Anheuser-Busch Inbev SA (BUD) 2015 Q1 法說會逐字稿

Welcome to the Anheuser-Busch end of first-quarter 2015 earnings conference call and webcast.

Hosing 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.

(Operator Instructions).

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 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, please see risk factors in the Company's latest Annual Report, on Form 20F filed with the Securities and Exchange Commission on March 24, 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, Maria.

Good morning, good afternoon, everyone, and welcome to our 2015 first quarter results, conference call.

Q1 was a strong quarter, in terms of both revenue and EBITDA growth.

Our focus brand strategy, coupled with disciplined market execution, enabled us to deliver solid revenue growth, of 6.2%.

This was achieved despite challenging conditions in several of our markets.

A strong revenue per hectoliter growth of 7.5%, on the basis of the same geographic mix, more than offset the decline in total volumes, of 1.2%, which was impacted by a very difficult [comp] in the US.

Volumes of our three global brands grew by 4.6%, led by Budweiser, while volumes of our focus brands declined by 0.3%, significantly impacted by the US.

The strong top-line performance translated into EBITDA growth of more than 11%, with the EBITDA margin expanding by 170 basis points, to 38%.

Normalized earnings per share also saw a strong growth, up from $0.87, to $1.40, driven by the growth in EBITDA, as well as very favorable net finance results, which Felipe will address in more detail later.

Volumes of global Budweiser grew by 6.2%, fueled by an excellent Chinese New Year campaign in China, significant growth in Brazil, and an improved performance in the US.

Global Corona grew by 2.7%, with growth across our key markets.

Results were especially strong in Australia, Canada and Italy, as well as Mexico, which was facing a very tough comp as a result of our FIFA World Cup campaign.

Finally, Stella Artois grew by 1.2%, due mainly to good results in the US.

The first quarter also saw Stella Artois launch the Buy a Lady a Drink campaign, one of our better world initiatives, focused on providing clean water to people in developing countries.

Turning now to the results in the US.

Industry volumes continued to improve.

We estimate that the industry's sales to retailers, STRs, declined by 0.5% in the first quarter, versus a 0.6% decline in the full-year 2014.

Our own STRs were down 1.5%, leading to an estimated decline in market share of approximately 45 bps.

Our sales to wholesalers, STWs, were down by 6% in the quarter, as expected, driven by the very difficult comparable fall in the buildup of wholesaler inventories, ahead of union negotiations in the same period of last year.

We continue to expect STWs and STRs to converge on a full-year basis.

US beer-only revenue by hectoliter grew by 1.3% in the quarter.

This result was adversely impacted by approximately 40 bps since price accruals are based on STR volumes, and not STW volumes.

EBITDA in the US declined by 6.5% in the quarter, driven by the STW comparable.

Turning to the performances of our brands in the US.

Bud Light, our most important brand in the US, continues to build on the momentum created last year, from the Up for Whatever campaign, and the Whatever USA event.

Our 2015 Super Bowl execution and continued rollout of the new aluminum bottle, added to this momentum, helping the brand to gain share of premium lights during the quarter, based on our estimates.

We estimate the brand was down approximately 20 bps in terms of total market share.

Turning to Budweiser.

Budweiser had one of its best quarters for a long time and we feel good about our plans for the rest of the year.

We finished 2014 with good momentum and built on this with our Brewed the Hard Way campaign, which was unveiled during this year's Super Bowl.

The underlying quality and heritage messages in this campaign are resonating well with the majority of our consumers and we're seeing good improvement in our STR and share results.

The decline in Budweiser market share in the quarter was approximately 20 bps, based on our estimates; much improved compared to historical trends.

We have a strong program for the rest of the year with a quality message at the heart of everything we do.

Our Bud & Burgers program, for example, brings together quality beer with great food and has already generated lots of excitement with our wholesalers and retailers.

This year our Made in America summer program will include not only music, which has become the mainstay of the brand in recent years, but also programs built around our new partnership with the National Parks Foundation, including some eye-catching primary packaging, which you can see on this slide.

We have a long way to go in stabilizing the share of Budweiser, but the year's off to a very good start.

Our portfolio of above-premium brands grew share about approximately 20 bps based on our estimates, with ULTRA, again, leading the way with growth in STRs of more than 10%.

We're very pleased with the momentum behind ULTRA and we'll continue to invest behind the brand's unique position in the market.

Stella Artois and Goose Island also delivered solid volume growth and share gains.

Our on-premise initiatives are also delivering good results.

We have seen strong momentum since the middle of 2014, driven by the investment behind our above-premium brands, as well as the focus given to this important channel by our new high-end business unit.

Our above-premium brands include a portfolio of near-beer products, which play an important role in connecting with consumers who would normally choose beer as their first choice of alcohol beverage.

These products are helping us to improve our share of total alcohol, as well as to drive premiumization of our category.

