Ambev SA (ABEV) 2009 Q2 法說會逐字稿

 Good afternoon and thank you for waiting.  We would like to welcome everyone to AmBev's 2Q '09 Results Conference Call.  

Today with us we have Mr. Joao Castro Neves, CEO for AmBev, and Mr. Nelson Jamel, CFO and Investor Relations Officer.  

(Operator Instructions)

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996.  Forward-looking statements are based on the beliefs and assumptions of AmBev's management and on information currently available to the Company.

They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.  Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of AmBev and could cause results to differ materially from those expressed in such forward-looking statements.  

Now I'll turn the call over to Mr. Nelson Jamel, CFO and Investor Relations Officer.  

Mr. Jamel, you may begin your conference.

 Okay.  Thank you, BJ, and good morning, everyone.  

I'm pleased to be with you today to discuss our 2009 second quarter results.  Before I start, I would just like to remind you that, as usual, the specific changes discussed during this call are both organic and normalizing nature.  Normalized figures exclude relevant items that are not recurring in nature.

As normalized figures are non-GAAP measures, we disclose our consolidated net income, EPS, EBIT and EBITDA, on a full reported basis in our earnings release.  As usual, I will start the call by sharing a brief overview of the quarter and then Joao will provide you with an overview of our results in Brazil, HILA-ex, Quinsa and Canada.  [Or close by,] providing more specifics regarding the second quarter financials.

Turning to the results.  

During the second quarter, our consolidated EBITDA reached close to BRL2.4 billion, which represented 13.8% increase when compared to the second quarter of 2008.  

Year-to-date, our EBITDA has reached close to BRL5 billion, an organic increase of 51% versus last year, while our margins expanded 240 basis points to 45.1%.  

Our Brazil EBITDA increased by 8.1%, supported by 7% volume growth with our EBITDA margin in Brazil increasing 90 basis points to 47.8%, driven by good revenue and cost management, partially offset by sales tax increases, [increasing] of certain market investments and higher accrual for variable compensation in the periods.  Year-to-date our Brazil EBITDA has increased to 12.9% in organic terms.  Joao will provide you with more detail of the key drivers in a few minutes.

In HILA-ex, we lost BRL10 million compared to BRL29.7 million in the second quarter 2008, driven by volume growth, good pricing and a strict cost management.  Our Quinsa operations delivered strong results with EBITDA growing 37.3% despite negative volume growth for the region in the periods.  

In Canada, volumes recovered from a poor first quarter and grew 2.3% in the period, due to both industry growth and market share gains.  Our EBITDA included 14.1% in the period, driven by good pricing in [term of certain marketing] investments.

Normalized net income totaled BRL1.375 billion in the quarter, which was 34.1% higher than last year.  Normalized earnings per share increased by 34.6% in the quarter.  

I will comment further on net income at the end of this call.  I will now hand it over to Joao as we start to look at little deeper into the results of each of our operations.  

Joao?

 Thank you, Nelson, and good morning, everyone.  

Let me start by discussing briefly our consolidated performance.  We closed the first half of '09 with another strong quarter, delivering year-to-date EBITDA of BRL$5 billion, an organic growth of 15%.  This growth exceeded our expectations given the continuing challenges to industry volumes across the countries that we operate other than Brazil, where disposable income and overall macro-economic environment remain positive.  

These results were only possible because of the quality of our brands, our people and our focus on productivity and innovation as a way to prepare for what is proving to be a challenging year in several markets.

Now let me start by detailing Beer Brazil.  Well, real disposal income growth continues to contribute to industry volumes.  We also delivered good market share gains in the periods according to Nielsen.  Our market share increased by one full point to 58.3% in the second quarter of '09 against last year.  Year-to-date, our market share is already ten basis points higher than last year at 67.7%.  These market share gains have been driven by our focus on innovation and are evidence of the strength of our brands that together continue to grow their preference in Brazil.

At the same time, a more rational competitive environment in Brazil during the period has also contributed to our share gain.  We remain committed to try to optimize profitability while improving our market share and we are pleased with the performance of our 2008 and 2009 innovations to date.  We continue to look for new ways to connect with our consumers and enhance our [preference] to position ourselves to grow profitability in the future.

During June, for example, we announced the launch of a new 300 milliliter returnable glass bottle and the launch of a new liquid under the heritage of Antarctica brand in Antarctica Sub Zero, both of which join our one liter returnable glass bottle, our 269 milliliter [can] and Brahma Fresh as relevant innovations which have been well received by the Brazilian consumer.

Our beer net revenues in Brazil per hectoliter in Brazil declined slightly when compared to last quarter.  Excluding the impact of our sales of barley, our net revenues per hectoliter increased 1% in the period when compared to last year.  As I mentioned in our first quarter earnings call, we made our prices increase to consumer during the summer which was mostly followed by competitors.  While our price to consumer were raising [in inflation], we have seen our net revenues per hectoliter growing 1% in the period.  

This is primarily a result of taxes growing ahead of inflation for us.  As a reminder, Brazilian federal tax increased by 15% this year, which in the past occurred every four to five years in [normative] pressures, net revenues per hectoliter in the first year it becomes effective.

Moving to our cost of goods sold, we are very happy with our performance.  Our beer COGS per hectoliter declined 11.8% in the second quarter when compared to last year as we continue to benefit from our currency and commodity hedges, lower price of corn and improved efficiency at our plants, partially offset by general inflation.  However, we do expect a more challenging COGS outlook for the balance of the year as our currency hedges rolled into less favorable levels for the second half of 2009, particularly in the fourth quarter.

Beer SG&A, excluding depreciation and amortization, grew by 30.4% in the period.  This increase is a result of higher volumes, general inflation, timing of certain investments and higher accrual for variable compensation in the period.  Year-to-date, our cash SG&A increased 17.5%, mainly as a result of volumes, general inflation and higher accrual for variable compensations.

Normalized beer EBITDA finished the quarter only 0.8% higher than second quarter '08, with gross margin expanding by almost 400 basis points, driven mainly by good cost management, while our EBITDA margin contract 200 basis points when compared to last year, mainly due to the tough comps on our accrual for variable compensation.

More importantly, year-to-date margins expanded by 100 basis points with EBITDA growing 9.7% versus last year, which is a more represented figure of the business underlying performance so far, as some market investment in the accrual for variable compensation phasing have impacted disproportionately our second quarter results.

