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Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's Third Quarter 2022 Results Conference Call. Today, with us, we have Mr. Jean Jereissati, CEO for Ambev; and Mr. Lucas Lira, CFO and Investor Relations Officer. As a reminder, a slide presentation is available for downloading on our website, ri.ambev.com.br as well as through the webcast link of this call. We would like to inform you that this event is being recorded. [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.
I would also like to remind everyone that, as usual, the percentage changes that will be discussed during today's call are both organic and normalized in nature, and unless otherwise stated, percentage changes refer to comparisons with 3Q 2022 results. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Ambev's normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profit, EPS, operating profit and EBITDA on a fully reported basis in the earnings release. Now I will turn the conference over to Mr. Jean Jereissati, CEO for Ambev. Mr. Jereissati, you may begin your conference call.
Hello, everyone. Thank you for joining our earnings call for the third quarter of 2022. Following a great first half of the year, I'm happy with our performance in Q3. Brazil's momentum continued to increase, not only in beer but also in NABs. And as a result, we are on track to deliver in some of our international operations. This quarter was marked by 2 themes that we have been talking about since the beginning of this year. First, how the consistent implementation of our strategy is the key to continuous improvement in our operating and financial performance; and second, how macro volatility continues to bring several challenges in the short term. And the good news is that we managed to deliver once again, led by net revenue per hectoliter growth continuing to pick up as the year progresses and volumes growing despite a very difficult comp in Brazil beer, showing strong execution and resilient elasticities. In fact, our commercial initiatives continued to yield results across most of our markets. Consolidated volumes grew 1.3% in the quarter, exceeding 46 million hectoliters, once again, an all-time high volume performance for a third quarter. Not only consolidated volumes performed well, premium brands gained weight in 9 of our 10 top beer markets, at least 85% of our customers in Brazil, Argentina, in revenues at the consolidated level and organic EBITDA grew double digits once again. However, macro conditions and the persistent high inflation in some of our international markets are not only impacting the consumer, but also our supply chain, especially in the countries with less flexibility in capacity and logistics like Chile, Canada and the Dominican Republic. Not only commodities were more expensive, but also oil prices hiked, raising inbound and outbound transportation costs. Therefore, results in our international operations were rather mixed. We saw a good resilience in LAS. Canada declined year-over-year, but continues to improve performance sequentially and CAC is the region that suffered the most. So let's start with CAC. The volume downside was mostly driven by the Dominican Republic and Panama. In the Dominican Republic, bottle supply issues were solved, but demand didn't pick up as fast as we expected because of high inflation rates pressuring consumption. In Panama, we witnessed a tough industry driven mostly by our large-scale protest against rising prices, which halted the country for more than a week in late July. Lastly, weather was significantly impacted by Hurricane Ian and Fiona in the end of the quarter. Our costs were impacted by the high inflation and the region is dependent on imports. We are now adjusting ourselves, the production plans, and we will continue to invest on our brands and work to develop a sustainable industry. But not everything was bad news there this quarter. Premium brands gained weight across most of the markets, driven by Corona and Michelob Ultra. Except for Panama, there was no significant change in sequential market share in our main markets. And marketplace net revenue grew in the 20s, driven by both Dominican Republic and Panama. That said, we need to do better there. Turning to Canada. Industry improved versus last quarter, but still negative versus a weak comp as last year, COVID restrictions were still in place. Volumes grew over 3% driven by estimated market share gains in beer and the rebound in the beyond beer industry from a weak performance last quarter. Premium brands gained weight and share in their segments, driven by a good performance of Corona and Stella Artois. Finally, in LAS, volumes grew 4.5%, driven by Argentina, where industry grew versus last year, and we estimate to have gained market share, driven by our premium brands. Bolivia is recovering from the COVID impacts. However, industry in Chile and in Paraguay declined, impacting volume performance. Nevertheless, core plus mix continued to gain weight in both countries. Marketplace continues to progress in Argentina and was fully rolled out in Paraguay. Now moving into Brazil. Nonalcoholic beverages delivered another stellar quarter in what had been a great year for the team. Volumes grew over 10%, resulting in estimated market share gains. Our portfolio is very well positioned to serve consumer needs with energy drinks growing almost 50%, the health and wellness brands over 30% and the premium growing 10%, with a highlight to Pepsi Black that now represents approximately 10% of our cola brands. And BEES is allowing us to serve a higher number of customers to NABs, 6% more than last year. Talking about beer, as we lapped over a very tough comp, volumes were flat in the quarter, but 35% above 2019. And on a 12-month rolling perspective, 13 million hectoliters above the same period of 2019. In terms of segments, premium led the growth with