Welcome to the Anheuser-Busch InBev Full Year 2015 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 Investors tab. Today's webcast will be available for on-demand playback later today. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two on your telephone keypad. If you should require operator assistance, please press star zero.
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 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, see Risk Factors in the company's latest annual report on Form 20-F filed with the Securities and Exchange Commission on March 24th, 2015. AB 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 Brito. Sir, you may begin.
Thank you, Jacqui, good morning, good afternoon, everyone, welcome to our full year 2015 earnings call. As usual, let me start with the highlights. 2015 was a year of strong organic top-line growth with particularly strong performance from our three global brands. We continued to invest behind our brands in 2015 to drive long-term growth while still delivering solid EBITDA growth and margin enhancement. In late 2015, we also announced a proposed combination with SABMiller. Let me recap where we are with the transaction before continuing with the review of our results. The proposed combination was announced on November 11th and included an agreement with Molson Coors on the disposal of SAB's Miller stake in MillerCoors, conditional on the closing of the main transaction.
In addition, in January, we received a binding offer from Asahi for the purchase of certain SAB's European premium brands and their related businesses. We have also pre-funded approximately $47 billion of the purchase price through U.S. dollar bond issuances, which allowed us to partially cancel $42.5 billion of the $75 billion committed senior facilities. Integration plan is well underway, but our focus is on obtaining the necessary regulatory clearances so that we can close the transaction in the second half of the year. Let's now look at the full-year results in more detail. Total revenue grew by 6.3% in 2015, with revenues from our global brands growing by 12.6%. Revenue per hectolitre grew by 7.7% on a constant geographic basis, driven by our revenue management initiatives and strong growth from our premium brands.
Total volumes were down 0.6% in the year, with own beer marginally down and non- beer down 4.7%. Volumes of focus brands grew by 0.4%, while volumes of our global brands grew by 7.3%. EBITDA grew by 7.8%, driven by the strong top-line results, with EBITDA margin expanding by 55 basis points to 38.6%. Normalized EPS decreased to $5.20 from $5.43, with good organic growth in EBITDA and lower net finance costs being offset by unfavorable currency translation. Finally, the board has proposed a final dividend of €2 per share for fiscal year 2015, bringing the total dividend for the year to €3.60, an increase of 20% over 2014. We believe we have the strongest portfolio of brands in the industry, with 19 brands each generating over $1 billion in retail sales per year.
Last year, our focus brands accounted for approximately two-thirds of our total volume and revenue, including our global brands, which accounted for around 18% of our volume, 22% of our revenue, and well over a third of our revenue growth. Our global brands are very complementary, providing us with the opportunity to connect with a broad range of consumers across multiple geographies and consumption occasions. Last year, revenues of our global brands grew by 12.6%, with volumes up 7.3%, well ahead of the growth of our total portfolio. Budweiser revenues grew by 7.6%, led by Brazil, China, and Russia. Stella Artois revenues grew by 12.5%, with great performances in the U.S., Argentina, Canada, and Brazil.
Corona delivered revenue growth of 23%, driven by good results in Canada, Chile, and the U.K., as well as the benefit of bringing the brand back into our own distribution network in a number of our markets. These are great results and show the benefit of consistent global messaging and marketing activation. In order to continue to accelerate top-line growth, we have developed a deep understanding of consumers' needs and occasions. These insights have enabled us to identify four commercial priorities which are relevant across the whole of our business. First, growing our global brands involves leveraging the potential of Budweiser, Stella Artois, and Corona. Second, premiumizing and invigorating beer is all about creating excitement and aspiration in beer, especially with millennials, by bringing new energy and variety to the beer experience.
Third, elevating the core is about raising the perception and relevance of our major core brands through differentiated messaging and large-scale activations. Finally, developing the near beer segment gives us an opportunity to compete for a greater share of total alcohol. These four commercial priorities are applicable in all of our markets. Although depending on the attributes of each market, some of the priorities may be more relevant than others. You'll get a better understanding at this point when I take you through the results in our four top markets. Let's start with the U.S. U.S. industry volume continued to improve. In 2015, we estimate industry sales to retailers, STRs, were marginally up in the fourth quarter and down only 30 basis points in the full year. We expect industry volumes to continue to improve in 2016.
Our own STRs were down 1.7% in the year, with our market share down approximately 65 basis points based on our estimates, after an improvement in the trend in the last quarter. This is obviously not where we want to be. Growing the industry and stabilizing our market share remain our top priorities in the U.S. Revenue [audio distortion] grew by 1.6% in 2015, helped by a positive brand mix contribution from our above premium brands. EBITDA for the U.S. was down 4.3% in the year, with EBITDA margin declining to 39.6%, primarily driven by a high single-digit increase in sales and marketing investments during the year, as we continue to invest for the long term. We're also working more closely than ever with our wholesalers in an initiative which we're calling Winning Together.
This was one of our major priorities last year and included collaborating with our wholesaler panel and on our three-year plan. We'll continue to build on this success to drive our relationship to a new level. Given the scale and sophistication of the market, it's not surprising that all four of the commercial priorities are relevant to our U.S. business. Growing our global brands means a deep focus on Stella Artois and Budweiser. Our craft portfolio, as well as Stella Artois, play key roles in premiumizing and integrating beer. Elevating our core brands of Bud Light, Budweiser, and Michelob ULTRA is our top priority in the U.S., while developing the near beer segment is important in growing our share of total alcohol. I now want to dig a little deeper into a couple of these topics, starting with elevating the core.