In Brazil carbonated soft drinks and nonalcoholic beverages, our volume performance was once again strong.  This was driven not only by industry growth by also by market share gains in the period.  Our market share reached 17.8% for the quarter, which is 40 basis points higher than last year.  CSD Brazil continues to be an important contributor to our overall profitability.

CSD and Nanc net revenue per hectoliter grew 4.7% in the period as we continued to price selectively in certain markets, partly offset by higher taxes on sales.  We will continue to track and monitor price opportunities very closely.  [Some] cost of goods sold per hectoliter fell sharply by 15.6% in the quarter despite the low comparison from second quarter 2008, driven by our currency hedge gains and lower [price] impact to mix, partly offset by higher sugar prices.  Also in soft drinks we are expecting much more challenging outlook in our COGS per hectoliter than we saw in first half 2009.

SG&A expenses, excluding depreciation and amortization, decreased 4.5% in the quarter as we anticipated important investments to support our brands into the first quarter.  Year-to-date, our cash SG&A increased 13.2%, mainly as a result of volume, general inflation and also higher accrual for variable compensation, partly offset by the timing of certain investments.

CSD delivered impressive EBITDA results, growing 53.3% versus last year, with EBITDA margin expanding by 1,400 basis points to 52.6%.  Year-to-date our CDS EBITDA grew 30.9% versus last year with margins expanding by 660 basis points and once again the year-to-date results are more representative of the business underlying performance so far.

Before moving to HILA-ex, I want to spend just a couple minutes to go over the impact of our accrual for variable compensation in our year-over-year comparison for our SG&A.  Because of our team in Brazil has a zero variable compensation year in 2008 and our year-to-date results in '09 has been positive, our SG&A, excluding depreciation and amortization, in Brazil has grown just under 17% or BRL260 million in the first half of the year.  Of this increase, about half of it is explained by our accrual for variable compensation for Brazil.

So should Brazil continue to perform well in the second half of the year, the accrual for variable compensation should continue to drive part of the SG&A growth to the similar levels.  Excluding our incremental accrual for variable compensation, our beer SG&A would have increased by 8.3% year-to-date June while our Brazil EBITDA for the same period would have increased by 17.4%.

Turning to HILA-ex, we continue to face challenges in the region with an EBITDA loss of BRL10 million for the quarter driven by significant decline in the beer industry [while] in some of our key markets.  However, we have started to see some encouraging results which give us the confidence we are on the right track, turn around our performance in that region.  Beer volumes declined 8.8% in the period as a result of significant industry decline across the markets, while CSD and nonalcoholic beverage volumes were up 10% due to strong industry performance in Peru.

Moving out to Quinsa and our operations in the south of Latin America, we are very pleased with our overall performance in spite of the industry contraction observed throughout the region.  We had been able to overcome this industry and slowdown by gaining market share both in beer and soft drinks and introducing specific actions to boost revenue and optimize our cost structure.

We achieved an EBITDA growth of 37.3% and a margin expansion of 590 -- almost 600 basis points.  Both our quarter and year-to-date figures represent all-time records in terms of EBITDA and EBITDA margin, with each single unit delivering strong growth rates.  Our volumes were down 3.5% as a result of market contractions, mainly in our soft drinks unit in Argentina.  We gained market share in beer and soft drinks, mitigating the overall industry slowdown.

Net revenues per hectoliter grew organically, both in beer and soft drinks, as a result of price increase introducing [line of] inflation and focused initiatives in terms of trade spend and revenue management.  We aimed our efforts at capitalizing opportunities in the value chain while fostering our premium brands performance.  At the same time, we are supporting and reinforcing our mainstream brands to attain customers' loyalty and avoid migration to value brands in times of economic downturns.

Our costs in SG&A expenses were negatively impacted by increases in labor, transportation and some raw materials, mainly due to inflation.  Nevertheless we're benefiting from lower prices in come commodities, effective currency hedges in the continued search for savings through ZBB and other best practices implemented.  We recently made some strategic moves to strengthen our position within the reason.  We took control over the Pepsi [front] in Bolivia and we added up the Budweiser brand portfolio in Paraguay.  We are confident that this [will add] value for our business by consolidating our top line while bringing cost synergies.

Now let's turn to our results in Canada where Labatt delivered a 14.1% growth in EBITDA versus last year.  This brings year-to-date EBITDA growth to 10.6% versus last year and showcases our ability to drive top-line growth while continuing to remove costs from our business.  Top line grew 5.9% in the period and has now fueled profit growth at Labatt for the sixth straight quarter.

Volumes in the quarter were up 2.3% versus last year with increased shipments in all five Canadian regions.  We continue to focus on maximizing revenues as of [this] by posting a 3.5% growth in net revenue per hectoliter in the quarter versus last year while gaining 0.1 share points versus last year.  Our COGS per hectoliter growth was 8.3% in the quarter as we have begun to cycle the commodity price run up from last year.

Secondly, significant production efficiency gains on our domestic brands are reducing the cost impact of our growing import portfolio.  Cash SG&A declined by 10.4% in the quarter, driven by timing of our sales and marketing expenses, which will be reinvested in the market in the third quarter and our relentless focus at uncovering efficiencies and removing working dollars from the business as evidenced by our ability to reduce our total distribution expense in the quarter, despite bringing more volume to the market.

We are very pleased with our performance in the second quarter and excited at the brands and brand building activities we have in place in the Canadian market.  In a time when our competitors are focusing on the value segment, we are focusing on value creation and innovation.  Our focus brands, Bud, Bud Light, Stella, Kiev and the Lakeport family have gained 1.4 share points versus second quarter 2008 in both Bud Light line and Kiev's White which we launched in May and March respectively, have both already surpassed our annual volume expectation.

More than ever, we are committed to our strategy of focusing investment in our key brands, discipline revenue management including price increase, smart trade programs and obsessive sales execution.  We truly believe that our great people, strong brands and tight management process will support our dream of building both EBITDA and market share.

Before I wrap up and hand it over to Nelson, I would like to comment on the recent ruling by CADE, the Brazilian antitrust authority, with respect to our loyalty program called To Contigo which resulted in a BRL352 million fine as well as the data that has suffered in the press regarding some other market -- AmBev marketing strategies.  Though we fully recognize the importance and need for antitrust regulation to ensure a level playing field, we disagree with the merits of CADE's decision regarding our To Contigo program and would challenge it in the Brazilian courts.

We believe the program, under its current configuration, is not anti-competitive.  Based on the advice of our counsel, we understand that the likelihood of loss in this case to be possible, but not probable.  Therefore, we have not accrued for this amount in our financial statements.  