a high single digit performance, driven by Original and Chopp da Brahma. Our core brands remain resilient and we continue to invest behind developing our core plus brands like Brahma Duplo Malte and Spaten. Numbers of fans and brand health of focused brands continued to improve versus last year, and revenue per hectoliter grew 17%, driven by disciplined revenue management initiatives and brand mix impact. And finally, EBITDA in Brazil beer grew almost 18% organically, with margins expanding by 20 bps. Our performance in Brazil gives us confidence that we entered the summer season ready to deliver on FIFA World Cup. This event is always an important moment to connect with our customers and clients, especially in Brazil. Our team has been preparing for the event, and I believe this year's World Cup can be better than we had in 2018. First, because this year, it will take place in the end of the year during our summer season, which is the peak consumption season. Second, because our business is much better prepared than last time around. Since the beginning of last year, I have spent each earnings call talking about our transformation journey, starting with cultural evolution across the organization, then moving the technological capabilities that we have been building through Ze Delivery and BEES and also this step change in our logistics footprint and service model. Finally, the evolution of the brand building strategy. During this year's Investors Day, we unveiled our Ambev-as-a-Platform framework. So I would like to use it, that same framework to explain how each of the 5 pillars will come to life during the FIFA World Cup. So first pillar, brands for each and everyone. Our brands are healthier than ever. If we compare to 2018, our premium brands grew year-to-date about 4 million hectoliters. Our core plus brands grew over 5 million hectoliters, while the core segment grew approximately another 5 million hectoliters. We're going to use the World Cup to support 4 main brands: Brahma, Budweiser, Mike, Guarana and on top of all that, Ze Delivery. Second pillar, third to lead the future. Our innovation as a mindset is a reality now. More than 25% of the volume growth compared to 2018 came from innovation, brands that didn't exist in Brazil back then. Third pillar are close to our customers' success. These allow us to interact more frequently with our customers. Orders delivered on time and in full will be key for their business during peak days. Also, we now offer, on average, more than 4 delivery days per week per customer, a number that is 64% above 2018 levels. Fourth pillar, experiences that come to you. Ze Delivery has evolved significantly since 2018. It is now available in almost 300 cities, covering more than half of Brazil's population who can order beverages and other products from the convenience of their homes during and after the World Cup games. And we just announced that Ze Delivery is the official sponsor of the Brazilian soccer team, a big move to that. Fifth pillar, and finally, together for a better world, 100% of our beers in Brazil for this World Cup are now made with 100% of renewable electricity, the event itself, but to deliver loved brands, quality products, unparalleled services and memorable experiences to our customers and consumers in order to create a longer-lasting effect going forward moving into 2023. So we are very excited with what Q4 can bring. Not only do we want to deliver a strong finish to the year, but we also are looking ahead and working towards starting 2023 better positioned. 2023 will certainly bring challenges and risks but also opportunities. After all, we are living in a more uncertain and volatile times with a business that is over 80% located across Latin America, we are no strangers to volatility, macro challenges and inflation. So we will continue to focus on the things we can control. And from my perspective, what matters the most is that since 2020, we are building a business that is fundamentally better, improving results consistently year after year. First, we turned around volumes, then cash flow, then return on invested capital. More to do still, but I have no doubt we are on the right track, and I'm proud of what the team has accomplished so far. With that, let me hand over to Lucas.
Thanks, Jean. Good morning, good afternoon to everyone. If Brazil was the main highlight of our operational performance, that was also true from a financial perspective. It's great to see Brazil driving once again the improvement in Ambev's overall results. Brazil's top line grew nearly 20% in the quarter, with net revenue per hectoliter growing almost 17%, while volumes were up 2.4%. And this growth led to around 24% EBITDA increase with gross margins flat and 100 basis points of EBITDA margin expansion. Although input cost pressure remained an issue, thanks to higher commodity inflation, cash COGS per hectoliter for Brazil beer, excluding the sale of non-Ambev marketplace products grew a little over 18%, thus within our guidance. And cash SG&A grew about 16% in the quarter, with sales and marketing growing around 13% as we continue to invest behind our portfolio, distribution expense growing around 18%, once again impacted by higher diesel prices while administrative expenses grew 13%, mainly due to our investments behind enhancing our technological capabilities. So all in all, continuous and consistent progress in our main market. Turning to our operations abroad. The financial picture for the quarter in some markets was certainly not what we would like it to be, particularly in Central America and the Caribbean. Over the last decade, the region went from roughly BRL 200 million of EBITDA in 2012 to almost BRL 4 billion in 2021. But following a strong post-COVID recovery in 2021, 2022 has not been COGS year. H1 already faced relevant headwinds and Q3's financial performance was severely impacted by nearly 20% volume decline, which