Earnings Call: Q1 2016

May 4, 2016

Welcome to the Anheuser Busch InBev First Quarter 2016 Earnings Conference Call and Webcast. Hosting the call today from AB InBev is Mr. Carlos Brito, Chief Executive Officer. To access the slides accompanying today's call, please visit AB InBev's website now at www.ab inbev.com and click on the results and filings center in the Investors tab. Today's webcast will be available for on demand playback later today. At this time, all participants have been placed Some of the information provided during the conference call may contain statements of future expectations and other forward looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks and uncertainties. It is possible that the company's actual results and financial condition may differ, possibly materially from the the anticipated results and financial condition indicated in these forward looking statements. For a discussion of some of the risks and important factors that could affect the firm's future results, seeing Risk Factors in the company's latest annual report on Form 20 F filed with the Securities and Exchange Commission on March 14, 2016. AD InBev assumes no obligation to update or revise any forward looking information provided during the conference call and shall not be liable for any action taken in reliance upon such information. It is now my pleasure to turn the floor over to Mr. Carlos Prieto. Sir, you may begin. Thank you, Jackie, and good morning, good afternoon, everyone, and welcome to our 2016 Q1 results conference call. The Q1 saw a strong performance in Mexico as well as improving volume trends in the U. S. And Europe. However, Brazil faced one of its most challenging quarters in many years due to the weakening macroeconomic conditions in the country and a tough comparable. The industry in China was also soft due to economic headwinds. However, before we get into the detail of the results, I'd like to give you an update on the proposed combination with SABMiller. When we made the initial announcement in November last year, we said we would be proactive in addressing any potential regulatory considerations, and we have made good progress in all 4 of the markets where regulatory clearance is a precondition to making the formal offer to shareholders. We have announced the sale of SABMiller's interest in MillerCoors in the U. S. And in CR Snow in China as well as the disposal of certain of SEB Miller's premium brands and related businesses in Europe, including Peroni and Grocery. Also last week, we announced our decision to divest of SCB Miller's Central and Eastern Europe Business and Brands. Of course, all of those disposals are subject to the closing of the main transaction. In South Africa, we are pleased to have reached an agreement with the government on the public interest conditions to be presented to the Competition Commission and the Competition Tribunal and have also completed a secondary listing of ABI on the Johannesburg Stock Exchange. From a financing perspective, we have essentially completed the prefunding of the transaction following a series of bond issuances in the Q1, allowing us to cancel as of today $55,000,000,000 of the committed senior acquisition facilities put in place prior to the announcement of the transaction. We continue to expect the transaction to close in the second half of this year, and we're working closely with SABMiller team towards this goal. With that, let's now turn to the Q1 results in detail. Total revenue in the quarter grew by 3.1%, with revenue per hectoliter growing by over 5% on a constant geographic basis, driven by our premiumization and revenue management initiatives. Total volumes were down 1.7% with our own beer volumes down 1.4%. Volumes were significantly impacted by results in Brazil, as expected, where our beer volumes fell by 10%, although our volume trends in Brazil in April were significantly better than the Q1. Our global brands continue to perform well despite the macroeconomic challenges in Brazil and China, with revenues growing by 5.9%. EBITDA grew by 2.5% with a marginal decline in EBITDA margin, driven by top line growth, partially offset by the timing of our sales and marketing investments, which will be weighted towards the first half of this year, in line with our guidance. Normalized earnings per share fell to $0.51 being adversely impacted by the swing in the mark to market adjustments related to our share based payment programs and net interest costs related to the prefunding of the SABMiller transaction as well as impact of currency translation. However, despite the weak start to the year, there are a number of positive trends in our business. Our global brands continue to deliver strong revenue growth, driving premiumization of our portfolio. Our business in Mexico has been great, and we're excited about the prospects going forward. In the U. S, industry volumes return to growth, and we're seeing very good volume growth with our above premium brands, but light volume trends are also heading in the right direction. In Brazil, our brands enjoy high consumer preference and the premium category continues to grow. In China, we continue to gain market share and our brands are well positioned in the core plus and above segments, which we believe have the greatest long term growth potential. Our volumes in Europe are growing, driven by our premium brands, and we're gaining share in the majority of our markets. And we're delivering solid results in Canada, South Korea and many of our markets in Latin American South. Let's now look deeper in the results