The first quarter saw the rollout of two new brands to complement our Ritas and cider products: MixxTail, a flavored cocktail brand with three variants, and Oculto, a tequila-flavored beer.

It's early days for these new innovations, but both are doing well.

Moving now to Mexico.

Our Mexican business continues to make good progress with another solid result, in terms of volume, revenue and EBITDA.

We estimate that industry volumes grew by low single digits in the quarter, driven by a growing economy and an earlier Easter; Easter being the most important holiday for beer in Mexico.

Our own volumes grew by 2.1%.

Revenue per hectoliter was also very healthy, growing by 5.9%, due to our revenue management initiatives and favorable brand mix from the growth of Bud Light.

The strong top-line result led to a growth in EBITDA of over 15% and margin expansion of more than 300 bps, to 46.8%.

Volumes of focus brands in Mexico grew by 4.4% in the quarter.

This result was led by Bud Light and Victoria, which both performed well.

The Corona brand also saw a good growth, despite cycling a tough comp resulting from the very successful FIFA World Cup promotion in the first quarter last year.

Moving to Brazil.

We're very pleased with our performance in Brazil with revenues growing by 10.7%.

Our beer volumes grew by 0.4%, despite the challenging economic environment and a difficult comparable with beer volume growth of over 10% in the first quarter last year.

We estimate industry beer volumes were marginally ahead of last year, resulting in a flat share for the quarter of 67.5%.

Our beer revenue per hectoliter result was very solid with growth of 11%, reflecting our revenue management initiatives; increased own-distribution volumes; and premium brand mix, while keeping pricing in line with inflation.

The Brazil soft drinks industry saw some weakness in the quarter, but we estimate to gain approximately 50 bps of market share with an average share for the quarter of 18.8%.

Guarana Antarctica Black was launched during the quarter and helped to drive this result.

EBITDA in Brazil grew by over 18% in the quarter with margin expansion of more than 300 bps.

Our guidance for net revenue growth in Brazil this year remains mid to high-single digits, despite facing a tough FIFA World Cup comparable with volumes in the second quarter last year growing by 7%.

Our commercial focus in Brazil is to maintain a healthy balance between volume and revenue per hectoliter growth.

We're delivering against this goal through our affordability and pack price strategies, supported by very strong, disciplined field execution.

All of our core brands, Skol, Brahma and Antarctica played leading roles in regional carnival events in this first quarter, building engagement with our consumers.

In addition, we continue to invest behind our premium brands, which include not only our global brands, Budweiser, Corona and Stella Artois, but also our strong domestic specialty portfolio.

We're also continuing to roll out innovations building off the strength of our core brands such as Skol Beats Senses, which competes in the near-beer space, and Brahma 0.0.

Both products continue to exceed our expectations.

Moving on to China.

Our China business had another strong quarter with revenue growth of over 15%, driven by a very successful Chinese New Year campaign.

Our beer volumes grew by 4.7% in the quarter with our focus brands of Budweiser, Harbin and Sedrin growing by more than 10%.

The Chinese economy continues to be soft although this appears to be impacting value and core brands more than core plus and premium brands, which is where we have chosen to focus our efforts.

We estimate that industry volumes declined by approximately 2% in the quarter, an improvement over the fourth quarter last year, resulting in an estimated organic gain in market share of approximately 100 basis points to 16.7%.

We estimate our market share in the quarter reached 18.5% when including our recent acquisitions.

Revenue per hectoliter growth of 10.1% was mainly driven by improved premium brand mix, led by Budweiser and Harbin Ice, as consumers continue to trade up to the core plus and premium segments.

China EBITDA increased by over 50% with EBITDA margin growing to 26%, driven by our top-line result, the timing of our sales and marketing initiatives, and strong operational leverage.

Budweiser delivered a great result in the first quarter with volumes by double digits and leading the premium segment with an estimated share of well over 50%.

Budweiser was at the heart of our Chinese New Year campaign, across nine major cities in China, linked to celebrations in Times Square in New York included.

We estimate the campaign reached over 500 million Chinese consumers in December and January.

It is programs of this scale, supported by liquid innovations, such as Budweiser Supreme and the aluminum bottle, which are driving Budweiser's success in China.

Harbin and Harbin Ice are also major contributors to our growth in China, building brand health through strong activations around our NBA program.

With that, I would like now to hand it over to Felipe, who'll take you through some further details in our first quarter results.

Felipe?

Thank you, Brito.

Slide 16 shows the EBITDA breakdown by zone.

As Brito said, our total Company EBITDA performance was very solid.

We have organic growth of 11.1% and EBITDA margin expansion of 170 basis points.

The EBITDA performance was driven by strong top-line growth, despite the difficult STW comparable in the US.