As for other antitrust issues that have been reported in press reports, we believe that our marketing strategies are [pro] competitive since they are designed to either attract more consumers and improve the service level at the points of sale or to respond to consumer demand in terms of packing in liquid differentiation and of consumption occasions at more competitive prices.  

Thus, as market leaders, we take antitrust compliance very seriously, are committed to comply in antitrust law and will continue to defend our rights to innovate in order to better connect with our consumers or to improve our relationship with point of sale.

Going back to the overall business, I wanted to finish by saying that I am very pleased with our performance in the first half of '09.  Our year-to-year normalized EBITDA growth of 15.1% was possible despite volume slowdown across most Latin American markets other than Brazil.  

I must say we expect the tough year.  We prepared for it by putting all of our energies and methods to face the challenges.  The results are proving our management teams around organization were well prepared and took the right actions with focus and discipline to meet the targets.  I want therefore to take this opportunity also to congratulate our people in Brazil, HILA-ex, Latin America South and Canada for the results achieved in the first half of '09.

We expect the second half of '09 to have a more challenging year-over-year growth than what we saw in the first half of the year across our regions, both to industry regions such as in Latin America South as our [staff] marketing investment comparisons, particularly in carbonated soft drinks, Nanc Brazil and Canada, but we believe we have the right plans in place and are confident that our people will continue to execute the plans we agreed on earlier in the year.  These plans are important not only to guarantee our short-term results, but more important, they will position our company for future growth.  

Now I would like to go back to Nelson.

 Thank you, Joao.  

In this final section I would like to guide you through the main lines between the normalized EBIT of BRL2 billion and the net income of BRL1.3 billion as disclosed on page four of our release.  

Our net financial expense [of] BRL249 million, a decrease of 22% and compared to BRL221 million in Q2 last year.  This decrease is mainly driven by lower interest rates as a result of the reduction in our gross debt and of the interest rates in the period.  

Our effective tax rate in the period was 21.6% compared to 24% last year.  This improvement is mainly a result of higher tax incentives versus last year.

Our operating cash flow generation in the second quarter added up to BRL2 billion and is around 31% higher than last year.  Year-to-date we have generate BRL3.6 billion in cash, exceeding our H1 2008 operating cash flow by just over 50%.  

All of this, while growing our profitability and advancing our brands and innovations are showed by our market share gains in Brazil, Canada and Argentina.  Nevertheless, operating cash flow generation remains one of our areas of focus for the second half of 2009.  

Our gross debt decreased to BRL8.8 billion at the end of June compared to BRL10.7 billion at the end of December as in the first semester we focused on the retirement of BRL2.5 billion maturing debt while distributed to shareholders approximately BRL500 million in interest on capital.

At the end of June, we raised around BRL400 million from [BNDS] to support our investments in Brazil.  Since then, we have paid BRL800 million debt which matured in July.  We remain committed to proactively manage our capital structure and to return the excess cash to shareholders.  In the rent paid out in July, an extra BRL745 million are IOC in dividends.  Besides, we just announced the new dividend in IOC payment of around BRL1 billion to be paid in October.  

That said, and assuming those significant change to the trades we see across the different markets where we operate, I believe we are in good shape towards maintaining our dividend payouts similar to our 2008 levels.

I'll now hand back to the operator and open up for questions.  

Please, BJ.

 (Operator Instructions)

Our first question comes from Robert Ford from Merrill Lynch.

 Hey, good morning, everybody, and congratulations, Joao and Nelson, on the quarter.  

My question had a do a little bit with respect to the pricing quarter-on-quarter and I know you addressed this in your comments, Joao, and I think it was addressed in the earlier call as well.  But I was curious, with respect to the segmentation efforts, the role of the one liter and how you see the dynamics.  Quarter-on-quarter there was a relatively significant move in terms of pricing, as you mentioned.  

And I'm curious as to how you see the role of the one liter in that dynamic and what you anticipate over the balance of the year with respect to any additional pricing you might be able to take.

 Hi, Bob.  

Well, thank you and let me start by addressing the part, I think, on the dynamics and outlook of price and then I go into the details of your question.  I think the outlook, as we stated in the first quarter and still stated today, is that I think the whole industry, given the pressure, the worry about the crisis and so forth and so on, the industry has -- it was and it still is concerned about the profitability, given that what we find in the marketplace is that we move the prices, as we always do, at the very end of the year.  Competitors follows faster than in other situations and then prices have pretty much stayed where they were.

Of course, there are price activities, but nothing different than the usual.  I think some people could think maybe we gain share and we are, of course, happy with the share gains that we had this year.  And that because of that, a more aggressive pricing situation could come in the marketplace.  

This is really not happening.  Okay?  I mean it's happening to the normal extent.  There are promotions and so forth and so on.  So actually, the dynamics are good and I think -- when I think about the outlook we will, as we see opportunities to raise prices, we will take those opportunities.  It looks like it will be as usual towards the end of the year.

So this is, I guess, just on the broader page.  When we think about the decline, I would tell you the decline is two-thirds to three-fourths due to the tax situation.  The fact that the federal tax or tax in general went up, it took most, whether 67% or 70% something of the price increase and the minor portion, whether it's one-third or one-fourth was due to the mix.  Whether we're talking about one liter, whether we're talking about Brahma Fresh, whether we're talking about the 269 milliliter.  We have had innovations and we now have the two new ones that I mentioned, some of them with higher [mark], some of them with higher contribution margin, some of them with lower contribution margin.  So the liter does have an impact, but it is a minor one.

So when I look about the future, I think the packaging mix will have an impact, but I think the most of the impact will be first from taxes and second, I would say, equally, price activity that we will not lead because we're still on the -- we're working on the basis of putting inflation to prices, share on profitability.  Very happy to share, but it's not enough.  We always want both.  So I'm actually looking in a positive manner for pricing.  Plus, given this case is not positive in the sense that prices into -- price to retailer will fully translate into the [net] two liter, again, mainly from tax and second from packaging mix.

The innovations, if were to talk a little bit about them, as we have said, it is the focus of the end of last year, this year and the -- some of the years to come.  Some of them will bring higher mark, others lower mark.  But I think what consumers, in a way, are looking for, I think it's interesting to see that a lot of the market share growth came from innovation.  And people did see positive aspects of the proposition that we brought, whether out of pocket, whether family gathering or, if we're talking about the liquid, such as the Antarctica Sub Zero.

 And Joao, this year is going to be a little bit different going into the end of the year because you have the deadline for the [Secovi] system implementation.  Can you comment a little bit about your own experience with Secovi and how you see the industry implementation as we get closer to the December 31 deadline?