Bud Light had a challenging year in terms of market share, in part due to a tough 2014 comparable when the brand benefited from the Whatever, USA campaign, the FIFA World Cup, and the rollout of the aluminum bottle. In 2015, Bud Light STRs were down low single digits, leading to an estimated loss of total market share of approximately 40 basis points and some share loss in the premium light segment. Looking forward, we expect Bud Light to benefit from a refreshed visual brand identity in our Raise One to Right Now campaign, which debuted at the 2016 Super Bowl. On the other hand, 2015 was a great year for Budweiser, with the brand delivering its best STR trend in more than a decade, driven by successful campaigns emphasizing the brand's quality and heritage credentials, supported by refreshed packaging.
STRs declined by low single digits, with total market share down approximately 20 basis points during the year. The Brewed the Hard Way campaign has struck a chord with many beer drinkers, and we continue that message through the Bud & Burgers summer campaign and more recently, the 2016 Not Backing Down Super Bowl campaign. Last but not least, Michelob ULTRA is on fire. ULTRA grew more than 15% in 2015 and gained more share than any other beer brand in the market, according to IRI. ULTRA is a lifestyle brand with powerful differentiators from the rest of the beer category. Increased media pressure is paying off, and for the first time in five years, we advertised Michelob ULTRA at the Super Bowl with the brand's new 2016 platform, Brewed for Those Who Go the Extra Mile. Turning to premiumization and integrating beer.
Stella Artois had another strong year, delivering double-digit volume growth, while Goose Island IPA grew more than 150%. Shock Top had a more difficult year, but we have exciting plans in place for 2016. All of our new craft partnerships are showing good growth trends and collectively grew double digits in 2015, making an important contribution to our wholesalers' portfolios. Moving on to Mexico. Revenues grew by 11.1% in 2016, with beer revenue per hectolitre growing by 3.5%, driven by our revenue management initiatives and the positive impact from our brand mix. Our team in Mexico delivered a strong finish to the year, with volumes up over 11% in the fourth quarter and more than 7% in the year, driven by a favorable macroeconomic environment and good performances by Corona, Bud Light, and Victoria.
Market share was marginally up in the year, reaching a level of just over 58%, driven by the strong performance of our focus brands, which now represent 90% of our total volumes. EBITDA grew by 18.2% with an EBITDA margin enhancement of over 300 basis points, reaching 50.8%. By the end of 2015, we had delivered EUR 940 million of cost synergies or 94% of our EUR 1 billion synergy commitment. We expect to deliver the remaining EUR 60 million to reach our commitment primarily during the first half of 2016. Growing our global brands in Mexico entails focus on Stella Artois, which is showing good growth from a small base. Of course, Corona plays a very important role in Mexico, but just like Budweiser in the U.S., Corona is a core brand in its home market.
Premiumizing and invigorating beer involves driving the Modelo brand family and enhancing our premium portfolio with international and craft brands. Elevating our core brands is key for Mexico with Corona and Victoria, as well as Bud Light in the core plus segment leading the way, while the Ritas are our primary focus for developing the near beer segment. Looking at elevating the core in more detail. The Corona family had a great year as we continue to drive the brand's undisputed leadership in the core segment. Victoria volumes are also very strong, in part due to the brand's new visual identity and the celebration of 150 years of Mexican heritage. Finally, Bud Light had another amazing year on the back of a great activation, particularly around NFL and Sensation, an electronic dance music platform.
While elevating the core is our top priority in Mexico, it is important that we also drive premiumization and aspiration in the beer category. Michelob ULTRA has played an important role in this respect. It was introduced in 2014 and has been well-received, becoming our second-largest premium brand by volume in 2015. Craft in Mexico is growing rapidly, and we have been supporting the development of this segment through our e-commerce platform, as well as select acquisitions of craft brewers, including Mexicali and Tijuana. We have also seen some great results from Beerhouse by Modelorama, an online retail site carrying imported and domestic specialty beers. Turning to Brazil. 2015 was a challenging year for Brazil, but we are pleased with how we quickly adapted to the new market reality.
Brazil revenue grew by 8% in the year, with beer revenue per hectolitre up 11.7%, benefiting from our revenue management initiatives, increased own distribution, and premium brand mix. Our total volumes in Brazil decreased by 2.7%, with beer volumes down 1.8% and soft drinks volumes down 5.2%. Our premium and near beer brands delivered good growth led by Budweiser, Stella Artois, Corona, Antarctica Original, and Skol Beats Senses. EBITDA grew by 10.6%, driven by solid top-line growth with a margin increase of 128 basis points, leading to 53.6%. We expect the macroeconomic environment in Brazil will remain challenging in 2016. We expect our own net revenues to grow organically by mid to high single digits after an expected weak first quarter due to a tough comparable. In Brazil, all 3 of our global brands have an important role to play in accelerating the growth of premium and driving positive brand mix.
They also play a critical role in premiumizing and invigorating beer in Brazil, supported by our portfolio of domestic premium brands and our recently acquired craft brands, Wäls and Colorado. Elevating the core is critically important in Brazil and requires maintaining and improving the health of Skol, Brahma, and Antarctica. Finally, we're very excited about the potential to shape the near beer segment in Brazil. One year after the launch of Skol Beats Senses in its iconic blue bottle, we added Skol Beats Spirit in a green bottle. Skol Beats has become one of the strongest brands in our portfolio, with very high preference among young adults. The near beer segment now represents 1% of our beer volumes in Brazil and is helping to increase our share of throat while driving incremental volume, revenue per hectolitre, and margins. Looking at a couple of those pillars in more detail.