The result was also helped in part by a modest increase in sales and marketing investments of 1.3%, although it should be remembered that the increase in the first quarter of last year was 16.7%, reflecting the start of our FIFA World Cup campaign.

We are maintaining our guidance for the full-year growth in sales and marketing of mid to high single digits.

Brito covered our four top markets, but I would just like to mention some highlights from other relevant markets.

The weak consumer environment continues to put pressure on volumes in Argentina, with our beer volumes down low single digits in the quarter.

MixxTail launched at the end of last year, to compete in the near-beer space, continues to exceed our expectations.

Industry volumes in Belgium declined in the quarter, although we estimate we gained share with a strong performance in the off-trade.

In Canada, good weather in March helped industry volumes in the first quarter and drove low single-digit growth in our own-beer volumes.

We estimate we maintained share.

Corona, which we took over in March last year, continues to do very well.

In Germany, our total volumes were marginally down in the quarter, due to the timing of our price increase.

We have recently introduced a number of exciting new Becks liquids and Franziskaner low-alcohol products in the German market, to build on the strengths of these two brands.

Our volumes in South Korea declined, mainly due to some share loss against a difficult comparable.

Finally, in the UK our volumes were down as a result of a weak industry, as well as a difficult share comparable.

I would now like to quickly reveal the below-EBIT results, starting with our earnings per share performance.

Normalized earnings per share increased to $1.40 from $0.87 in the first quarter last year.

This increase was due to a $0.16 per share improvement in organic EBIT growth, driven by our strong top-line result and favorable net finance results of $0.53 per share, which I will explain in more details on the next slide.

Net finance results in the first quarter was an income or $91 million compared to an expense of $866 million in the first quarter of last year, a variance of almost $1 billion.

This was driven primarily by $757 million market-to-market adjustments linked to the hedging of our share-based payment programs compared to a loss of $52 million in the first quarter of last year, a swing of $809 million.

In addition, our first-quarter net finance results includes a positive currency impact and other hedging costs of approximately $153 million, and the payment of other bank fees and taxes in normal course of business of approximately $37 million.

Our normalized effective tax rate for the first quarter was 18%, down from 18.8% in the first quarter of 2014.

This decrease is mainly due to the non-taxable nature of the gain from the hedging of our share-based payment programs in the first quarter of 2015.

At the same time, one should keep in mind the first quarter 2014 loss was non-deductible.

Our guidance for full-year 2015 remains in the 22% to 24% range.

As a reminder this, guidance continues to exclude the impact of any future gains or losses related to the hedging of our share-based payment programs.

Our capital allocation objectives remain unchanged.

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.

We will always be ready to look at opportunities when and if they arise, provided that the target, the deal structure, and price make sense.

We do not feel any pressure to do deals, and there is no predetermined timetable for that.

We recognize the value of growing dividends over time, consistent with the low volatility of a non-cyclical business.

Our goal is to reach a dividend yield between 3% to 4%, in line with other consumer goods companies.

Our optimal capital structure remains a net debt to EBITDA ratio of around 2 times.

At this level the return of cash to shareholders is expected to be consistent of both dividends and share buyback programs.

With that, I will hand back to Maria to begin the Q&A section.

(Operator Instructions).

Trevor Stirling, Bernstein.

(Inaudible) my side.

Relating to the other operating income and the $50 million gain coming from investment incentives, you highlight in the text, Felipe, that's recurring.

But should we be expecting a further $50 million increase in each of three quarters to come this year?

You should look at that as a percentage of net revenues, Trevor.

There has been an increase throughout 2014, coming from a lower base, as you look into the first quarter 2014, to approximately 6%/7% implied this quarter.

You should think about that as a percentage of net revenues going forward.

As we keep investing, there may be more incentives, grants, but that is specifically for Brazil and, to a certain extent, to China as well.

Understood.

Thank you very much, Felipe.

Olivier Nicolai, Morgan Stanley.

Just one question on Brazil, revenue per hectoliter grew by 11% in Q1.

Could you please quantify the three elements here: so, the mix; the pricing itself; and the increase in weight of direct distribution?

Should we also expect revenue per hectoliter to be as strong for the rest of the year or should moderate a bit?

Thank you.

Hi, Olivier.

As you said, our net revenue per hectoliter in Brazil grew by 11% in beer Brazil.

With all the real growth, that is what's above inflation, coming from premium, which is growing ahead of our total volume, by the way growing double digits, and the increase in direct distribution, which now reached 72.5% of our volumes.

So -- and we continue with our policy of increasing prices in line with inflation.

So everything that's ahead of that, in terms of real growth of net revenue, came from, basically, these two initiatives: premium growing ahead of total volume and direct distribution having a bigger impact.

Thank you.

Thank you.

Chris Pitcher, Redburn.

Brito, I was wondering if you could comment on your strategy in craft, not just in the US where you continue to buy brands, but what you're learning from there, obviously buying brands in Brazil?