 Sure.  I actually think, Bob, when I talk about this rationality of the industry, I think that Secovi, once again, in the same way that the flow meters back four or five years ago have helped to bring more people into taxpaying situation, definitely Secovi is an enhanced better version than the flow meter.  Okay?  We are in full compliance, given the calendar, given the schedule.  And we think most of our competitors are coming into this situation also.  So this is happening in our industry as well as similar systems are going into other industries.

So I actually think this is one of the reasons why we have this rational situation or somewhat rational situation in the marketplace.  I think as we role this out towards the end of the year and beginning of next year, that that should continue to help us in that matter.  I think we, as have always done in the past, have to do as much as we can with the government to fight tax evasion.  And we will continue to do so and Secovi is one of the ways to do that.

 Great.  

And then just lastly, I know you had an adverse sugar compare, but you're still ahead.  Can you talk a little bit about your sugar costs going forward to the extent you have visibility?

 Yes, I think I will not -- I would not go into the details of each component and Nelson can jump if he wants to as I ended this.  But basically, very favorable currency and commodities hedges on the -- especially currency hedge in the first half.  Not as favorably in the second half and that's why we mentioned the comps on cost of goods will be a little bit tougher.  

As we roll into 2010, I would say that 2009 will be somewhat [object] of comparison.  We -- when we look at 2008, not that much.  It will probably be between the two.

I think what could be good news for us to compensate some of the commodities that are going up is that the hail has decreased a lot.  And as the hail decreases a lot, if it continues to decrease in the second half this, of course, will help the cycling of the currency hedges for next year, compensating the levels that we see sugar that now are in all-time high.  And as we roll this into the next year, that would be not favorable.  But the currency will more than compensate for that as we roll into the second half of 2010.

 Great.  Thank you very much and, again, great, guys.

 Thank you, Bob.  Thank you very much.

 Our next question comes from Lauren Torres from HSBC.

 Good morning.  

On your first quarter conference call, I think you seemed rather hesitant to endorse similar volume growth in Brazil for the second quarter, but you delivered similarly strong results this quarter.  So I was just hoping you could talk about the drivers of that growth and if you think these types of growth rates are sustainable as we think about the second half of the year.

 Okay.  Well, Lauren.  Very good question.  

You are right.  I mean, I was hesitant and, as I continue to be -- I'd rather be -- it's more of a mood type set.  I'd rather be cautiously optimistic.  Maybe I was more cautiously, as we enter the second quarter and now I'm adding the cautiously optimistic.  It isn't true to have that mood is -- I think the fact that we were  in a sort of tough mood mindset help us to make a lot of hard decisions on the productivity side and really helped us a lot in the cost of goods sold and somewhat in the expenses.

We -- as we go into the second half, we definitely have a different mindset than we started the year.  And as we see the industry better than expected and see the share better than expected, we have to prepare for a better summer because I think the worst that could come is not having the volume to serve our clients.  So we are squeezing every bolt to have a capacity everywhere.  So I am more optimistic.  But it's hard to predict.

But let me then tell you about the fundamental factors that should affect us in the second half.  I think first, when we talk about the industry -- we said that in the beginning of the year -- the fact that the minimum wage has increased by 12% and that actually food inflation is still coming down every month, this actually is a positive factor, very important positive factor that rolls into the second half.  So that will help us to maintain as a positive industry.

I think second, which definitely is very hard to predict, although some people continues to try and we also buy that is the weather.  I think we have had positive weather and we also have had a lot of holidays in Brazil.  And we are executing very well holidays also in the marketplace.  That also helps and that will continue to also be true in the second half.  So I think those three things -- per capita income, weather and the holidays and so forth -- those are things that will probably help the industry in the second half.

In terms of market share that, of course, has helped us a lot, I think there's one thing going on for us in the first half that will also go for us in the second half.  Hard to say it will be of the same magnitude, which is the innovation.  A lot of our share gains, as I said in the previous question, come from those new things that we put in the marketplace.  So I think we are reading well consumers' mind and putting good things out there.  We know our competitors are already and will be [catching] that, so right now we are playing a game where they are not there.  They will come out to the leader as they have already come out to the smaller can.

So -- but we also have the new news.  We have Sub Zero that was not there in the first half.  We have the 300 milliliter returnable bottle that was not there.  So it's hard to say whether we will continue the run -- whether consumer [increase] or even maintain a much higher level of share than what we started the year where our most two base -- two full points ahead of the beginning of the year share.  So that should also continue to help us in terms of [running], not as much in the first half because we see competition coming, but somewhat it should help.  So I am starting the second half on a much better mood than we started the first quarter or the second quarter with all the cautious that a crisis moment should entail.

 Great.  Thank you.

 Thank you.

 Our next question comes from Trevor Stirling from Sanford Bernstein.  

Mr. Stirling, is your phone line on mute?  We're unable to hear you, sir.

 Sorry.  Apologies for that.  

Two questions.  The -- concerning the currency hedges and looking at your policy of 12-month -- give or take 12-month hedges and when the weakness in the real came, would it be fair to say that the big weakness on currency hedges come in quarter four rather than quarter four rather than quarter three?  And the second question, looking at HILA-ex, there's quite a big contrast in the performance in beer and soft drinks.  Is that purely a matter of country mix, as you said?  Strong performance in CSDs in Peru and presumably weak beer in Venezuela?

 Yes, well on your first part of question, Trevor, is the currency hedge -- yes, the fourth quarter is the worst comparison as I stated in the beginning of the call.  So that's actually -- given that we know the plus or minus 12 months, into 14, whatever that is the case.  

In terms of HILA-ex, what we saw is that we saw, actually, a strong industry in Peru, in southwest, so that has helped with the volumes of CSD and have seen bad -- some bad markets, some bad volume, industry-wise, even as well, also in Dominican Republic, that has made the comparison negative for beer.  Which I think is interesting for HILA-ex is that I think we have been batting in the right innovation also in those markets.  So although the industry has declined as it did in some of the markets in Latin America and south, I think we are batting on the right products.

So for example, Brahma Light in Dominican Republic, we also launched the liter in -- the liter bottle also in Dominican Republic.  And actually, when we think share-wise, the performance has been very good.  And that's true also for some other markets.  But we did two things.  So we knew early on that those markets would be tougher, in a tougher situation.  We think we have the right innovations in place there, but we did a much tighter control, both in terms of costs of goods sold and as well as expenses.