led to about 13% net revenue decline and 900 basis points of gross margin contraction, while inflation regarding distribution costs and supply chain losses were the biggest drivers behind the higher SG&A. And as a result, EBITDA margin contracted nearly 1,500 bps. On the other hand, despite higher COGS and SG&A levels, LAS posted resilient EBITDA growth driven by Argentina and Canada showed some sequential improvement. Moving on to cash percent decline versus Q3 2021. Here, we also saw a similar dynamic to the P&L, strong cash flow generation in Brazil, resilience in Argentina, but a harder time in important regions such as CAC in Canada. Despite the lower profit in the quarter year-over-year, cash flow from operating activities before changes in working capital actually improved in the quarter. However, in terms of working capital, some important operational factors played against us in the short term. Receivables in Canada increased given top line acceleration. Inventory levels rose in Brazil, given buildup during the quarter ahead of Q4 with the FIFA World Cup, and payables in CAC were negatively impacted by the lower production volumes, offsetting the increase in payables in Brazil. Also, it's worth reminding everyone that in Q3 2021, we monetized over BRL 800 million in Brazilian tax credits related to the ICMS in the taxable basis of the PIS and COFINS and the litigation, which was a one-off. Year-to-date, cash flow from operating activities is down 20%, given primarily our performance in Q1 when we faced, first, higher cash outflows to suppliers given 2021 CapEx calendarization and second, payment of variable compensation related to our 2021 performance. And finally, normalized profit declined by nearly 14% in the quarter. Despite the EBITDA growth, net finance expenses were higher, mainly because of an increase in carry costs in Brazil and Argentina in connection with our hedging strategy for currency and commodities. And our effective tax rate faced a tough comp because in Q3 2021, we recognized a gain of over BRL 750 million related to a one-off income taxes, favorable legal decision by the Brazilian Supreme Court. Nevertheless, year-to-date, our normalized profit is up 4%. Before I close, I would like to invite everyone to attend our ESG day next week on November 3, when we plan to share in detail our progress in terms of environment, social and governance agendas. The idea is to cover how we are trying to build climate resilience along the value chain, how our cultural transformation is enabling change in the company from within and how increasing diversity and inclusion can create value? And we will close with a roundtable with the new members of our Board of Directors and some of our executive officers. In closing, Q3 was a good start to H2, and we are on track to deliver our ambitions for the year: first, Brazil back to bottom line growth; second, deliver organic EBITDA growth at the consolidated level ahead of the 10.9% organic growth in 2021. And third, do so with a stronger consolidated net revenue and EBITDA organic growth in H2 versus H1, supported by also better cash flow generation and consequently, a better return on investment for shareholders. And looking ahead, we want to continue to build momentum and pave the way for a good start to 2023. Speaking of next year, we will keep pursuing continuous and consistent improvement in our financial performance by: 1, continuing to protect liquidity; 2, improving profitability through increasing our return on invested capital and improve profitability by also focusing on gross margin and EBITDA margin expansion; and 3, delivering strong cash flow generation in order to allow us to not only allocate capital towards organic and nonorganic growth opportunities at attractive returns, but also return excess cash to shareholders from time to time. That's it for me. Let's go to Q&A.
[Operator Instructions] Our first question comes from Alan Alanis with Santander.
Congratulations on the results JJ and Lucas. My question has to do -- well, I have 2 questions. One of them is how do we understand -- how can we better understand the discrepancy in drinks, soft drinks and beer in Brazil, I mean, with this such a strong growth in soft drinks? And the second question, I need to give just really quick context about the second question. Regarding the performance of your brands in the beer portfolio in Brazil, you're seeing high single digit in premium and also mid-single digit in core. That means that -- but you didn't talk about super premium or value and the volumes are flat. So that means either one of them or the 2 of them are declining. So could you expand a little bit more in terms of what you're seeing in terms of the composition of the portfolio of beers within the different price points? And how do you see this going forward?
Thank you very much, Alan, for the question. First, I will try to elaborate on soft drinks and beer. I think we -- first of all, what we are seeing is that all this transformation that we started like 3 or 4 years ago with innovation mindset and this vision that we have to innovate in beer that we brough 2 more brands that it was Brahma Duplo Malte and Spaten. And so a lot of things happened in between 2019 and to date, right?
And beer really performed well in this period. And if you look at our numbers of beer, when we compare with 2019 levels, so we are pretty much 30%, 30 something -- on the 30s, right, 34% above in this quarter, our performance on the -- compared with 2019. So we unlocked a lot of growth during this time, and we get to all-time high volumes last year in beer. That we are so proud that we were able to really get that flat this year because it's really like confirmed all of this volumes and transformation during the pandemic and the innovation working and all the in-home occasions that we created for beer, that they maintained a residual when the bars came back.