And whether you can confirm that you've taken a minority stake in a craft brewer in Colombia as well?

Then as a follow-up, following on a bit from craft, could you talk about your learnings in social media, because you've had some successes and some recent mistakes, let's say, or problems.

Could you [talk] how you're learning on there and to help build your brands?

In terms of craft or specialties, the strategy in different places, of course, in different countries, are slightly different because they are at different stages of development.

In the US, for example, the segment is more developed than in other countries, of course.

Here, we're adopting a strategy, very clearly, of having more regional relevant brands.

That's the case when we joined with Goose Island, Blue Point, 10 Barrel, [Illusion], but also developing our own like Shock Top.

Also trying to focus in a few that could be nationally expanded.

A few will remain regional; some will go national in some specific segments within the craft portfolio.

For example, IPA, it's clear it's Goose IPA with wheat.

It's clear, it's Shock Top.

If you think about specialties with lager it's clear, in a broader sense it's Stella Artois.

That's our strategy for the US.

In other markets, what we're trying to do is get the US learnings over to other markets, and try to be, of course, ahead of the curve, especially in markets where we lead, like Brazil, where we are trying, again, together with our domestic specialties that we have in Brazil, to have also some other local specialties, like [Walls] that we acquired.

That's pretty much how we expanded and that's how we'll continue to do it in other countries.

To your other question, special media, as we all know, social media continues to grow within our mix of media spend between social and traditional.

We are learning every day by connecting more with consumers and making our content relevant.

Of course, it's a very fast paced-type interaction with consumers and we don't intend to get everything right all the time.

But I think when we don't get it right, we apologize and learn from it.

We take it very seriously, our messaging to consumers.

So that's --- we've always been -- as a Company, we take things very seriously and we'll continue to do, be it in social media or traditionally.

But the learnings are very interesting.

Brito, could you just confirm whether you've taken a stake in the Colombian craft brewer, Bogota Brewery?

Because there were press reports on that Bogota Beer Company.

Yes, on April 17 we closed a transaction in which InBev became an indirect owner of 100% of the shares of a company called Bogota Beer Company, a very successful company in Colombia.

Again, as we did with Goose Island, the craft feature, creativity and dedication that makes the Bogota Beer Company an exceptional brewery will remain unchanged.

It will be critical to business success in the future.

What we're trying to do in Colombia, Colombia's a very exciting market, is of course, to play the high end with our global brands and our local brands.

Thank you very much.

Welcome

Mark Swartzberg, Stifel.

One, Brito, on Brazil.

Can you just help us better understand what you think the scale and pacing of the opportunity you might have there as you acquire more of your own distribution?

And then Felipe, the repo rate of nearly EUR500 million, with EUR1 billion as the target, basically says if you keep up that rate, you'll be done by June/July.

So my question there is what next?

Well, on distribution in Brazil, this is something that has been going on now for 20 years, as far as I can remember.

So there's no news really there; it just continues and it's now at 72.5%.

Last year I think it was more towards 70%.

There's no really any news there.

It continues to be the consolidation pace we've had for many years.

It's interesting, because it provides scale, provides alignment, but that's not the only way to do it.

That's the way we figure out in Brazil.

In the US, for example, it's a different way.

We're very happy with the wholesalers we have in the US.

We do amazing things when we are aligned with them, and when we go to market on a focused way.

So it's business as usual, I would say, in Brazil.

So is the corollary then, Brito, that in spite of the lack of volume growth there, you're not putting a greater emphasis on taking that 72.5% up?

No, the strategy on direct distribution in Brazil has been a consistent one.

It's not going to change, because of one year volume softness or anything.

It will remain consistent; business as usual.

Great.

Well, on the second part of your question, you are right about the pace.

However, we are the kind of company that we want first to cross the finish line before deciding the next move, which is something that is up for discussion with the Board.

As we get there, we'll make that decision.

So we should think more like the second quarter we'll get an update on any incremental repo or some different approach with the balance sheet, if there's no news between now and then?

Current buyback program was much more risk management driven than capture structure driven, as we are hedging the stock exposure under the stock ownership plan, which is something we will keep doing, as we continue to gravitate towards the 2 times net debt to EBITDA optimal level.

Got it, great.

Thank you gentlemen.

Thank you, Mark.

Welcome.

Sanjeet Aujla, Credit Suisse.

Just want to get a sense of why you think the beer category seems to be holding up relatively better than other consumer categories, particularly soft drinks?

Sorry, can you repeat the question please, Sanjeet?

Yes, I just want to get a sense of why you think the beer category, around flat in Q1, seems to be holding up relatively better than soft drinks and other consumer categories.

You mean in Brazil?

Yes, in Brazil.