of each of our top markets, starting with the U. S. Industry volumes returned to growth in the Q1 with SDRs up 0.7% based on our estimates. Our own SDRs were down 0.3%, leading to an estimated market share decline of approximately 45 basis points, a 20 bps improvement compared to full year 2015. STWs were down 1.2%, slightly behind STRs as a result of adjustments to inventory levels in the normal course of business. We continue to expect STWs and STRs to converge by year end. Total revenue was flat compared to the same period last year with revenue per hectoliter up 1.3%, helped by our revenue management initiatives. And EBITDA grew by just over 2% with margin expansion of 82 basis points, supported by a strong cost of sales performance and despite the timing of sales and marketing investments, which are weighted towards the first half of the year. Turning to the performance of our brands in the U. S. We believe Bud Light is heading in the right direction, although there's still a lot of work to be done to return the brand to growth. Our volume, share and brand trends are improving and purchase intent is up since the launch of the new Bud Light party campaign at the 2016 Super Bowl. As a result, we saw good improvement in Bud Light volume trends in the quarter with FTRs down just over 1%. The new Bud Light visual brand identity, which was rolled out at the start of April, should help build further momentum. Our Budweiser marketing campaign built around the brand's quality and heritage credentials continues to resonate with consumers, further extending the brand's best trends in over a decade. Budweiser STRs were down low single digits in the quarter, while share was down 25 bps based on our estimates. We have built a strong program for the summer and platforms such as Budd and Burgers are building on last year's success as we continue to work towards stabilizing Budweiser's market share. Our bulk premium brands delivered strong growth in the quarter, gaining approximately 50 bps of market share based on our estimate. This was led by Michelob Ultra, which continued its double digit growth and gained more share than any other beer brand for the Q4 in a row in the U. S. Stella Artois and Goose Island also performed well, and our craft partners and new beer products made good contributions to the segment's growth. Returning industry volumes to growth and stabilizing our market share remain the top priorities for the U. S. And our above premium brands are making significant contribution to this market share growth. Moving now to Mexico. Our Mexican business had a great quarter, driven by a favorable consumer environment and our own commercial initiatives. Our volumes were up 13% in the quarter, benefiting from an earlier Easter holiday and an easy Q1 2015 comparable. Revenue grew by over 16% with revenue per hectoliter growing by 2.7% due to favorable brand mix in our revenue management initiatives. EBITDA grew by over 10%, and our EBITDA margin declined by 237 bps to 43.4% due to the timing of our sales and marketing investments. All of our focus brands continue to perform well. Corona activated campaigns around the brand's 90th birthday celebrations. Victoria continued to drive preference with young adults through its Mexican heritage campaigns and Bud Light, good distribution throughout the country, especially in the North. We'll continue to drive category growth by supporting our brands and creating new and exciting consumption occasions. Turning to Brazil. Brazil had a weak start to the year as anticipated. Our O and B volumes declined by 10%, driven mainly by a challenging macroeconomic environment, which saw consumer disposable income under significant pressure. Familiar Carnival holiday and price increases to mitigate state and federal tax increases also contributed to our weak volume performance. Non beer volumes declined by 3.8% due to industry weakness. Brazil top line declined by 4% with our revenue management initiatives helping to drive an increase in revenue per hectoliter of 6%. Regional competitive dynamics led to some market share loss in the quarter, although our brands remain healthy and we expect the share losses to be short term in nature. The decline in Brazil top line led to an EBITDA decline of 5.8% and a margin contraction of 96 bps to 51.4%. Despite the weak start of the year in Brazil, we remain focused on what we can impact and influence as always. We have good momentum in many areas of the business and a focused set of commercial priorities. Elevating our core brands remains our top priority in Brazil. Our brands Skol, Brahma and Antarctica remain healthy with consumer preference being driven by regional Carnival events and other campaigns and activations. Accelerating premium is a great example of something we can impact and influence despite the weak economy. Volumes of our premium brands, which include our global brands, Budweiser, Corona and Stella Artois, as well as our domestic specialty portfolio, continued to grow double digits. We expect growth in the premium category to continue, and we'll fuel this momentum through our own initiatives. In eared beer, the Skolbeats family is building volume and share, while Brahma 0 has built a strong market share position in the non alcohol beer market. In terms of occasions, we're working hard to shape in home consumption, increasing the penetration of returnable bottles as part of our strategy of driving affordability for our consumers. We're also enhancing the out of home experience by activating key selling occasions and moments. Along with Carnival, we are