And I think that's the reason we are actually quite happy with the much better, although negative.  And this is somewhat normal, given that we're trying to grow those markets.  But we don't want to be burning as much cash as we burned whether last year or last quarter.  So we're actually happy that the cost control, both in variable costs and expenses have helped to compensate part of the industry decrease, mainly India.

 Thank you very much.

 Our next question comes from Alan Alanis from JPMorgan.

 Hello.  Good morning, Joao, Good morning, Jamel.  I have a few questions.  

The first one has to do with -- could you remind us how much of your beer volumes in Brazil are being sold through the 600 milliliter and how much of your volumes roughly are being sold right now in your one-liter presentation, please?

 Okay.  We're going to go with all the questions first, Alan.

 Sure.  

The first one -- the other two are regarding Canada and the ABI branch and I would like to hear your comments regarding what's the strategy there and how much the increase in the cost of goods sold is related to the significant shift towards Anheuser Busch brands in Canada.  As you mentioned, this Bud Light and Bud Light Lime and Stella are being very strong performance in Canada.  But those might be less profitable brands for you.  And I would like to hear your thoughts regarding the strategy.

And the final question has to do with the -- if I -- just a clarification of a comment that Jamel said.  You mentioned the dividends might be similar to the levels of 2008.  Does that include dividends and share buybacks or only dividends?  If they are only dividends, that means that the money given back to shareholders will be around 20% less this year in 2009 than in 2008 and significantly lower than in 2007.  And I want to see if I'm listening correctly to that statement.  

Those were the three questions, Joao.

 Okay.  Great.  

Okay, Alan.  Well, I will take the 600 and one liter and I can give my comments on the Bud Light Lime situation in Canada and then I'll leave the COGS of Canada and the dividend clarification for Jamel.

 Sure.

 I think first, we don't -- we, for competitive reasons, will not fully open the details of the 600 and the one liter, how much is one or how much is the other one.  I think what -- I would say two things.  First, the one liter is a very focused strategy, okay?  And you know the market, you know soft drinks also.  The one liter has been mainly focused on the route supermarkets.  Okay.   Most supermarkets went to [four].  And in areas where competition potentially has a value proposition that could be very aggressive, mainly also in those channels.  So it's not an across-the-board type of situation.

But once we've found the right price point and the right channels, which was somewhat in the middle of the first quarter, the liter has started to develop much better than it was.  I mean, you have to remember that the liter has already like ten or 11 or 12 months.  But as we fine-tune and find the right execution for the one-liter bottle that obviously cannot be everywhere given that it's lower contribution margin.  So very focused and we see a lot of consumers like in that [view].  When you -- when I said in the beginning, just to also have a little bit of a few -- that out of our share growth or volume growth, a lot of it is coming from innovation.

But then it's not really only the one liter.  It's really the combination of much more availability in different cans.  You have to remember now that cans in Brazil, we used to have just one offering and how we have at least six.  We continue to have the [150], have much more 473 than we had before, much more 269.  The 12-pack, the 18-pack, the 24-pack.  Those were things that when you look two, three years ago or sometimes even last year were not available.  So that has a big impact together with the liter, but also together with Brahma Fresh.  So you can think one-third, one-third, one-third.  Just think about how innovation as a whole and not just the liter.  

There's a lot of noise about the liter, but the contribution, it's really only distributed by those -- at least three different things that I just mentioned to you.  And we're coming also with a batch of Sub Zero in parts of the country for the second half.  So we're excited about the second half when we look about innovation, liquid and package.  As you know, those are the two areas that we are working on.  And we know that a point in time, comparison will come, trying to copy some of that.

When I talk about the Bud Light Lime and if I go back, I think we explained a couple of years ago when we entered Canada, that we actually have a very, very good contact.  We used to have a very good contact and we still do because the contact is the same with ABI.  Nothing has changed after the acquisition of Anheuser Busch.  So we had a very good contract, such a good contract that the Bud -- actually, the -- whether Bud Light or the Bud family -- gave very similar marks than the AmBev.  

So our tough decision back then was actually to find the right portfolio.  And when we saw that we had the number one selling brand with Bud and that we were trying so much to hold it because of about this and that, we realized that was the wrong decision and then we start to focus in the right portfolio that is much before this ABI integration or closer ABI relationship.

In that -- given that is a fact and Bud is the number one selling brand, Bud Light was one of the most brands with the higher growth rate.  And given that, we buy consumer research slot, that consumers were looking for that lime flavor, the brand proposition of Bud Light Lime was a clear potential winner in that marketplace and we enter just at the end -- at the -- during the month of June, so it's very early to give you any specific feedback.  

But very early, let's say two months, results are very encouraging.  So we're very happy with the introduction of the brand.  And we're also very happy with the profitability that brand brings to AmBev given the very good contract that the previous management, even before we bought this company, were able to negotiate with Anheuser Busch.

Okay.  I give it to Jamel now for the other two pieces of the question.

 Thanks, Joao.

 Okay.  Hi, Alan.  

Well, regarding -- let me start with the COGS in Canada.  We -- I think we talked a little bit about that before, that Q1 and Q2 -- we should have a tougher comp in Canada.  And as we would enter the second semester we would start to see -- especially because of the commodities price, we start -- added commodity price, we would start to see a better COGS performance versus was here.

So what we saw in Q2, if you look at the increase of -- just above 8%, primarily driven by tough comps in terms of the hedge of the commodities we have as well as the depreciation of the Canadian dollar.  So on average we had an implied exchange rate depreciation of 10% in Canada versus the dollar, which is an important component of the COGS also there.  And that was pretty much the reason on driving the difference or the increase we had so far.

And that should, as I said, get better for the balance of the year.  Of course, since we are selling more Bud and Bud Light, like Joao said, this has an impact, a mix impact in the COGS which is benefiting both net revenue, but also impacting cost and then you'll see the net impact of the margin level.  But at this stage, it's clear to say that the pressure or the decrease in our gross margin in Canada is much more linked to the dollar depreciation, a dollar depreciation and the commodities.  So in the tough comps we had in terms of commodities rather than anything else.

So that was about the COGS in Canada.  Now going back to your question on the dividends, so what we said and continue to say right is that we have no reason to sit on excess cash.  Right?  

So our policies also distribute and pay out the excess cash.  In the first semester we had an important amount of debt maturing, had BRL2.5 billion maturing, debt we added by retiring.  At the same time, we managed to raise BRL400 million and also have additional BRL300 million in the pipeline for the second semester, second trench of BNDS money that is used to support or CapEx needs, our investments.  So that's how we had to handling that.