Well, I think that's a very interesting question, thanks for it, because it -- our guys in Brazil, which has been through tough years before, at the beginning of this year they decided they were not going to be part of the bad mood, or whatever, that was in some of the industries in Brazil.

They decided that we would focus on the things we could control.

We felt we had good plans in our hands, so decided to keep our head down; focus on execution and out-execute the competition in the market place.

But at least have that intent.

I like to remind people that in spite of the bad mood or some poor macro indicators, the fundamentals in Brazil remain the same.

So demographics; the fact that LDA is growing at a healthy pace, LDA-plus; the weather; the beer culture; the regional differences; middle class; all those things are there.

Plus, our plans, which is to continue to grow our core brands and some line extensions, derived from some very strong core brands that we have.

Accelerate premium.

Premium is getting nailed to 8% of the total Brazilian market.

You look to Argentina, for example, it's more than double that.

We feel that there is enough space for us and the other competitors to continue to accelerate the premium growth.

So that's very promising, because the margins are much better.

Near beer is also another great opportunity in Brazil.

That's pretty much now being scratched a little bit on the surface by us with Skol Beats Senses, which has a very low cannibalization.

So 70% of its volume source comes from outside of beer, from other categories.

Then you talk about the off-trade.

Everything we learn in the US and Europe getting the off-trade to be more of a sophisticated execution, more segmented execution in Brazil, with coolers; and shelves; and pack prices; and promo-opti.

So lots of things we've been developing in other markets and the on-trade.

Now with the urban on traders, or call it salesforce, more segmented to high-end parks, it's key to develop things like the high-end brands, the specialties, but also things like the Skol draft, which is a new initiative in Brazil.

We just decided not to be part of this whole bad mood, and decide to focus on an amazing business we have.

Our people in Brazil are used to deal with tough situations and we have a great team there.

So that's why we feel great about them and very happy about this first quarter.

Thanks.

Thank you.

Rob Ottenstein, Evercore.

Just two questions on the US market please.

First, in terms of volume, industry volumes overall.

I think you said you thought they were down.

Just wondering if you could talk about that in the context of what we hear of an improving economy and the lower gasoline prices?

And perhaps what you're doing in terms of growing the beer market as a whole.

And then second, also on the US market, perhaps give us a little bit more perspective on your price mix realized.

And some of the factors, positive in [nemat], particularly given the fact that your mix continues to improve in terms of your above premium.

Thank you.

So in terms of your first question and then, as we said in our outlook, we expected industry volumes to improve this year, 2015, compared to 2014.

2014 was already an improvement versus the prior year, 2013.

So in 2013 the industry declined 1.8%; in 2014 it declined 0.6%; and in this first quarter it declined, according to our estimates, 0.5%.

So heading in the right direction.

What we're doing as a market leader?

We invest in our core brands, Budweiser Ultra, and we're coming with innovation.

We're also investing in different segments like kraft.

And we continue to support our value brands.

That's our, let's say, our contribution to a better industry.

In terms of your second question, which was around the revenue realization.

As we said in our release, this quarter, first quarter, our net revenue per hectoliter increased by 1.3%, and that's to be adjusted by a 0.4%.

That had to do with the mismatch between STWs and STRs, and the way promotions are accrued, based on STRs and gross revenue based on STWs.

So you can see that with this divergence in STWs and STRs during this first quarter, this has led to disproportionately higher accrual for price promotions, than would be the case if STWs and STRs were more closely aligned, which is normally the case.

So that's why we continue to guide for STWs and STRs to converge on a full-year basis, as we always do.

Okay.

Were there any other factors?

Even at 1.7% that is somewhat less than over the last few years?

Well, again, we have some packs that we introduced.

Some are like the 25 ounce can that are dilutive at the top line, but accretive at the bottom line, as we've said before, last year.

It's a very -- it's one quarter up, so it's very hard to derive any conclusions from just one quarter.

Terrific, thank you.

Thank you.

Edward Mundy, Nomura.

Just following up on the US revenue per hectoliter.

Would you say that 1.7% is a reasonable guide of 2015?

Yes, we don't provide that kind of guidance.

But, yes, what we said about the US was in terms of guidance was that industry would be better in our view and that we expect that STWs and STRs to converge, and that's it.

In terms of top line, that's the guidance we gave.

Thanks.

And as a follow-up, as you go into the peak summer selling season in the US, what makes you most excited, Brito?

Is it the improved performance of Budweiser or is it the launch of some innovation?

What really gets you excited?

Well, lots of things get us very excited.

First, the Bud Light program, which proved last year -- because you have to remember that Bud Light, for many years, didn't have much support as a brand during the summer, because most of it -- investment was tied to sports and NFL which, in the summer, doesn't really take place.

So it was a very low support season for Bud Light.

Last year, we decided to -- as you saw, we upped our investments in the US.