Premium is growing quickly in Brazil and already represents 10% of our volume, with our global brands playing a key role. Budweiser leads the premium segment based on Nielsen data, while Stella Artois is positioned as the most aspirational beer in Brazil. Corona is off to a good and terrific start, better say, after its launch, and it's generating huge consumer interest. Turning to elevating the core. In 2015, Skol's Summer On campaign delivered great consumer experiences, including Carnival and other major summer events, helping the brand to finish 2015 as the most valuable Latin American brand across all categories based on the BrandZ Annual Report, an amazing achievement. During the second half of 2015, we also launched Skol Ultra, a low-calorie line extension, further enhancing the Skol brand equity.
Antarctica and Brahma also had campaigns around major events, including Antarctica Samba events in Rio de Janeiro and Brahma country music festivals in São Paulo. Skol, Brahma, and Antarctica play a central role in Brazilian culture and will continue to deliver great experiences for consumers through summer festivals, Carnival, music, and sports, including the 2016 Rio Olympic Games. Moving on to China. Continuing economic headwinds led to a decline in industry volumes of approximately 6% in 2015, with most of the impact being felt in the value and core segments. Our own business, which is more focused on the core plus and premium segments, performed much better than the industry, with total volumes up 0.4% in the year and the combined volumes of our core plus, premium, and super-premium brands growing by double digits.
We estimate that we gained approximately 100 basis points of market share on an organic basis, reaching a level of 18.6%. Our revenue grew by almost 10%, with revenue per hectolitre growing by 9.4%, driven mainly by brand mix. China EBITDA grew by 33.7%, with margin expansion of over 400 basis points, leading to 22.6% margin. Growing our global brands, premiumizing and integrating beer, and elevating the core are the most relevant of our commercial priorities in China. As we highlighted during Investor Seminar in Guangzhou in September, future growth in China is expected to come from the core plus, premium, and super-premium segments. These segments now account for more than 50% of our total China volumes and include such strong brands as Harbin Ice, Budweiser, Stella Artois, Hoegaarden, and Corona.
We also have strong core brands, including Harbin in the northeast and Sedrin in the southeast, and protecting these strongholds is a priority. In terms of growing our global brands, Budweiser is the leading brand in premium, delivering double-digit volume growth in 2015 in a challenging market environment and from an already large base. We also see significant opportunity to develop the super-premium segment given the growth of our urban centers and consumer interest in brands with authenticity. Our global brands, Corona and Stella Artois, and our international brand, Hoegaarden, are well-positioned in this space. In the core segments, Harbin, Sedrin, and our other regional brands provide choice for our consumers, enabling us to compete in multiple channels, especially the traditional on-trade. Harbin Ice is our flagship brand in the core plus segment and accounts for more than 30% of Harbin's volume.
Harbin Ice is the cool beer brand in China, bringing fun, young, and energetic programs to our consumers. I'd now like to highlight a couple of important initiatives in our Better World agenda, starting with our Smart Drinking Goals. For more than 30 years, we have invested in the promotion of responsible drinking, discouraging binge drinking, underage drinking, and drunk driving. With the launch of our new goal, Smart Drinking Goals, in 2015, we have deepened our commitment to reducing the harmful use of alcohol. Our new goals aim to encourage consumers to make smart drinking choices and modify their behaviors with the introduction of no-alcohol and lower-alcohol beer products. One of our commitments, therefore, is to make 20% of our beer volume no alcohol or low alcohol by 2025.
Our water strategy focuses on stakeholder engagement to manage our water risks, invest in effective partnerships, and ensure long-term sustainability of water supplies for our operations and for the communities in which we live and work. At 3.2 hectoliters of water per hectoliter produced, we became the most water-efficient global brewer in 2015. We're now ramping up our water stewardship efforts through initiatives such as the scaling up of our SmartBarley program and the improvement of the health of high-stress watersheds. We're also building awareness of the importance of clean water through the Stella Artois Buy a Lady a Drink campaign in partnership with Water.org. With that, I'll hand it over to Felipe to talk about earnings, cash flow, and capital allocation. Felipe?
Hi, Brito. Hello, everyone. I will start with a summary of our normalized earnings per share performance in 2015. Then drill down into some of the more important line items. Normalized EPS declined by 4.2% to $5.20 per share in 2015. As you can see from slide 30, the strong organic growth in EBITDA from our underlying business and lower net finance results were offset by unfavorable currency translation. Drilling down into some of the other line items. Starting with EBITDA, Brito has already covered our EBITDA performance in detail, but slide 31 shows the contribution of each of our six zones to the revenue and EBITDA performance in 2015. Each of our six geographic zones generated over $1 billion of EBITDA last year with a healthy balance between developed and developing markets.
In 2015, more than half of our revenues and EBITDA was generated in faster-growing developing markets. Our total company EBITDA grew organically by 7.8% last year, with the majority of the growth coming from our developing markets Brazil, Mexico, China, and Latin America. The North America zone remains our largest zone in terms of revenue, EBITDA, and cash flow generation, delivering almost $6.2 billion of EBITDA last year. The decrease in net finance cost to $1.2 billion included a reduction in net interest expenses of $468 million, mainly due to a lower average rate of interest. In 2016, we expect the average rate of interest to be in the range of 3.5%-4%, excluding the impact of the proposed combination with SABMiller.
In 2016, the net cost of the pre-funding of the SABMiller purchase price will be accounted in net interest expense as a recurring item, and is expected to amount to approximately $400 million in the full board. Other financial results included within net finance costs includes an $824 million of net gains linked to the hedging of our share-based payment programs, compared to $711 million in 2014. As well as net foreign exchange gains on US dollar cash balances held in Mexico. Moving to tax, the normalized effective tax rate for the year was 19.1%, an increase from 18.8% in 2014. This increase is mainly due to changes in country profit mix, partially offset by the favorable impact of the gain linked to the hedging of our share-based payment programs.