And therefore we just resumed our share buyback and our dividend payout strategy which, as you look towards the end of the year, when I said that you should get to 2008 levels, that's arranged.  We can be slightly up, slightly less of, say, today.  More towards -- we are really confident we can at least match the amount of dividend excluded in the share buyback we had last year.  But that's something that we're going to decide as we see the evolution of the results for the balance of the year.

 Okay.  

Now you're -- right now you're roughly at 0.4 times net debt to EBITDA.  How do you see the corporate structure or the -- in terms of debt -- net debt to EBITDA ratio for the remaining of the year?

 Well, we had --- the 0.4 -- you are right.  I mean, as we take a picture of June, that's the number you should see because it had an accumulation of cash, primarily, which we used it -- part if it already in July when we tied something like BRL800 million of debt, which, of course, didn't change the net debt.  But then it had the IOC and the dividends.  So everything we announced so far in terms of IOC and dividends, of course, we will -- got to generate some cash also in the next month or in this month.  

But you take our net debt to EBTIDA ratio up and go past 0.4.  Our historical range is something between 0.8 and one.  We tend to be in the low end, especially because of the IOC benefit that I can get once I can pay out IOC and maximize IOC, a lower leverage help us in maximizing IOC and that has an extremely attractive fiscal benefit.

So we should always find ourselves towards the low end of that range.  But it is something that we are handling on a constant basis and we don't expect it or want it to be towards a deleveraging below, like the 0.4 or below this level, like towards the 0.4 like you saw.  This should catch up already in this first month of the second semester.  But this also, in the end, depending on how much cash we can generate.  So it's a dynamics situation and that's what we assess constantly.

 Okay.  Thank you very much.

 Our next question comes from Lore Serra from Morgan Stanley.

 Yes, hi.  Thanks for the -- or taking the questions.  

I just want to go back for a second in terms of the Brazilian beer pricing in the quarter and I understand the comments made about mix, et cetera, and the taxation.  But the fact is that your revenue per hectoliter went down 3% sequentially.  And if I'm not mistaken, the excise tax increase was effective January 1.  So could you just go back and help me understand what drove the 3% sequential decline?

 Sure.  Hi, Lore.  This is Joao.  We -- when you look on a quarter-by-quarter basis, you have the impact of taxes overall.  So taxes overall is a combination of federal and state taxes.  So taxes have taken.  If we look at pure prices -- okay, so prices to retailer -- prices pretty much remain flat.  Okay, quarter against quarter, price to retailer.  So when you see the -- all the -- two-thirds to three-fourth of the decline that you see on a quarter-by-quarter basis is taxes overall.  So it is the 15% IPI tax increase, but also -- you also have the state tax that, on a quarter-by-quarter, semester-by-semester basis, they also increase their taxes.  So they also -- they always do one, two or three times.  For your surveys, this year price increase, there is a catch-up process.

Okay, so you should not only think about federal tax, but you have to account for state tax which is actually -- has not changed at all from past years.  But maybe because the IPI was flat.  People are not taking into account the state taxes.  So that combination of state tax and federal tax is what it takes, the 60% to 75% of net sales -- of the impact on net sales.  And the rest is the mix, is the combination of the cans, the liter, the brands, that whole combination.  That's basically what it is.

 Okay.  That's helpful.  So just thinking about the second half of the year, you're expecting more COGS pressure as you've talked about in the -- I mean, overall, but I assume in the Brazilian beer business as well.  The factor of variable comp and bonus accruals affecting SG&A will hopefully reoccur, right?  Because you want that to happen.  So if you don't get more pricing, isn't there some risk that your margins are going to be under pressure in the second half of the year?

 I would start by saying that, well, first, in terms of the verbal bonus, it will only occur if we have good results.  So given that we always worry about share and profitability and given that we have gained probably more share than we expected in the timeframe.  Of course, we wanted to recover and we have fully recovered on a year-to-date basis, but only by ten basis points.  

But when you compare on a month-by-month basis, it's more like 200 basis points.  We entered the second half in a way on a much better situation than we entered the first half.  So I actually have the possibility here, if we find situations where we can move prices and we -- if we were thinking that our margins will be affected and I think we now have very good visibility on this, we have -- we may have opportunities to do some revenue management there.

So I think we have a lot going on for us to try to not just to work on the gross margins.  So if we find savings, whether that's in cost of goods sold or that is in SG&A, to put it back in the marketplace.  As I said in the beginning of the year, if I find good ideas, I am not going to work for the next budget cycle to really speed it up.  Good ideas.  But again, always giving that we want to maintain an important level of profitability.

If that doesn't happen, if -- I mean, if we don't have the results we expect, there will be no variable bonus payment.  I think when we take out the variable bonus payment and given that we grew on the way we grew, I think if we look on the first half and not just on the quarter -- because then you have the timing situation -- I think we have pretty much SG&A out -- in control, given that formula that somewhat we have mentioned that we look at in the best -- in the very many best years.  So I think we have SG&A under control.

We actually have a lot of good things in term of productivity helping us to, eventually if we need, to put some money back in the marketplace.  Although we have tougher COGS, which is true, we also have savings that could also help us.  And if we find a good situation for a price increase on that mix of share and pricing, we will do so.  So I look at the second half more cautious, but I am optimistic given the sort of things we have recovered in share, in pricing analysis and in the control of expenses as well as cost.

 Great.  

And just one quick question.  Year-to-date, I think your CapEx has been something like BRL500 million versus about BRL1.8 billion last year.  Can you just give us an update on what the CapEx budget is for this year, please?

 Sure.  I'll ask Nelson to cover that.

 Yes, our total -- hi, Lore -- our total CapEx for this year budget is around BRL1.6 billion.  Out of it, BRL1 billion in Brazil and that's the type of investment level which -- that you see by year end.

 Thank you.

 Yes, the good -- just to comment a little bit on this, I think the good thing is that we have been able, expecting a tougher year, but with the same CapEx -- we still expect that with the same CapEx we will be able to deliver a much bigger growth than we had, let's say, initially anticipated.

 Great.  Thank you.

 (Operator Instructions)

Our next question comes from Celso Sanchez from Citigroup.

 Hi.  Good afternoon.  

I -- sorry to beat a dead horse on the revenue per hectoliter, but just looking back, I understand, Joao, what you talked about with the state taxes and I know the timing tends to be sort of second quarter versus first and there's an impact.  But when we look at the years past, the progression of first to second quarter, there really has been almost no change at all.  