One of the reasons being, we decided to support Bud Light during the summer, and the results were quite impressive.

So this year, we're doing that again.

So that's one thing.

The other thing's Budweiser.

With the Super Bowl Brewed the Hard Way, we re-encountered the whole -- or went back to the roots of the brand in terms of tradition and heritage quality: Brewed the Hard Way, 30 days opposed to 15 days.

Everything that made this brand stood the test of time.

We went back to the roots, decided to communicate that back to consumers, and the consumers reacted very well.

So we decided again to put more money when things are working and that's going to be a little different for Budweiser.

So the Bud & Burgers, together with Brewed the Hard Way, together with Made in America, this time linked to National Parks Foundation, so it's going to be a very strong program for Budweiser as well.

And then, of course, you have the ULTRA -- Michelob ULTRA brand, which continues to grow; grew 10%.

And you have the high end and you have the Ritas, which we have most of our investment for the year kicking in now in May/June for the summer season.

So the summer's going to be very active and so very excited about the summer.

And Brito, you didn't touch much on the innovation, the MixxTails and Oculto, which I think in your opening remarks you said that they were both doing quite well.

How do you think about the rollout of these?

Can they be as impactful as the Ritas back in 2012?

Yes, what we're doing at this point, Edward, is that is, of course, we're in early days, so it's very hard to predict anything at this point.

But we are using some focus markets, for example, Oculto, we're heavily in Miami, building showcase for what it can be and learning from it before we go heavy or heavy up on investments in other places.

But Share of Throat is a big play for us in the US, and both Oculto, MixxTail and Ritas continue to play in that arena.

Again, let's remember, they all have -- command a much higher revenue per hectoliter and are less cannibalistic or, therefore, more incremental.

So all good news when you talk about near-beer-type products.

Okay, thank you.

Thank you.

Andrea Pistacchi, Citi.

So the first one, please, is on Corona.

Now, I think you said the brand globally grew 2.7%, which doesn't seem that much considering that you're starting to leverage the brand globally.

So I was wondering what held back the performance somewhat and should we expect an acceleration in the coming quarters and driven by what?

And then secondly, if you could please give us an update on your brewery project in Vietnam, whether -- when do you expect to start shipping beer there?

And if greenfields, like Vietnam are something we should expect to see more of going forward?

Well, thank, Andrea, for the question.

Corona, we're very happy with Corona around the world, outside of Mexico, also in Mexico.

But of course, you have two different growth patterns.

In Mexico, it's the number one brand, so it's grown this year.

Corona grew over 10% the first quarter in Mexico so -- I mean last year; last year.

So very tough comps because of the World Cup.

So this year, it grew again but, of course, low single digits.

So that's -- and because Mexico has a much higher base than the exports to the rest of the world, of course, outside of the US, because it's not ours, then you have to understand that outside in the world things are doing much better than Mexico.

But Mexico, of course, being against a very tough comp of 10% last year, because the World Cup dragged down this volume a bit now.

But again, very excited.

All the countries who put Corona at this point has an amazing power.

People know about the brand.

It's very premium and it's doing very well.

So in terms of Vietnam, yes, we're building a brewery there.

We expect to ship beer in May, so this month, in Vietnam.

We're very excited about Vietnam.

It's a country, again, demographic, weather, beer culture, 90 million people, a very extensive or very big high-end segment and that's where we want to play with Budweiser, Stella and Corona, also Hoegaarden.

So very exciting market; very committed to it, and learning from our experience in China, to do a lot of what we did with Budweiser in China in Vietnam.

Thanks.

Thank you.

Mitch Collett, Goldman Sachs.

I wanted to ask about the US margin.

We see there's some negative operating leverage this quarter.

But I guess there wasn't positive operating leverage in the comparable quarter, so I just really wanted to ask whether the slight decline in margins is maybe structural rather than driven by operating leverage.

And then secondly, you've obviously got clear guidance on sales and marketing expenses.

I recognize it was up significantly this time last year.

Can you perhaps give us some color on the likely timing of sales and marketing investment?

It was only -- I think it was down 1% this quarter and your guidance is for it to be up mid-single digit.

Thanks.

Yes, hi, Mitch.

So in terms of the US, to take this quarter as an indication of anything would be a mistake because, of course, this quarter you had a 6% volume drop, because of everything we explained; the tough comps last year because of the union negotiation.

Our STRs were down 1.5%, but our STWs, which is the one that moves the P&L and the financials went down by 6%.

So, of course, when you have a 6% drop in volume, it's very hard to compensate it anywhere else; so that's one point.

So I wouldn't take this quarter as any guidance for anything going forward or anything.

It's a one-off.

In terms of sales and marketing, our guidance, as you well said, for global sales and marketing remains, as we said before, mid to high single digits.

This quarter the fact that we were up only 1.3% has to do with some timing issues.