activating numerous events throughout the country, bringing people together to drive demand and build our brands. This includes activation around the Olympic Games in the Q2, focused on Skol Ultra, our new active lifestyle brand. Just a few more words on our premium and year beer brands. We have seen good growth in this category in the last few years, as you can see from Slide 15. Prior to 2011, our premium portfolio consisted mainly of our domestic specialty brands, such as Bohemia and Original. However, in 2011, we launched Budweiser into the market and the brand was an immediate success. We followed up this launch with increased support for Stella Artois, which had been in the market for a number of years. The launch of Brahma 0 in 2013, Skolbeats in 2014 and Corona in 2015. In the last couple of years, we have also acquired 2 craft brewers, Walls and Colorado, to take advantage of growing consumer interest in the craft segment. So to summarize the situation in Brazil. Brazil is facing a tough macroeconomic environment with continuing pressure on consumer disposal income. However, we remain focused on what we can impact and influence. Our major brands are healthy with consumer preference ahead of their market share, and we have a clear set of commercial priorities to drive our business. Affordability for consumers, especially in today's challenging economy, remains a key focus. In our revenue management and cost efficiency initiatives, we'll continue to play an important role in driving financial results. Our beer volumes in April were significantly better than the Q1, and we're making no change to our full year 2016 guidance for Brazil revenue growth of mid to high single digits. We have always been very positive about the long term future of our business in Brazil, and that has not changed. Moving now to China. China bean industry volumes declined by around 4% in the Q1 due to economic headwinds. Our old volumes were down just over 1% in the quarter versus a tough Q1 last year when our volumes grew by 4 0.7%. We estimate we gained approximately 45 bps of market share in the quarter, reaching a level of 19% market share. We believe the core plus premium and super premium segments have the greatest long term growth potential within the industry. Our brands in these segments represent more than 50% of our total channel volumes and are well positioned with strong brand health metrics. Total revenues in China grew just under 1% with revenue per hectoliter growth of 2.1%, lower than we have reported in recent quarters. This is due to positive brand mix being partly offset by unfavorable regional mix, driven by poor weather and industry weakness, particularly in the south and east of the country. We expect these headwinds to be temporary in nature. China EBITDA increased by 3.8 percent with EBITDA margin expansion of 76 bps to 27%. We believe our strategy of focusing on the winning segments, winning channels and winning geographies will enable us to continue to outperform the industry in terms of both volume and profitability. We explained this strategy in detail during our Investor Seminar in Guangzhou last September. This included our focus on the fastest growing segments, namely the core plus and above segments, the fastest growing channels, including nightlife, high end Chinese restaurants, restaurant bars and e commerce and the fastest growing geographies, particularly those urban centers with a growing middle to upper class. Although the weak industry is likely to persist in the short term, we believe we have built the right strategy for the long term. With that, I'd like to hand it over to Felipe, who will take you through some further detail in our Q1 results. Felipe? Thank you, Bruno. Bruno has already covered our 4 top markets, but I would like to mention some highlights from our other relevant markets. Canada continues to perform well with volumes up almost 1% and a stable market share based on our estimates. Europe had a strong quarter with own beer volumes up 2.5% and revenues up 4.6% driven by our premium brands. Volume growth in France, Italy, Netherlands, Russia, Ukraine and the UK was partially offset by industry weaknesses and some share loss in Belgium and in Germany. Latin America South delivered solid financial results despite pressure on beer volumes, mainly driven by a weak consumer environment. Colon and mixed sales saw good growth, especially in Argentina. Finally, our business in South Korea performed well with low single digit one growth as well as gain in estimated market share. Moving on to below EBIT results, starting with our earnings per share performance. Normalized earnings per share decreased to $0.51 per share from $1.40 per share in the Q1 of last year. As you can see from Slide 20, the underlying Q1 EPS result was flat with the same period of last year, excluding the market to market adjustment linked to the hedging of our share based payment programs, the net cost of the pre funding of the proposed combination with SABMiller as well as the impact of unfavorable currency translation. Net finance costs in the quarter were almost $1,300,000,000 compared to an income of $91,000,000 in the Q1 of last year, a variance of nearly $1,400,000,000 This variance was driven primarily by an unfavorable $138,000,000 mark to market adjustment linked to the hedging of our share based payment programs compared to a gain of $757,000,000 in the Q1 last year, a swing of close to $900,000,000 just there. Net finance costs also includes an increase in net interest expenses of $273,000,000 mainly driven by the net