So that is -- is a big chunk of that 3% that Lore referenced before the state tax thing or is it really a pretty major change in mix away from cans in the summertime to, perhaps, less expensive presentations in the second quarter?  If you could just clarify that.

 Sure.  Okay, Celso.  I think it's the right question to question.  

It's, again, I think the last time we had [AmBev] increase is five years ago, so that doesn't happen every year.  So we have [best] on inflation enterprises.  Okay?  And on a sequential basis, it's much more, let's say, that combination, although on a sequential basis, the federal tax has a much less impact, so state tax has a much greater impact.  I would say this is at least two-thirds of the impact and the rest is the mix.

I mean, it's not that I don't want to give more information in this, but it is what it is.  I mean, we haven't lost any retailer margin.  We have not lost any distribution margin, so those things are totally still under control and we still have all the targets related to this and we're very comfortable on the margins, whether retailer or distributors.  But again, it's been a year and we knew it was going to be at this year on a -- regarding taxes.  And we still worry about taxes.  We work day in and day out regarding that, discussion with state governments, with the federal government, to avoid it to get worse.  And then the mix has an impact.  But it's the smallest piece in this whole equation.

 Okay.  Just maybe talking a bit more about, since the end of the second quarter, if we could, if you can give us just some color there.  The comments that [Famsa] has made have talked about maybe rolling back a little bit of their pretty large price increases on a year-over-year basis and having done some of that towards the end of the second quarter.  So presumably that plus the fact that they did it late in the second quarter and that you mentioned in your press release a pretty rational environment.  Has that changed at all when you consider what's gone one since June 30 in the marketplace?  Any less rational or are you still comfortable in spite of --

 Well, surprisingly or not -- and I think it's a very important question -- we haven't seen that much price activity from them.  I think ourselves -- Famsa and [Kintalio] have all been rational to this point.  If we were to relate some price activity, I would say this comes more from a [Itava] perspective than from the other two players.  But again, this is nothing different than what we're used to.  So I think the industry is looking for ways to fight the innovation rather than price.  I think we have seen already Itava launching at 310 and [Melkan].  We have heard the rumors about Famsa and [Skien] launching their one liter, about Itava launching their one liter.

So my perception today is also after, let's say, a month-and-a-half into the third quarter.  It's more that sore of situation.  I'm not saying there is no price activity.  There is price activity, but nothing different than the normal.  Nothing different than -- or maybe do expect it because of share loss, of share gain. The share gain is important, but let's also remember that what we did is to recover what we lost.  Okay?  And then, okay, in the second quarter maybe we went a little bit further, but this is actually the situation today.

So I'm not saying -- I'm not positive on the -- that we're going to see a major change in the third quarter up or down.  Okay?  I mean, maybe slightly down, slightly up.  But nothing big.  And then I think on the fourth quarter, as always, if we find the space as we have found in the previous years to enter with the price, we will do so.  I mean, that's how much outlook I can give pricing-wise.

 Okay.  Thank you.  

And just finishing up the pricing question in Canada, can you talk just a little bit about what the role of [Blue] in the portfolio there -- at least in Ontario we've seen Blue below 30 for most of the past 12 months.  I would have thought it would be more probable with the Canadian and it's at a substantial discount there.  So can you talk a little bit about how you see that part of the portfolio evolving and what the role of Blue is now versus maybe a year ago in years past?

 I think compared to the years past it was a little bit in the way I was answering the other question is -- it's Blue - it's not, I would say, a top focus brand as it was in the past.  So that has been a change with me a few years ago.  We -- of course, it still has a role in the whole portfolio, but it's not the sort of focus that it was.  

And I think Canada, in a way, is also in the same mood as in Brazilian terms as innovation.  I mean, we have launched the Bud Light Lime.  We have launched the Kiev's White [Lounge].  We're been strengthening the Lakeport portfolio.  We have been strengthening the Bud and Bud Light portfolio.  So I think those four or five family brands are right now of a greater focus than Blue.  Blue will play a role as we have other brands in Canada, but not to the same extent that it had in the past.

 Okay.  Thank you.

 Thank you.

 Our next question comes from Jose Yordan from Deutsche Bank.

Please go ahead.

 Hi.  Good morning, everyone.  

Well, my questions were answered, but I have one more on HILA-ex.  You mentioned in the press release that you were well on your way to breakeven or you had some concrete plans to break even.  And I'd just be interested on what exactly can we expect a breakeven run rate, let's say, for HILA-ex?  Is it middle of 2010 or what?  Any color on that would be helpful.

 Okay.  Hi, Jose.  This is Joao.  We don't have -- we don't give very specific guidance here.  What I can say is that, without getting into the details, I think every country we operate in HILA-ex have now clear strategic roles than they had in the past.  I think the work we did in the first half was to sort of stop the bleed, okay, especially in Venezuela.  

I think the team is doing a great work to stop that.  As you stop Venezuela bleeding, you will most stop the bleeding of the whole HILA-ex.  So that's what we did.  So I think we go into the second half on a much strong position than we did in the first half.

So I think there are two situations here.  Even if we were to reach, let's say, breakeven the fourth quarter, that doesn't mean necessarily that I have reached already, found the solution going forward every year.  You know our mindset when we entered there was to have a zero cost option.  I think that has been the situation when we enter most of those markets.  It makes still sense in some markets.  It doesn't make in other markets.  But zero cost option.  That costs us BRL80 million.  It's not a zero cost option.

So I think the first thing I have to do is try to go towards that zero cost option, which is breakeven.  But also remembering that if we have a new strategy of still acquiring A or B by being there, we may have to be more aggressive in some markets and less aggressive in some markets and we will see what will be the outlook as we get to there.  I think we have a clear strategy today than we had in the past.  And I think we have a plan to stop the bleed in Venezuela that we definitely helped the total of HILA-ex to get to, let's say, to a breakeven level faster than we could expect.

 Okay.  Great.  I mean, and maybe you can give us a little color about why was Venezuela bleeding?  Because I mean, I guess the other visibility we have into Venezuela is through the Coca-Cola operations there.  And they're not particularly bleeding, certainly not in the next -- in the last six months with the artificially strong currency, et cetera.  I mean, what is different about the beer business in Venezuela versus the soft drink business that was making you bleed?  Not to mention, obviously, they're a market leader and you're not.  But I mean, aside from that.

 Yes, that is a big portion, of course.  But I think there is no -- just one point.  I think it's a combination of points, I think, given the focus that we have in different markets.  Venezuela was not the focus and I think we made a few mistakes, whether in the brand during the efforts that we had.  Whether in the exactly right price that we had.  

