization. I was just wondering if you have been seeing any sort of restriction of the bottlenecks so far, or if this is a concern for you, if indeed volumes accelerate in the market going forward. The second thing is, if you could bring some more color on Canada. Our volumes decreased 4%. If correct me if I'm wrong, this used to be a fairly stable market, and we saw this big decrease in volume. Just wondering what happened there. If it's something related to cannabis-infused drinks or something like that. Thank you.
Hi, Leonardo Alencar. Thanks for your question. On the first one, on the bottle makers, we have no issues at all. Not only we are seeing no issues from our suppliers, but we also have some of our own bottle plants. Combining both, it's not an issue, and then we are not even hearing anything about it in our operations. On your second question on Canada, I think Canada is a very mature market. It is a very profitable market, but of course, as all mature markets, it has its own challenges. I think what we've been seeing is that similar to other places, it's getting more and more premium, and we are investing a lot behind that.
Our premium strategy is working, but it's even more of a portfolio game than in other less mature markets. You should expect like a consistent growth over time, although it's fair to say that 2018 was not necessarily a great year. On your question about cannabis, it's too early to say. There is a lot of discussions about it, but there is no hard evidence that it's helping, working against or making any meaningful impact on the beer category so far. I think it is still something we have to learn about.
Got it. Just a follow-up on the first question. What percentage of your production you can supply internally for bottles? Do you disclose that?
It's around 50%. 50% of our volume we can supply by our own verticalized facilities.
Perfect. Thank you very much.
This concludes our question and answer session. I'd like to turn the conference back over to Mr. Bernardo Paiva for any closing remarks.
Okay. Thanks for the attention of everyone. Before I finish our call, I'd like to close saying that we are confident, very confident, that we are evolving in a consistent way with our commercial strategy and the innovation pipeline. In Brazil specifically, we are certain that the premium market is a portfolio game, as we said, have been saying a lot, and that we are in a very strong path with the portfolio that we have to continue to gain share in this segment like we have been doing in the past several months. We're also very positive about the rebound of the economy in the country, in Brazil. We have a portfolio of brands in our core that are really, I mean, leading. We have Brahma, Skol, and Antarctica as well, but Brahma and Skol really leading the way.
The innovation behind those brands, Brahma in the past and Skol now, are really proving to be a success. The core segment is even more strong. We have been launching initiatives for the value segment to increase our share of segment. We think that the segment will contract like we saw in the last two or three months, because, I mean, if the economy is doing better, if you think that will, and I think that will, this will be a trigger. The premium will grow and the core will grow, and we'll be in a much better shape than in a to really fully benefit of this rebound of Brazil.
I think that we are exiting this crisis, I mean, the country as a whole, and Ambev in a much better place and shape than exactly what we entered years ago. Ready to fully benefit for the rebound of the economy that everyone here expect in the country. Thank you. Have a great day. Enjoy the rest of your day. Thanks again.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.