Our normalized effective tax rate is expected to be in the range of 22%-24% in 2016, between 23% and 25% from 2017 and 2018, and in the range of 25%-27% thereafter. This increase in the effective tax rate over time is driven by lower deductibility of goodwill amortization in Brazil, country profit mix, and the assumption of zero future gains or losses on the hedging of our share-based payment programs. For the purpose of stock, our guidance on normalized effective tax rate excludes the impact of the proposed combination with SABMiller and the impact of the pre-funding of the purchase price, for which no tax deduction is expected to be reported at this point. Normalized EPS was impacted by unfavorable currency translation of $0.65 per share, driven mainly by the Brazilian real, the Mexican peso, and the euro.
We take a long-term view of our markets and are focused on the organic growth of our business, accepting that currency volatility is part of doing business in a global company. Our FX risk management policy includes the hedging strategy focused on our transactional exposures, principally costs of sales, and we also continuously monitor our debt currency mix in light of ongoing developments in our core business and financial markets. 2015 was another year of robust cash flow generation despite significant currency headwinds, with cash flow from operating activities of $14.1 billion and free cash flow as defined of $11.4 billion. Changes in working capital had a positive impact of $1 billion, of which more than 50% was driven by improvements in core working capital. Core working capital consists of those elements of working capital which we consider are fundamental to the operation of the business.
It excludes certain items which management has little or no ability to influence. For example, payroll-related payables and approvals. In 2015, we continued to drive improvements in core working capital, reaching an average level of negative 12.5% of net revenues. Moving to dividends, the board is proposing, subject to shareholder approval, a final dividend of €2 per share, which combined with the interim dividend of €1.6 per share paid in November last year, would lead to a total dividend payment for fiscal year 2015.
Of EUR 3.60 per share. Finally, before closing, I would like to confirm that our capital allocation objectives remain unchanged, and will not change following the closing of the proposed combination with SABMiller. Our first priority will always be to invest behind our brands and to take full advantage of the organic growth opportunities in our business. M&A remains a core competency, and we will always be ready to look at opportunities when and if they arise, provided that the target, deal structure, and price makes sense. Please recognize the value of growing dividends over time, consistent with the low volatility of a non-cyclical business, and our goal is to reach a dividend yield between 3%-4%, in line with other consumer goods companies.
Our optimal capital structure remains a net debt to EBITDA ratio of around two times. At this level, the return of cash to shareholders is expected to consist of both dividends and share buybacks. With that, I will hand over back to Jacqui to begin the Q&A section. Thank you.
The floor is now open for questions. In the interest of time, we will limit participants to one question and one follow-up. Again, if you have a question or comment, please press star one on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two on your telephone keypad. We do ask that while you pose your question, you pick up your handset to provide optimal sound quality. Our first question comes from the line of Nik Oliver with UBS.
Thanks for the questions. Can I please start with your craft strategy in the U.S.? You highlighted the continued double-digit growth. I am just interested in, one, how many craft brands you think you can support on the portfolio, what % of U.S. volumes craft actually can become over time, and whether you see any of those U.S. brands having potential to travel internationally.
Hi, Nik. Brito here. Craft is a growing segment in the U.S. That goes without saying. It is also very profitable. That is why we felt we had to reinforce our portfolio with a couple of craft brands from different regions. I think it is only fair to offer to our wholesalers and to our consumers an option in that segment as well, a segment that is growing and it is profitable. For sure, some of those have global potential. Even before global potential, we will talk about the national potential. Craft is in itself a very local or regional play, but many crafts have become national crafts, and in our portfolio, Goose IPA that grew 150% in 2015 is showing that there are consumers out there that, yes, will consider a national craft.
Now the next question is, what about consumers, the global consumer, will they consider a national or international or global craft? We think the answer is yes, and we have thoughts around this.
Great. Thanks a lot. Just as a quick follow-up, I've seen the guidance you mentioned that you expect the U.S. market to improve overall. Do you expect AB InBev to do a better performance in volume terms overall as well, either in terms of a lower volume decline or just sequential improvement?
Yeah. Our guidance comes from the fact that the trend in the U.S. industry development every year has been getting better and better. Last year, if I'm not mistaken, was 0.6%, this year was -0.3%. The last quarter was +0.15%. Of course, the weather helped, 0.15 positive percentage points. We think the economy continues to create jobs. That's important. Gas prices are down, and the trend is positive. There's momentum there, and we think that's the outlook we have for the industry. We will continue to try to not only help the industry grow or come back to growth, but also balance our market share, but doing it in a way that makes sense for the long term.
That's why we're investing ahead of the curve and investing ahead of top-line growth in the U.S. because we believe that there's lots of great opportunities to build an even better business for the future.
Okay, thanks very much.
Thanks, Nik.
Our next question comes on line of Sanjeet Aujla with Credit Suisse.
Hi. A couple of questions, please. Firstly, on your outlook for China, one of your competitors has given a bit more of a positive outlook, expecting stabilization. Can you just talk about current dynamics there and why you seem to differ in your view? Secondly, just on your outlook for sales and marketing investments, particularly with regards to the U.S., can you just give the sense of where the priorities are? What are the big activations, and do you commit to improving your market share performance in 2016 there? Thanks.