Also, the fact that we are against last year's 16.7% growth in sales and marketing, so you're comparing against 16.7%.

You also have in the US some savings that will be there throughout the year, because we had an in-sourcing -- in-source model of media buying and planning, but decided to outsource that to MediaCom.

With that came savings that will be seen in the US beer, which means that if you -- we could be spending the same amount of money in the US, but with more media pressure, because we're reinvesting the savings.

So that is going to be something that will be again a one-off for this year in the US business, which is a big business for us, that will impact also.

But, again, our guidance is the same.

Okay, very clear, thank you.

Thank you.

Simon Hales, Barclays.

Just a couple of follow ups really.

Brito, just going back to the US market I don't think you mentioned the performance of Montejo in the quarter.

I don't know whether you could just update us on the performance of that brand?

And secondly just sticking with the US, distribution expenses I noted were relatively low in the quarter, or the change was relatively low.

I assume we're seeing the benefits of lower oil costs starting to feed through, but you were warning back at the Q4 stage that you were still seeing elevated freight costs rates.

I just wondered if you could just update us on what's happening there and how we should think about that expense looking forward.

Yes, in terms of the whole strategy for the Mexican segment, or more broadly for the Hispanic consumer, which is what we should think about.

You talk about Montejo, of course that's a very important piece, but even more than that is Bud Light, Budweiser and Michelob ULTRA, because those are brands that are very big with the Hispanic consumers.

We're spending more money last year and this year on Hispanic media and touch points, because those brands are big ones.

Bud Light is the biggest brand with Hispanics in this country, so those are very important brands.

But for the first time ever we are now able to play the Mexican segment with Mexican brands.

We were never able as AB, as a company, to do that, and now we're able to do it.

So we bought our first one, Montejo, there's more to come; first one is Montejo.

I think it's doing well -- very well, for a brand that has to be built at the same price of other established brands that have been here forever at core-plus-type prices.

So we're not discounting or anything to get quick gains, we want to build this brand for the long term, because we're here for the long term.

So we want to build it the right way, so we're selling at the same price as the next competitor, who is selling that core-plus brand.

And when we started, we only had one pack, now we have more packs.

This pack -- the tall can, the big can is very important for the convenience channel, which is important for the Hispanic consumer.

And we're also expanding out to other states.

So I think again, we're very excited, very committed.

Montejo is all about Mexican authenticity, it comes from the -- us and we are the Mexican leading brewery in Mexico.

So talk about authenticity, that's what we offer.

So very excited about this, more to come.

But again don't forget that Bud Light, Budweiser and Michelob ULTRA also play a big role in the Hispanic market.

So on the second part of your question regarding distribution expenses.

I would point out to the global guidance of distribution expenses per hectoliter to increase organically mid-single digit.

As you look into the first quarter, we are above that level, which implies an expected improvement in the coming quarters and in terms of year-over-year growth in US is not exception given its size.

Okay, perfect.

Thanks, Felipe.

You're welcome.

Thanks, Simon.

Eddy Hargreaves, Canaccord.

Just a couple of questions on China from us.

You record a very strong EBITDA margin advance in the quarter, 677 basis points, and that was following a good advance in the prior-year quarter as well.

To what extent was the phasing of sales and marketing responsible for that?

So can you give some indication broadly of whether that margin was flattered somewhat by the marketing phasing?

And then the second question is, the Chinese market was down 2% you estimate in the quarter, you're keeping your guidance for growth in the full year.

Now, clearly, you've got some very weak weather comps in the middle part of the year.

Would it be fair to assume that the underlying trend, if you like, is still negative for the Chinese market as a whole?

Well, we're very happy with our Chinese performance; it has been very consistent.

If you look at the last four or five years, we've been gaining share, growing margins and we are more and more -- and more and more we have our business in that core-plus and high end of the market, which is less affected when you have a year like this when the economy it's still growing at 7%, but softens up a little bit.

That affects much more the value and core brands, and much less our business, which is in the core-plus and the high-end super premium and premium.

So as you saw once again, like last year, the industry declined 2%, but we increased 4.7% in the first quarter, and our revenue up by 10% -- 10.1% mainly driven by this positive (inaudible) effect.

In terms of our guidance, we said that we expect the industry volumes to return to growth in fiscal 2015.

That was not the case yet in the second quarter, although better than last year, because last year industry declined by 4% -- 4.2%, and in this quarter it declined by 2%.

We also said that we expect our revenue per hectoliter to continue to be driven by favorable brand mix.

So it's a very positive story.

We're very excited about it.

And now, we're bringing to China brands, like Corona, which will again redefine what premium pricing is in China

Again, given our route to market in China, this sits very well with the Budweiser route to market, given that Budweiser is the number one premium brand in China.

So, we're very excited about growing that premium part of our business in China, which is now most of it.