cost of the pre funding of the SAP Miller combination following issuance of bonds in January March 2016. The net cost of this prefunding is estimated at $450,000,000 on a full quarterly basis for which no tax deduction is expected to be reported at this point. Nonrecurring net finance costs were $684,000,000 in the Q1 this year compared to an income of $395,000,000 in the Q1 of last year. These items do not impact normalized EPS but are included within reported profit. This increase in expense was driven by a number of factors shown in detail on Slide 22. The main items are the mark to market adjustment resulting from derivative instruments used to hedge the deferred share instrument related to the combination with Grupo Modelo and the mark to market adjustments related to the FX hedging of the purchase price of the proposed combination with SABMiller. As Pedro mentioned earlier, we have made good progress with the funding of the SABMiller transaction with 3 bond issuances in the Q1. Slide 23 contains a summary of these issuances, which resulted in net proceeds of $621,600,000,000 and an average coupon of 3.2%. These issuances allowed us to cancel $42,500,000,000 of the $75,000,000,000 committed senior facilities by the end of the Q1. We also canceled a further $12,500,000,000 in early April after the Eurobond issuance, bringing the total cancellations to date to $55,000,000,000 Our normalized effective tax rate for the Q1 was 23.2%, up from 18% in the Q1 of 2015. This increase is mainly due to the loss from the hedging of our share based payment programs in the Q1 of 2016 as well as counter mix. Our guidance for the full year 2016 remains in the 22% to 24% range. As a reminder, this guidance continues to exclude the impact of any future gains and losses related to the hedging of our share based payments programs. Our optimal capital structure remains a net debt to EBITDA ratio of around 2x. Our first priority for the use of cash, we always busy invest behind our brands and to take full advantage of the organic growth opportunities in our business. De leveraging to around 2x will be a priority following the combination with S&P Miller. M and A remains a core competency, and we will always be ready to look at opportunities when and if they arise, subject to our strict financial discipline. Subplus cash flow should be returned to shareholders. Our goal is for a dividend to be a growing flow consistent with the non cyclical nature of our business And dividend yield, earnings payout, free cash flow payout, we always remain references in determining the amount of the appropriate dividend payment. And with that, I will hand back to Jackie to begin the Q and A section. Thank you. Jackie, yes, we can start the Q and A session, please. The floor is now open for questions. In the interest of time, we will limit participants to one question and one follow-up. Our first question comes from the line of Trevor Stirling with Bernstein. Hi there, Richard and Felipe. Two questions from my side, please. What is it that gives you the confidence? You've had a soft start to the quarter. You mentioned that April slightly better in Brazil. Let me see the confidence to maintain your full year guidance. Hi, Trevor. I mean, we have to understand Brito here. We have to understand the Q1 in Brazil, as anticipated, would be a tough one because of some tough comps given the Carnival timing, which in Brazil is a key date because it's for most people, it's when the summer ends and the holiday period. So that's key for us. This year was early. That's one. Second one is that we have to implement price increases to mitigate taxes at the federal level and state level and of course inflation. So you have the macro, which is not helping consumers. You have the calendar also not helping a lot. It is true that Easter was earlier, but Carnival is way more important in Brazil than Easter. And you had a price increase. So I mean, if you put all this together, we knew we would have a Q1. April, as we said, way better than the Q1. And we have our strategy, which isn't changed. I mean, the reasons we have to believe and the reasons why we kept the full year guidance on Brazil is that the 5 pillars of our strategy remain unchanged. First one is elevate the core. So we continue to see our brands performing well. We have great campaigns, innovation coming up and the affordability agenda on those brands. We have the premium growing double digits. It's already more than 10% of our volumes coming from 5% or 6% some years ago. And if you look at the preference for those brands, it's still above its market share and again with very good margins and very good top line. Near beer, again, very good margins, accretive, great top line, great margins. Skol Beach Senses plus Spirit, Brahma 0.0. So very incremental and good for the mix. In home, I mean, the whole, again, affordability and again, here, a very important thing about the returnability. So as we're trying to take advantage, if there is one silver lining in the whole macro situation in Brazil and the pressure on consumers and their disposable income is the opportunity we were given to get returnables back into the off trade big time, especially in the big off trade. And that's it's great because it's a very smart choice for consumers in terms of out of pocket. It's a great it's a very good margin play for us. So that's the in home. In the out of home, we continue to invest to improve the on trade experience, building not only the global brands, but all solutions like Skol Draft and entertainment at the Park La Brea at the point of