Hi, Sanjeet. In terms of China, what we said in our outlook is that we expect industry volumes to remain under pressure in 2016, we expect our volumes to perform better than the industry as we've had the last few years, driven by the fact that we're heavily skewed towards premium and super premium brands. Industry in China was 6% down in the last year. As we said in our investor meeting in China is not about averages
Averages can be misleading. If you look at 2015, the segments, super premium grew by 18%. That's our own, that's the CMI estimates. Premium grew by 9%, core plus grew by 3.8%, core and value declined by 10.8%. That gives the 5.8% or 6% down for the industry in the fiscal year. Because more than half of our volume today in growing, very different from the market, is in core plus premium, super premium, that's why we've been able to gain share and increase our profitability, grow EBITDA by 33%, top line by double digits, even in an industry where volumes are down by 6%. We think that the blue-collar consumer is under pressure, not the service sector type consumer. That's why, in our opinion, value and core segments are down.
Core plus premium, super premium are up and we're very happy to see that our business is more skewed towards those segments that are growing. Let's go where the growth is. That's China. In terms of the U.S., sorry, could you repeat if you asked about market share?
Yeah, it was just really, what are your priorities on sales and marketing investments in the U.S., and whether you can commit to a better market share performance in that market, or when do you expect to get close to stabilization in market share in the U.S.? Thanks.
What we know about the U.S. is that some things are working, very important things. Some others that are also very important are not yet there. For example, Budweiser is negative yet, but it's still negative, but had its best year in decades. Michelob ULTRA, the biggest brand in terms of share gain in the U.S., a big brand. Stella Artois, double digits growth. Goose Island on-premise gaining, craft gaining. Bud Light has performed better. The Rita family has performed better. What we're doing in the U.S., because we're in this business for the long run, is that because now we have a portfolio that we feel that we have some winners, we're not only trying to fix the gaps we have, but we're also trying to feed the winners.
I think one of the things that give me comfort on the direction we're proceeding in the U.S. is a number that's not public to you, which is U.S. gross profit. I can give you the delta. Since 2012, we have increased our gross profit margin by one percentage point from 2012 to 2013, another percentage point from 2013 to 2014, and by 0.8 percentage point last year. For me, that tells me that the mix is going in the right direction. The EBITDA is not having the same dynamics because we're investing out of the curve, because there's a mix shift in the U.S., and as a market leader, we would like to continue to support the current segments in which we're strong, but also build our participation on the new emerging segments.
We have a little bit of an overlap there in terms of marketing investment, but that's for a better future in which we'll have a more balanced portfolio. Gross profit give me the perception or the idea or the certainty that we're moving in the right direction.
Thanks. Just a quick follow-up on dividends, the payout ratio moving up to 76%. Are you able to, or do you feel confident in being able to maintain that payout ratio going forward?
Well, our dividend policy has never changed, and it was never based on payout ratio. It's much more based on yields between 3% and 4%, and growing dividends, and I think that's where we are right now. We are between 3% and 4%, depending on the share price you get. I think we're doing that because when you look at our cash flow from operating activities, despite all the currencies, despite everything, despite us investing more in marketing and all that, we generated the same EUR 14.1 billion that we generated last year, 2014. In 2014, we generated cash flow from operating activities EUR 4.144 billion and in 2015, we generated EUR 14.121 billion, so EUR 14.1 billion. We're able, with our discipline and focus on financial metrics and execution, to generate the same cash flow despite investing more in the market and continue to grow dividends.
Great, thanks.
Thanks, Sanjeet.
Our next question comes from the line of Trevor Stirling with Bernstein.
Morning, Brito and Felipe. First question from my side concerns Bud Light. Brito, can you give us a bit more color on what the plans are on Bud Light and what gives you the confidence that the Wieden+Kennedy work is going to succeed where the previous agencies didn't really deliver what you wanted?
Yeah, that's a very good point. Bud Light is the one that really we need to get to a better place because we have lots of things working in the U.S. Bud Light, if we can stabilize the brand before it even grows, it would be a big plus. Bud Light, for example. Let me talk about Super Bowl because I had some questions around that today during media interview and all that. On the Super Bowl, we kicked off our new campaign, we have very positive consumer feedback. Not only we got billions of impressions and earned media, social mentions and all that, but more importantly in several brand measures like purchase intent, helps me make a good impression, brings people together, I like the direction the brand is moving. There were statistically significant increases.
In terms of the ACE score, which is a score that lots of companies use to measure effectiveness of media, it was the highest score we've achieved for total Anheuser-Busch in the past three years with beer drinkers ages 21 to 35, even more than the last start from Budweiser from last year's Super Bowl. Again, this is only a piece of the puzzle. I think the other exciting thing about Bud Light is the whole thing about the visual identity that we're going to change beginning now in April. I think it will bring back some of the things that made Bud Light an 18%, 19% share brand in the U.S., like quality and heritage cues and things that were missing in the last pack that has been there for eight years now. I think it was time for a refresh. Wieden+Kennedy is an amazing creative agency.
They are one of the few ones that are truly independent, they have really people that challenge you, that bring new ideas, that's what we think for a brand like Budweiser that has always been creating culture in terms of being funny, but smart funny, we want to go back to that wit that really made the brand big. They get that. They understand that. Of course, the campaign is not going to turn the brand on a dime or overnight, Wieden+Kennedy is an agency that we've been looking and trying to get on our side for a long time, finally we're there. Again, they're not going to make any miracles, we're very happy in working together with them with Bud Light. We're very hopeful that this is the beginning of a new future with Bud Light.
Thank you, Brito. My follow-up question is concerning Brazil. Can you tell us what the outlook is for excise taxes in Brazil with a government budget balance that must be under a lot of pressure?