Actually, also in the CapEx that we had.  So it's really a combination.  I think we had a good run back in 2006, 2007.  We had the opportunity back then maybe to make some CapEx investment to actually grow because we were on a roll.  We were growing share back then.  We were like more on the eight, nine, ten sort of level.  For different reasons we probably didn't do that.  If you don't do that, then you just ended up just moving the price and maybe it was not the right moment to move the price.

And then you ended up not to -- exactly protecting your costs as you should.  So it was really a combination of things that, at the end, given that we lost some share, you lost critical mass.  When you are the number two or the number three, as it is the case, number three, even in Venezuela, any critical mass that you lose, but losing share, it's a huge difference in the marketplace or in the P&L, actually.  So I think our P&L does know it's suffered from losing scale and by losing scale without predictability.

If you lose a scale without predictability, you didn't respond fast enough for that new situation which, in a way, was not just the 2008, but to us some decision that we made even before that.  So I think we quickly learned that in the beginning of the year and try to reestablish the new situation and made the right operational changes to the burning rate or burning cash on a level that is right for that operation.  If you don't find ways to find the right scale for an operation where you have 4%, 5%, 6% market share, then your P&L will never work.

 Okay.  Great.  Thanks a lot.

 Okay.

 Our next question comes from Alexander Robarts from Santander.

 Hi.  Thanks, everybody.  

Okay, I guess my main question really is on Beer Brazil SG&A.  I mean, the cash SG&A was obviously -- there were some issues and surged pretty impressively there.  And I'm trying to just understand if we're seeing kind of just a general step up here in your business in Beer Brazil and I guess the question relates specifically to this item that you discussed vis-a-vis the higher expenses from channel mix.  If you can give us kind of some color behind that?  Is that a one off?

And just kind of connected to this, I mean, when you talk about Brazil SG&A, right?  Kind of the more -- the larger number increasing in the quarter 14%, that adjusted number and then for the first six months, 8%, do you think for the year are we going to be more toward the 14% or toward the 8%?  So that would kind of be the first question.

 Hi, Alex.  This is Joao.  

Do you want to give me all the questions?  Just to have an idea because this is the first question?

 Sure, sure, sure.  Okay.  

And the next two are really clarifications.  I just wanted to understand, as you kind of mentioned in the press release, you're more optimistic on the second half than you were earlier in the year.  And is that really -- or is the change there really this notion of food inflation coming down quicker and a better innovation pipeline or is there something else?  

And then the second clarification is in the appeal process with this fine, the antitrust fine, maybe you've talked about this before, but can you keep the To Contigo program alive or do you have to suspend it?

 Okay.  Okay, Alex.  Thank you.  Well, on the -- maybe starting on the clarification piece, I think what I was trying to convey on the more optimistic is twofold.  I cannot be, let's say, as cautious as I was -- as I started the year.  Because when I started the year, the -- I mean, the way the world crisis would unfold in Brazil was not clear.  

So therefore the world was not clear, not so clear.  Not that it's very clear now, but it was not so clear.  And Brazil less, even less.  I mean, because we didn't know what was going to be the impact in Brazil.  And third, I don't know exactly how our innovations would perform.  So the reason I go into the second half more optimistic is because now we have a better view on Brazil.  So Brazil is better than what we expected.  As the world, given what we read here and analyze also is slightly better.

So the two external components, world and Brazil, are better as well as our innovation, market programs, market share gains, our specific industry.  So I go into the second half much more optimistic than I was answering the first half.  And having said that, we maintain, I'd say, the cautious piece, giving that -- I mean, we're still in unstable -- in an unstable world.  

So much more optimistic about the second half, given all the disclaimers and worries about the COGS comparison, the year-on-year comparison and so forth and so on.  So that's the first clarification.

On the food prices and specifically on your point of the To Contigo, the To Contigo, as is currently configured, it can stay as it is.  Okay?  So I think that's the clarification.  Going on Beer Brazil SG&A, if I understand your question correctly, I would make two comments.  We mentioned, as I said, the 8.3% right for the first half, I think is a number to keep in mind.  That goes to the 16.9% with the accrual of the variable bonds.  So the 8.3%, if we think that the inflation was 4.5% to 5%.  That the volume went up by the numbers that you know.  That the fact that we're still growing our direct distribution center and so forth and so on.  This has -- this fully explains [if any].

So if we go into the second half and we had no variable bonds accrual, given that last year we didn't have, we would be around 8% or below.  Okay?  That's the sort of number.  

Again, if we were to repeat the volume growth that we had in the first half.  In terms of the step up, I think the best way to look into this, although that's not very easy to necessarily forecast or predict is we are maintaining healthy levels of share of voice.  Okay?  And we found innovations that work.  Given that we have that, as long as I find good ideas, I will only step up if they work.  So it will be sort of cooking in its own sauce.

If I find the money from an innovation, if I find money from some product launch and then I can put it back into the marketplace.  So -- but if not, then I will not step up.  I will step up if I see that it works and that I can, as a leader, grow the industry as a leader.  Grow my share with the innovation which we learn a lot in the past year or so, contributing for us not -- to be not just a good company in sales execution but also in terms of brand building, brand preference, understanding better our consumers.  Given that we know that the price [tomorrow] also depend on the brand preference that we build today.

 Okay.  And the higher expenses from channel mix as well, what is that referring to exactly?

 Yes, I don't know the channel mix exactly.  I think you may remember that every time supermarkets have an important growth in the mix, they usually bring some additional expenses.  This is on the key accounts mainly, which is around 10% of the beer volume.  So if key accounts were to grow, you could have a growth also in that.  That's what's we refer when we say channel mix.

 And you're not expecting something like this kind of in the third quarter?

 Well, I think supermarkets overall in Brazil are having a good run overall and in our business.  So they have been growing.  It's -- again, it's not any breakthrough or anything.  But this has been growing slightly in the past few years.  It continues to be slow.  That always adds a little bit to the SG&A growth.

 Okay.  Thank you very much.  I appreciate it.

 Thank you very much.

 Ladies and gentlemen, this concludes the question-and-answer session for today's call.  

I'll now turn the floor back over to Mr. Nelson Jamel for any closing remarks.

 Thank you, BJ, and thanks, everybody, for your questions and attention this morning.  And that's all for today.  Thank you very much.

 Thank you for your participation in today's conference.  We appreciate you joining us today.  You can disconnect your lines at this time and have a great day.