sale. So and then of course, on the cost side, we made some adjustments. Our guys in Brazil are very used to tough environments every now and then. And they saw it early because the Q1 coming and we adjusted the plans, but not anything that would mortgage those 5 initiatives that I just mentioned. So that's why we're confident in keeping the full year guidance on top line. Okay. And my follow-up question, Britta, refers to the U. S. It looks as if the input cost savings in the U. S. More than offsetting increased A and P, but your price mix has also slowed down a little bit sequentially. Are part of those savings and input costs being recycled into slightly higher promotional activity? No. I mean, our promotional activity I mean, when you look at our net revenue per hectoliter growing at 1.3%, that's pretty much in line with what we had prior. There has been some noise, I know, in terms of pricing and discounts in the marketplace. What I can tell you is that despite the noise, our pricing strategy remains unchanged. In other words, the level of discount is in line with historical levels. And but every year, we're always looking for better ways to invest the same envelope of promotional dollars, right? So and 1.3% is what our revenue management or net revenue impact a little bit grew. The other thing is that stellar shipments. We had a slight phasing on Stella shipments. A year plus ago, we had an issue with Stella being frozen because of weather patterns crossing the ocean. And this year, 2015 to 2016, we decided to anticipate some shipments to avoid the harsher part of the winter, which never came by the way, but we didn't know. So Stella STRs for the Q1 is ahead of the STWs, which, of course, impacts the overall number. So those would be the comments on the U. S. Yes. Thank you very much, Peter. Thank you. Our next question comes from the line of Andrea Pistacchi with Citi. Yes, good morning and thank you for taking the questions. The first one is on Brazil, where you've historically wanted to stay in the $67,000,000 to $69,000,000 market share range. Now you ended fiscal 2015, I think, very close to that level. And possibly, you've dipped slightly, slightly below that in Q1. I'm not sure. But the question is, first, what is driving, would you say, this market share loss? Is it any region in particular, any brand in particular? And secondly, about this 67% to 69% range, how important is this to you? And whether in the current environment, how do you think of market share versus profit? And the second question, if I may, is on Europe, where you've seen a significant turnaround in volume growth since 2H last year. What is driving that? Is it corona in your portfolio making a lot of the difference? Or is it also other things? So let me start with Europe. I mean, on Europe, I mean, Andrea, what we did is in a strategic review some 2 years ago, we decided that given consumer trends, given our footprint in terms of brands in countries that we should really pivot more and more towards premium brands and global brands, okay? And that's what we did. So we took money from countries and we reallocated money within segments, within countries, within channels, within brands. And we're now harvesting some of that decisions on the consequence of it. So very happy because Europe was always a place that we saw high margins, but no growth, even the client industry. And we said, okay, how can we make the best out of Europe? And as we started having more global brands, with Budweiser first, Corona second and even the recognition that Stella, Hogarth and Lafe could play more of a Pan European role. We looked at our footprint in Europe, where money was being allocated. We look at margins. We look at consumer trends, segment by segment, region by region, brand by brand and decided to do a big reallocation of money and that is proven to be the right thing. So we're very happy with Europe. We think it's something that's sustainable and it's based on brands, on choices about resource allocation and great people. We also seen some people there, so great leadership. In Brazil, in terms of share, our commitment or our range that we work within remains 67% to 70% as measured by Nielsen. It is true to say that, as we said, our market share was pressured in the Q1 because we had to increase prices to compensate not only for inflation that, on an annual basis, reached more than 10% in March, but also federal and state taxes that were implemented in the last few months. So we had to pass it on to prices plus inflation. So of course, consumers felt that. And because Brazil is a very competitive environment, you can imagine that there was some share repercussion given our decision to increase prices. So that's the thing on share. And as you know, in Brazil, we've always said that. I mean, that's why we have a range for share because we always try to balance like in any other country this equation of market share with profitability, okay, both short and long run. And some years will be more one way, some other years will be more the other way depending on consumers, on the macro, on the competitive environment, But you can be sure that that's our range. There's no change there. Thank you. Thank you. Our next question comes from the line of Sanjit Azhawa with Credit Suisse. Thanks for the question. You just elaborate on your craft acquisition strategy in the U. S? You've made some further acquisitions there recently. How big is craft as a percentage of your U. S. Business? And do you see any further gaps in your portfolio there? Well, I mean, in terms of kraft, I mean, we think we made a lot of progress. The idea that we have on craft is a simple one. I mean, we had the market leading in the U. S. Craft is a growing and very profitable segment. It's one where we are underrepresented. So it's a twofold strategy. 