Well, yeah. Brazil is having a tough time. Had a tough time in 2015. We're saying it's going to be a tough year in 2016. In terms of excise for beer, that was a new model that was approved last year. There is already a tax increase scheduled for 2016, 2017, and 2018. We already had a change. We continue to think that in terms of federal excise, because the model has just changed, we would like to think, and we're talking to the government all the time, that it makes sense to keep it this way because, again, we continue to invest in the Brazilian economy, continue to create jobs, and consumers are already under pressure, and we already gave our fair share. If you look at taxation for Brazilian beer, that's one of the highest in the world.
I think we already pay our fair share. The different thing in Brazil, of course, is that each state of the 27 states have their own value-added tax as well. Some states, like São Paulo, have already increased. That's an important state. Some others increased, but much less than they had previously announced, so that was good. We'll have to be vigilant and talking to them and trying to demonstrate that if it's all about tax collection, not about tax rate, that they should look at the overall picture, not only about the tax rate. I think the governments in Brazil understand that. Again, it's going to be a tough year in Brazil. We're not trying to predict anything. We're just saying we're very active on that front.
Thank you very much, Brito.
Thank you, Trevor.
Our next question comes on the line of Brett Cooper with Consumer Edge Research.
Good morning, guys. A quick question on the U.S. We've seen in the past some of your efforts, whether it's Budweiser, Bud Light, the new beer or craft. Some succeed, some fail in any given year. What gives you the confidence that this year you can sort of manage all of those so that we continue to see improvements in Budweiser while you improve on trends of Bud Light, as an example? Thanks.
Brett, your voice a bit muffled, so I don't know exactly. Can you repeat the question maybe? Maybe you're too close to the mic. I don't know what's going on.
My question is with respect to all the efforts in the U.S. We've seen in the past when you succeed in certain areas, say, the improvement of Budweiser, you seem to fall off in places like Bud Light. What changes in 2016, or what gives you confidence that you can get all parts of the portfolio moving in the right direction?
I think one thing that's different about 2016 is that we have more clarity on our priorities. We're working more closely with the wholesalers. I think that makes a big difference. João, our new zone president there, has put a lot of emphasis in working with our partners, our wholesalers. The wholesalers, they're an amazing asset in the marketplace. They have an amazing penetration in the market. João has been doing a lot of the planning, including parts of the three-year plan in terms of route to market, with the wholesaler panel. I think that's a big difference as well. In terms of Budweiser, we'll continue with the voice of the brand. The brand struck a chord with consumers in terms of the Brewed the Hard Way.
Interestingly enough, on the last Super Bowl, Super Bowl 50, the drunk drive message or the Simply Put ads of Budweiser was the highest-scoring ad from all the ads we had in Super Bowl. Again, we'll scale up on successful programs like Bud and Burgers. That proved to be very effective during the summer. Bud Light, again, I just answered the prior question. You have a new visual identity, new campaign, new agency. We're very excited about it. The debut of this new campaign was during the Super Bowl. These two brands are, of course, our bread and butter, but the high-end is growing very fast. Michelob ULTRA is a core plus, but also Stella, Goose Island, and the other crafts. Those are the things we need to get working at the same time. There's a lot of things working together now.
We just need to add Bud Light to that group.
Great. Thank you.
Thank you, Brett.
Our next question comes in line of Chris Pitcher with Redburn.
Yeah. Good afternoon. It was a question on your sales and marketing outlook for this year, Brito. You're talking about a high single, low double-digit increase, which is EUR 600 million-EUR 800 million, that sort of range. Should we expect a disproportionate amount of that to be going into the U.S.? Can you give us a feel for how you're monitoring the effectiveness at that? If in two years the market share gains haven't improved, do you feel like you're over-investing, or do you think this rate of investment now in the U.S. is the new normal for competing as people become more brand-focused and portfolios become more fragmented?
Chris, you've known us for a long time. You know we love metrics, we measure everything in the business. We gave the guidance of high single to low double digits in terms of sales and marketing. We're doing that because we believe that there are opportunities that we should not pass. In times of crisis in some countries, that's when we feel even more excited about investing, because that's when competition normally takes their foot off the pedal. In our history, we've seen many times when we either penetrated or acquired businesses during tough times in some countries where everybody was exiting, or when we pressed the pedal harder when everybody was taking their foot off the accelerator.
In terms of the U.S., again, as I was saying a couple questions before, what gives me the certainty that we are in the right direction is that when I look at the U.S. gross profit, a number that you don't have access to unless you go to the Ambev, you take Canada, you can get there. U.S. gross profit has been expanding by one percentage point every year since 2012. For me, that tells me that the portfolio is getting more premium, that consumers are paying more for our beers. It also tells us that we are in that point where I'm not taking money from the base and adding money to get the momentum going on some new emerging segments, that of course, will not be there forever, until it gets some critical mass and some momentum.
Interesting also to say, it's in our press release, that the guidance for sales and marketing, high single to low single digits, is weighted more towards the first half of the year. That's important not to forget. Again, we're very excited about the opportunities we see. We are in a kind of business, Chris, that it's still, in many respects, in many brands, many countries, too far away from the saturation point. Therefore, the more we invest, the more we get on top line. Sometimes, yes, we invest a little bit ahead of the curve because we look at the long term as well. We're trying to build the long term as well as managing the short term. The U.S. is no different.
It's our main market in terms of dollar cash flow, very important, we'll continue to invest behind it, as well as other markets in our global brands.
Thank you. I've got a slightly tangential follow-up question. Obviously, you're helping fund all this investment through some excellent working capital improvements. If you look at the Ambev level, there was a significant improvement on payables. Could you give us a bit of a feel for what's going on there, Felipe? Then when you were in China, you said China was at 45% of sales working capital. Is it still around that sort of level and the rest of the business is starting to catch up? I'm just trying to get a bit more of a feel there. Thank you.