On the sales and marketing piece, as you pointed out to a 2.6% reduction, which leads to $5 million out of a $90 million organic EBITDA increase.

I would also refer to the fact that in the first quarter of last year sales and marketing growth was 35%.

So, the slight decline this year is versus a very, very high base.

Again this is connected to the calendarization of this year and we will continue to invest in China, as we have been big time.

Big time; big time.

Thank you.

Wim Hoste, KBC Securities.

I have two questions please.

First one, on Mexico you estimated industry volumes grew low single digits in the quarter, and you were up 2.1%.

Could you shed a little bit of light about the regional market share trends and market dynamic?

And then another question following up on your premium portfolio.

You noted that Stella is growing below Budweiser and Corona up on 1.2% in the quarter.

Are -- your findings with Corona and your enthusiasm on Corona, is this impacting your views on the outlook and potential for Stella?

In other words, will it be mainly focused on growth in the US and getting a little bit less emphasis in other regions?

Thank you for sharing your views on that?

No, we're not all.

We're very excited about our three global brands: Budweiser, Stella, Corona.

Stella this quarter suffered from a weak UK business performance, but that's one quarter, but did very well in the US, did very well in Brazil, and in other markets.

So, a very good Stella business.

Corona again, as we explained, has to do with Mexico lapping a very tough first quarter from last year, because of the 10% growth because of the World Cup, and that's a bigger base compared to our export volumes, but the export's growing way ahead.

And with Budweiser you see the kind of growth that has been very consistent at this level of 6-plus-%.

In terms of your question about Mexico, we kind of grew with the industry; low single digits, 2.1%.

The regional mix impact was not relevant this quarter.

As you know share numbers for Mexico, we only have for the full year.

Okay, thank you.

Thank you.

(Operator Instructions).

Brett Cooper, Consumer Edge Research.

We've seen some brand fragmentation in developed markets over the years, how concerned are you about that taking place in some of your core markets?

Then I guess, the opposite of that is how big of an opportunity does that represent for you in markets where you have no or small representation today?

Thanks Brett.

You're right; brand fragmentation is a reality, it has to be managed though.

One of the ways to manage is it with technology.

So, for example, by increasing the use of smartphones with our sales reps, which is something we do, and using more algorithms, you can be better at your offer being tailored by customer when you have a bigger portfolio.

You also have to be smarter about how you split your marketing money and sales money in support of those brands.

So we're developing better models to check return on investment on both traditional and social media.

So we are sharper on how to allocate resources behind brands.

You also have to have better training of our people, so they can talk to customers and also try to tell customers and also try to tell customers and give insights to customers on how they should build their assortment.

Because what we see these days is that some customers that went too wild on assortment lost business on a relative basis and they keep asking themselves why, if I'm offering more assortment, which is what consumers seem to want, how come I'm losing share of business to my competitor, my neighbor?

And the insights we bring is that there is a point at which more assortment becomes like overwhelming to consumers, so they buy less of it.

Not only that, it also becomes much harder to operate.

So think about this, if Bud Light, which has a high-turning SKU, had six facings on a cold box and now there's only three, because you increase your assortment and you put lots of brands that turn much slower.

Some consumers will be frustrated, because they'll come and their Bud Light will not be cold, because they have just been replenished.

Then they will go to another store with a better assortment and with a cold Bud Light, and things of that sort.

So if you have some of the craft brands, for example in the US, we've been proven, data proves that some of them should sit outside of the cold box, because they turn one six-pack per month.

That, of course, doesn't compare to a Bud Light that turns six packs in a day.

So those are the things that, with the increased fragmentation, we need to do.

We need to be smart about technology in our production, sales and distribution facilities.

We should use more insights to help us and our customers to think about assortment.

And I think we should use the skill and the Company to go for value-enhancing fragmentation and try to get rid, every time, of the value-destructive fragmentation, because you have both: good fragmentation's great; bad fragmentation should be dealt with.

So again, it's where the market's going.

It's a little bit of a pendulum.

Some customers of ours have seen -- we have seen customers of ours they're going too much to the one side with lots of SKUs being added, then come to the conclusion that their costs was getting hit big time because of more working capital tied up in inventories; more bad products having to be thrown away, because of best before dates; and then going back and losing share, because of consumers being overwhelmed and not having their cold beer available, coming back to a more rational assortment.

So we're helping our customers with those category insights.

Great thanks.

Thank you.

Thank you, everybody, for your time this morning.

We are very excited about the beginning of this year.

We had a great quarter in terms of both revenue growth and EBITDA growth, so that is a great start for the year.

We'll talk to you again on July 30, 2015 when we report our second quarter.

Have a great day.

Thanks for your time.

Bye.

Thank you.

This does conclude today's teleconference and webcast.

Please disconnect you lines at this time and have a wonderful day.