1st, we have crafts of our own, like for example, Choctaw, just to give one example. 2nd, we acquired some, very few, as you think that there are 4,000 craft brewers in the U. S. And we acquired less than 10, if you put it all together. But it's important to have some of those because first, you bring some amazing craft partners to join us and to continue to help our brewers to continue to be to create the very best beers and styles in the marketplace. So that has been great. We have had some connected some amazing craft people from these brands that we got associated with. Plus, they have very strong brands in the regions. So we're very happy to be able to offer our wholesalers options within our own portfolio of brands also for craft. A short top, for example, which is one of our own crafts, gained shares, gained share organically now since February. We put a big effort in terms of going back to its positioning of living life unfiltered. And so we're very happy with our craft development in the U. S. Just a follow-up from Brazil there. Just back to the market share point. You mentioned that you don't expect to continue to see market share losses. Can you just elaborate on what will change there? Well, again, in the Q1, because of the price increase that we had to implement, market share was disturbed because of that. But as in any price increase, what you do afterwards is as in any competitive market, you adjust a little bit here and there. And then you find the optimum point for your brands. And that's one of the reasons why April was way better than the Q1. So with the problems I just described on the 5 pillars in Brazil, be it elevated core premium near beer, in home occasion and out of home occasion. We feel that we have the plans, and we have the necessary resources, and the brands are doing well. And our guys are used to having to replan in tough situations. So that's why we feel confident about keeping the top line guidance for the year despite Q1. Many thanks. Thank you. Our next question comes from the line of Anthony Beccullo with HSBC. Hi there, Brio. How are you? Hi, It's Hans. Hello. Hi. The decision to sort of offer up the European franchises here for possible sale, one thing that sticks out is when you sold the European businesses back in 2009, you kept Russia as a bit of a strategic piece to hold on to. Poland sort of is a similar market in the sense that it is a strategic piece. It's a big profit pool. There's high levels of consumption. There's a super premium market there to be had. Why would you have included Poland in that with the other four markets that you're putting up for sale? Well, Tony, as you know, from day 1, we said we'd be very proactive with the regulators from day 1, and that's what we've been doing. So in the U. S, by the divestiture in China, it's the same thing. In Europe, we decided to offer day 1 to be proactive and come with the Peroni and Grocery Mean Time, divestiture and related business. And we follow that with the S and B Miller assets in Central and Eastern Europe, including all 5 countries, Hungary, Romania, Czech, Slovakia and Poland for divestments. These assets include a number of top brands, as you said, in those markets. And we expect to attract considerable interest from potential buyers. So and in line with our ambition to close the overall transaction during the second half of twenty sixteen, as I said before, we made this commitment we've made this commitment in Phase 1 of the European Commission inquiry. So now we expect Commission to review the proposed transaction, including our proposal thoroughly, and we'll maintain an ongoing dialogue with the CAES team to answer their questions and continue to work proactively to address any potential concerns. So again, this is all in the same realm of us being very proactive, and this is exactly within that same context. Is Poland a market that ideally you'd like to hang on to? Again, at this point, Tony, what I can say is that we offer those assets together with Peroni and Roche for disposal. And we expect now the commission, of course, to review our proposals and all in the Phase I environment. And again, we're trying to be very proactive in dealing with regulators and keep an open channel with them. Okay, great. Thank you, Brito. Thank you. Our next question comes from the line of Robert Ottenstein with Evercore ISI. Great. Brito, a couple of questions related to incentive compensation, please. First question, as you look to set the targets for the various zone leaders and how that cascaded down this year, can you talk about any shifts or tweaking of the relative weights between top line measures, whether it's volume, price, market share and more bottom line measures? Any sort of tweaking that you could give us some color on in terms of this year, please? No. Robert, as I have we've said before, our targets are always balanced. We have checks and balances in there. So they are all in the realm of top line, global brands, cash flow, EBITDA targets, so in market share. So those are the targets that we believe are for the big in terms of big ideas for the company, in terms of checks and balances. We have some there that are more top line driven, commercial driven. We have some there that are more financially driven. We believe that's how we've always managed the company. So top