Well-
Yeah.
Okay, go ahead, Felipe. Sorry.
Hi, Chris. China continues to lead the way, which is a good source of inspiration and benchmark for the other zones. Other zones are catching really fast, Europe, so on and so forth. Americas are more on the bottom of the pack, but also progressing quickly, and Brazil is in that pace as well. We continue to see room for overall progress. Last year, we reached the -12.1. As you know, we are always raising the bar and aiming for higher, and we believe there's still room for growth.
Thank you.
Our next question comes to the line of Anthony Bucalo with HSBC.
Brito, on U.S. wholesaling, where are we in terms of the evolution on wholesaler consolidation or branch strategy or exclusivity strategy? Have there been any sort of major changes in strategy or in approach over the last year or so?
Hi, Tony. No, what we said is that WODs is something that we like to have some. Today our volume's around 8% done through WODs. We think it serves the purpose of getting our people closer to the marketplace and also being able to train our people closer to the retailers and the trade in general. I think that's good not only because it gets us to get to know the market better and our competition better, but also in the dialogue with wholesalers, it makes it a more effective dialogue because we know the reality they face every day. We've been operating WODs for more than 50 years, and we feel that's part of our business. We also feel that it's totally in line with our support of the three-tier system. What's wrong?
What João Castro Neves is doing in the U.S. now is trying to work much closer with the wholesalers in terms of planning of our route to market and activities in terms of the next year, next three years. The Winning Together program that he put in place, or mindset, we think is working very well. I think that's a change, if you will. Other than that, it's business as usual. Wholesalers expect that we provide them a great portfolio of brands. We expect them to build brands with us, and that we compete effectively in the marketplace. No change there.
Okay. What about exclusivity, Brito? Anything there? Anything changing there at all?
No. We've had this program with VAP, Voluntary Alignment Incentive Program, that has been in place for 15 years. We just came with a new version. Like any program, from time to time, you revamp it, you renew it. It's the basic program that has been there for 15 years. The name says it's a voluntary program.
Okay. Just one quick follow-up, Brito. On Bud Light, sort of following up to Trevor's question. I think the positives of Bud Light are pretty obvious. When you're talking to your consumer, Bud Light market share slippage has now been going on for a few years. What is the challenge for consumers? Why is the brand losing market share, and what key do you need to unlock to sort of get that back on track?
Well, first, I think in a market as fragmented as the U.S., to have a brand with 18%, 19% market share is already an amazing thing in itself. On the other hand, when people want to grow, of course, they all target the big guy with the most of the shares. That's one thing. I think the second thing is that for a number of years, the past few years, we have not afforded the brand, we have not given the brand the support an 18%, 19% share brand in the U.S. market, fragmented U.S. and competitive fragmented U.S. market deserves. I think now we're beginning to rebuild that. For example, Budweiser has always been very connected to culture and fun in a smart way. At some point, it become fun, but maybe in a more not so smart way.
We're trying to recover that, because when we go back and see what made the brand what it is today, we're trying to recover not only the packaging and cues and communication. Trying to recover a little bit of the, let's say, the founder spirit of the brand of 20-plus years ago. I think that's what's happening, and we're very hopeful now. In April, we're going to have a new visual identity, a new campaign. It's just the first step. It was introduced in the Super Bowl. We had some very interesting comments from consumers. I just said it was the highest-ranking ad we've had in many years for total AB company. Again, and we're working with a great agency, so I think it's all good. Now we need to make it happen.
Okay. Thank you.
Thank you, Tony.
Our next question comes from the line of Caroline Levy with CLSA.
Hello?
Caroline, your line is open. Hi, can you hear me?
Yes, go ahead, Caroline. Hello?
Her question has been.
Jacqui, maybe we.
Her question has been withdrawn. Our next question comes from Edward Mundy with Nomura.
Edward, okay.
Morning, everyone.
Go ahead.
Hi. Morning, everyone.
Oh.
Since the announcement of the proposed combination with SAB, you've had three months to work on the integration planning. Given the increasingly tough macro in many of SAB's core markets, are you more or less excited about the combination and the opportunity for value creation?
I'm more excited because, first, their results organically have been better. Second, I've had a chance through the integration planning to get to know a bit more of their markets, of course, within the rules of what's allowed to be shared. I've met some of their people through the integration planning. I'm more excited because, first, their results are better. Second, they are in very interesting markets, growth markets. They have some very strong brands, some great people that I met. Currencies, it's something that would be happening with the deal or without the deal. Of course, it bothers you in the short term, but in the long term, currencies, the same way they go, they come. We come from Brazil, many of us, Latin America, and we are in a way used to it.
Again, if you look at last year's cash flow from operating activities, even with all currencies and everything, more CapEx investment, more marketing investments, we delivered the same cash flow from operating activity, $14.1 billion. We try to be disciplined. We try to find money in non-working ways or non-working monies to put to work. I'm more excited now than I was before.
As you look at the synergy opportunity of EUR 1.4 billion, that's on a subsidiary revenue base of EUR 16 billion. You've just delivered EUR 1 billion on a revenue base of EUR 4 billion from Modelo. Are you still confident that EUR 1.4 is the right number?
EUR 1.4 is the number that we have out there, the number we committed, and that's the number we have, yes.
Thanks. As a follow-up, just coming back to the dividend question again. Could you comment on how you plan to balance deleveraging post the combination with SAB and your aspiration for a dividend yield of 3%-4%?
I would say from when we announced the transaction that the dividend policy would be kept, and that was one of targeting a yield between 3% and 4%, a growing dividend. We're very disciplined in terms of our messages, and that's what we intend to do.
Great. Thank you.
Thank you.
Our next question comes on the line of Mark Swartzberg from Stifel Nicolaus.
Yeah, thanks. Good morning, Brito. Hi, Felipe.
Hi, Mark.
I guess the first question on Brazil, Brito, is I think your market share is down approaching 100 basis points calendar 2015 on calendar 2014. I know 2015 was a year focused on profitability. Even sequentially, you had an improvement in the third quarter, I think that reversed in the fourth quarter. Could you just speak a little bit about how enduring this share erosion is? What brand do you think it's particularly an issue for? Then, this is very secondhand, I don't know that it's worth much of a response from you, but it seems that there may be an issue with ingredients and corn that's an issue among some consumers of some of your brands down there more recently. If that's relevant to the larger topic, that would be great.
No, our market share in the year was 67.5%, according to Nielsen. That's within our 67%-69%. As you said, last year was a year of margins and profitability, nothing strange in having this share more towards the bottom of the range. We've had this range now for, I don't know, over 15 years, it's always the same story. We bounce back when we get to, say, 67.5%, we go to 69% and come back. That's pretty much how we operate. Always trying to balance market share, profitability, tax decreases. Inflation, all these things that we have to balance in Brazil, especially when inflation's up and the country's going through a tough economic situation. I don't see any issues there. I don't think this thing of corn or anything has anything to do with it. I think that it's chatter.
If you look at the health of our brands in Brazil, they're doing very well. If you look at Skol, our number one brand there, had an amazing year. If you look at our premium brands, had also an amazing year, including the global brands. I don't see anything in terms of the health of the brands that would say anything other than we are very strong, this market share is based not only on the execution, but also on consumers pooling and electing our brands. Having said that, market share does come up and down depending on the year, depending on the quarter, yes.
Okay. Great. Felipe, you mentioned understandably that your tax rate guidance doesn't have any effect for the SAB transaction. You also mentioned this topic of deductibility of a portion of the purchase price. If that is something you're ultimately going to get, and I realize you're evaluating that, is it reasonable to expect you'd communicate on that simultaneous with closing on the transaction, a quarter or so after closing on the transaction? Just trying to get a sense of when we might get clarity on your expectations on that topic.
Yeah, I believe when we get closer to the closing of the transaction, we should have a much better view and then moving to some sort of guidance that is taking into account the combined company. For now, we conservatively prefer not to assume any deductibility on this pre-funding $400 million cost. We continue to work on it and continue to work with our SAB colleagues while planning for the integration for when and if we have, and we will get the regulatory approval. Closing is expected for the second half of the year. At that point, yes, we hope to be able to share with the market more colors on this front.
Fair enough. Great. Thank you, gentlemen.
You're welcome.
We have time for one additional question. Our final question comes from Tristan van Strien with Deutsche Bank.
Hi, good morning, Felipe. Good afternoon, Brito. Just first as a follow-up on Chris's cash flow question earlier. Your working capital had a nice EUR 1 billion swing in your favor, which seems to be related to the timings of your capital expenditures, the payables of those. Since this is a timing issue, is that something you would expect to reverse next year, or is that something you can keep hold on when we look at your working capital next year? Actually, my question was more on Mexico. When I back out your synergies this year and the last quarter, I can see a contraction of both your margin as well as your EBITDA, despite a very strong organic revenue line.
When we think about next year, the higher sales and marketing costs you had this year, as well as the transactional FX impact you had this year, should we expect the same next year when we don't have these synergies anymore? Thanks.
In terms of the working capital, we've been on this journey, as Felipe says, since, I don't know, 10 years now or nine years. In the last few years, we've been capturing EUR 1 billion, EUR 1 billion-plus per year in terms of change in working capital. I think that continues the trend. As Felipe said, we're getting closer to that 15% that we have as a target. It was a better year. Of course, we had to get more disciplined because we wanted to continue with our activities despite the currency. Maybe we look for more opportunities in a more intense way. In Mexico, what's happening that you have to also think about in your second question is that Bud Light is on fire, and a lot of it because of lack of capacity in Mexico.
Remember, we're building a new brewery in the Yucatán Peninsula for 5 million hectoliters. We're bringing Bud Light from the U.S., a lot of it. That's impacting our cost. There's also sales and marketing to fuel the brand growth. The EBITDA growth from the numbers I have here was EUR 368. Stage 2 was EUR 210. There was an EBITDA growth of EUR 158 despite the logistics cost of Bud Light and despite some capacity constraints in Mexico that's forcing us to transport product from different breweries far away to make up for the fact that we don't have the capacity we need in Mexico, and the fact that it's not always possible to predict 100% of what the market demand will be for different packs. I think in Mexico, as we get that capacity online, the profitability should take care of that.
Just to follow up on Bud Light in Mexico, once you start getting more into local production, you'll be looking more returnables or does Bud Light remain a one-way pack in that market?
They have both. Yeah, both.
Both. Okay.
It started as a one-way pack. Now in the north of the country, you already have the returnable.
Thank you very much.
Thank you.
Thank you.
Well, Jacqui, I think that's it. Let me just say a couple of words here. Once again, thank you for joining the call today. 2015 was a strong year in terms of top line and EBITDA growth, despite the challenging macroeconomic environment in a number of our markets, particularly Brazil and China. Currencies also posed a challenge, discipline and attention to detail helped us to deliver another robust cash flow result. Our number one priority will always be the organic growth of the business, and especially top-line growth. We're also very excited about the proposed combination with SAB and are working hard to close the transaction in the second half this year. I look forward to talking to you again in early May when we report first quarter results. Thank you, and have a great 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.