line, efficiencies, cash flow, market share, we believe that those are good checks and balances to have. And then as you know, we have a 3 tier system. So those are for the company as a whole. Then you have the BU targets, the business unit targets, which are pretty much a combination of those same targets. And then you have the individual targets, which is what we expect from each individual in the company to work towards those big umbrella targets. So that's how we work. That's the balance we try to achieve. So I mean understood it's always a balance. So no particular tweaking one direction or the other this year? No. I mean it's not this year, but it's fair to say that top line has been growing in terms of importance, top line growth in the past few years, not this year necessarily, but in the past few years. Yes, it's fair to say that. Great. And then as a follow-up, there was an interesting long term incentive program geared towards a $100,000,000,000 target revenue target for 65 top managers, but those below the EBM level. Is there anything analogous to that in terms of long term revenue growth targets for you and the EBM level, please? Yes. Again, we have different incentives in the company, Robert, as you might know. I mean, they're all in the 20 Fs. So you see that we have different incentives. This one is just one of them. We decided to link it to a target that we have internally. There's not a company guidance or anything in terms of 2020 or anything. We have all sorts of targets and dreams that we have for different business units, for different lines of the P and L inside the company. And from time to time, we connect some of those incentives to some of those dreams. So it's something that, again, to your first question, is in line with our increased weighting on top line growth on a profitable way, of course, not at any cost. And that's how we look at it, yes. But is there any specific number, long term number that you and the EBM are going to be incenses on? Yes, we do have, but it's not public. So again, in the way we do targets, I mean, targets are internal, budgets are internal, And that's the way we run a company. We like to dream big. We have a kind of culture in which we're comfortable or not totally uncomfortable in living with dreams and targets that we don't know 100% how to get there. You know that our culture is to put stretch targets always that we know 70%, 80% how to get there. Some other companies wouldn't feel comfortable living with that kind of uncertainty in terms of the gap to the target year in, year out. We are that's how we built our company in our lives. And then we always put targets and dreams, be it yearly or multiyear, in which we know 70%, 80% ought to get there. And we feel that that's the way to build the company because then it gets people to be creative, it gets people to use their best side of their brain to try to bridge gaps, and that's how we've always managed the company. The one we mentioned is just one more example of that stretch target. Thank you very much. Thank you. Our next question comes from the line of Eddie Hargreaves with Canaccord. Yes, good morning. Thanks for taking the question. This is really on the U. S. You mentioned in the statement about the continuation of the Winning Together initiative with your wholesalers, driving it to a different or new level in 2016. I wonder whether you could just briefly tell us what you see there's still left to do in that relationship. What do you want to change this year? What are your sort of specific deliverables, if you like, from that engagement with the wholesalers? Well, I mean, since we got here in 2008, 2009, we have always recognized and said that our wholesaler system is one of the biggest assets that the AV system, us and wholesalers, have in the marketplace. I mean, they really are amazing operators. They are very good at what they do. And if you give them a good idea, a good program, they will execute the hell out of it. So when we say wholesale relationship, Joao came here and branded this, winning together. Joao is very close to the panel. A lot of things we're doing in the marketplace now are being also curated, let's put it this way, by the panel and with the panel. So it's 4 hands doing it. And we feel that this has been really has gotten great acceptance and traction on the wholesale community. And again, we're partners. And the more aligned we are in terms of thinking that this program is better than this and this resource allocation is better than that one, the more effective we are in the marketplace. So that's the idea, winning together. Okay. Thank you. Thank you, Eddie. Our next question comes from the line of Caroline Levy with CLSA. Thank you and hello everybody. Hello. My question is on back to U. S. Price mix because given that you've got the mix shift towards the high end brands, which are growing rapidly, while the lower price are declining, you've got the craft acquisitions and there may be some wholesale acquisitions, I'm not sure. But it's suggesting that price realization on your biggest brands could be negative. Am I getting that wrong? Or is that what's happening? No, Cale. What we said just some minutes ago is that Stellar, which is a big brand for us in the high end, big driver for net revenue per hectoliter growth. We had a shipment that differs from the FCR. So we shipped more Stella before the height of the winter because the year before we had some frozen products and that disrupt a little bit the supply for the U. S. So we decided to anticipate in 2015 to avoid that peak January, December, January freezing period. And that's why now you see STRs are still ahead of STWs, okay, just because and that, of course, has an impact on the net revenue impact of the growth, okay? So but again, 1.3% is in line. It could be better if STWs and STRs were more in line, especially in Stella because that's a big driver. But that's where we are right now. So no, no nothing more than that. Okay. So no decline in pricing on your big brands? No. I mean, as I said before, I mean, our in terms of our discount strategy, I mean, the envelope we're using is pretty much in line with the envelope and the money we had before. So our pricing strategy remains unchanged. But of course, every year, we look for smaller ways to use the same promotional dollars. And that's what we're doing. Okay. And then just a question about activating volume growth in China or in Asia overall. I think Korea was pretty good. But in China, you've got a very difficult environment. What specific plans do you have in place over the summer? Well, in China, what we see is that this quarter was particularly different in terms of revenue per hectoliter growth because our brand mix was favorable, but our regional mix was very unfavorable because the South and the East, especially Guangdong as a province, had very poor weather and very poor or very strong economic headwinds. And that is something that affected a region where Budweiser is very strong and that, of course, rippled throughout the China numbers. But Budweiser continued to grow throughout China with exception of Guangdong, where we gained share on a very weak industry. So volumes are affected despite gaining share. Having you said that Budweiser continues to be the number one brand in the premium segment in China. And we have now what we call super premium company with Corona, Stella, Pro gardener, Leffe and Goose IPA that has margins that are 9 times more profitable than corn value and even double the profitability of Budweiser. So that's where we see more and more that 50% of our total China volume is in the core plus premium, super premium segments. And those segments, we believe, are the ones that will continue to be the most interesting segments in terms of growth and profitability in China. So I think we are poised, as we were before, for a bright business in China. But we said in our outlook that industry volumes in China would remain in the pressure this year, and the Q1 was in line with that. Thanks so much. Thanks, Caroline. Our next question comes from the line of Brett Cooper with Consumer Edge Research. Good morning, guys. Hi, Brett. When you purchased Modelo, there are gaps for you to close in Mexico. Can you talk about where those stand today in terms of execution, brand health, brand building? Because I'm trying to understand the runway for performance there and see if there are gaps opening up with Mexico being better than your other regions such as you can challenge other parts of your business with their performance? Thanks. I think it's a good point. I mean, Mexico did a very good job in terms of the integration of Grupo Modelo to our company. I think it was the best integration every time we learn a bit more. And we're going to learn, of course, from their toolkit that they added to the existing toolkit that we had from AB. As you said, we've had some very good performance there and that the industry grew, the category grew, we grew our market share, we grew our margins by double digits or double percentage points since the very beginning, like 17 percentage points. And our brands there, Corona, Victoria, Bud Light, are performing very well. Those are our main brands there. And we have also lots of activities in the market in terms of trade activation, in terms of new consumption occasions. And the pillars in Nexco are basically 4. It's about growing, growing our global brands. It's about growing premium, which is still to come because premium in Mexico is like almost nonexistent. So there is everything to be done on Global Brands and Premium. Elevating the core, where both most of the business is today, but going forward, we're going to be putting more resources behind premiumization and global brands and developing the near beer segment, which is also nascent, but very accretive and very profitable. So we have the key pillars in Mexico. Our brands are doing very well, and the country is doing very well as well. We also had some craft acquisitions in Mexico, T1 and Cermex. So we of course, craft in Mexico is very small, but like in any market, it's a segment that is growing with very good market shares, very good sorry, macros, very good margins. And we would like, of course, to be present and active in that segment as well. So Mexico is a very focused team with very good momentum and after a very good integration. So flying on all cylinders, I would say. Thank you, Brad. Okay. So thank you very much, everybody. The Q1 was a challenging one with macroeconomic headwinds in Brazil, as anticipated, waiting on our overall group results. However, as said, we have very good momentum in many parts of our business and remain focused on the things that can impact and influence as always. We're also making good progress towards closing the proposed combination with SABMiller and look forward to providing you with further updates in due course. So again, thank you very much for joining the call today. Thank you for your time and enjoy the rest of the day. Thank you. Bye. Thank you. This does conclude today's teleconference and webcast. Please disconnect your lines at this time and have a wonderful day.