So somehow these volumes of beer long-term a little bit if you look a little bit further on comparing with the previous year, they are very good. So we are very -- and we built this in 3 years, okay? So when we felt comfortable and this was working, so then we really turned around to make NABs work. And we are just starting this journey with NABs. And we are not there yet on innovation for example, so where I really want to be. But I'm very happy with our portfolio that Guarana is performing well, that Pepsi Black is coming. And somehow, we are seeing a resilient industry on NABs, as the return to work is really helping with the occasions too, right?
So industry resilient, our portfolio very well established, BEES helping us to go along, really to grow. It's really making -- we gained a lot of market share and really performed well in NABs. But I think this performance, it really came a little bit further on this transformation that we started on beer. And then we are just starting this transformation on NABs. So we foresee that we will be able to outperform the market moving forward. But in beer, somehow this was something that we started before. So I elaborate a little bit on soft drinks and beer. So then coming back to beer and talking about portfolio, right? So portfolio, in the end, when we mentioned the high end, we combined the premium and the high end over there. So these numbers that we mentioned to you, they are super premium and premium that are growing high single digits as the combination. And when we look a little bit compared with 2019, it's the combination of premium and super premium, they grew 57%. In volumes that we grew total beer, 34%, right? So it's a very solid growth. It was a very tough comp on premium and high end, and they are consistently growing with 16% CAGR in 3 years.
And then we have a core very resilient. And then we have value regional brands really struggling, right? So it was an important piece of our business in 2019. We talked a lot about the regional play on affordability playing on regional brands. And this went down if we compare with 2019, 50%. So what we are really seeing is our portfolio getting better. So the core brands, they are resilient. We created this core plus business that now represents a lot to us. And then high end and that is premium, super premium is really resilient. So what we are seeing is a good shape of the portfolio happening.
That's very useful. Congratulations again JJ on the results.
Our next question comes from Marcella Recchia, Credit Suisse.
Let me circle back on the International division first. During the second quarter, we had impression that we were about to see recovery trends there, right, notably in the Central America and Caribbean. What was missing back there? What's the current outlook ahead? And what has been the main initiatives to stabilize the operations? That's my first question. And secondly, during the presentation, Lucas, you also mentioned improvements in margins and ROIC to be a focus next year. So what can be shared about the main levers for that? And if you can share anything or say anything about the cost outlook for next year?
Marcella, thank you for the question. This is Lucas speaking. In terms of the evolution in CAC from Q2 to Q3 and what we're trying to do to improve performance going forward, I think, first, it's important to note that in Q2, we also saw a challenging operating environment, not only in the Dominican Republic, but also in Panama for different reasons. In the Dominican Republic, we had a specific issue with the glass supplier. And the good news is that issue was addressed, okay?
However, supply chains take time to stabilize, specifically in this region, where you do rely on a greater level of imports and the infrastructure in the region, right, is not at the same level of infrastructure in North America or in South America. So it is a more unstable supply chain, and that has proven to be right, tougher to restabilize post the resolution of the glass supply issue in Q2 than we would have hoped for, okay? So that's the Dominican Republic, number 1. And in terms of Panama, the main issue -- the 2 main issues in Panama in Q2 were one market share, okay? There was a market share loss during the first half of the year that we're still working on to try and revert. And we also faced supply chain issues. The level of imports in Panama is higher than other markets. So as the supply chain constraints, right, were a factor in the entire region, Panama was not immune. Given the higher weight of imports, volume suffered even more. Going forward, the focus there is also on -- in terms of stabilizing supply chain, okay? So to the second part of your question, right, what we are doing? First and foremost, the focus is on stabilizing the supply chain. Without product availability, everything becomes much tougher. So that's our first priority to stabilize the supply chain. And then the second priority is really to improve commercial execution, okay? And what I mean by that is, for instance, in countries like the Dominican Republic and Jean alluded to this in his prepared remarks, it's very important in order to reactivate demand at the consumer level to make sure that we have great price execution with the right SKUs at the right price for the right type of occasions.
So there's a lot of focus on price execution in a market like Dominican Republic. As we restabilize the supply chain in the Dominican Republic, with a broader coming back, we need to make sure that we have the fuller assortment of our SKUs with more coverage because we lost coverage during -- some degree of coverage during the first half. So we have to recuperate that. And the good news is that sequentially within the third quarter in July, August and September, we saw improvements not only in terms of price execution but also in terms of coverage levels for the broader assortment of the portfolio in the Dominican Republic.
So heading in the right direction. And third, make sure that we continue to invest in developing the marketplace so we can serve customers better, not only with our right traditional beverage portfolio, but also other products and services that are of value to our clients, okay? So that's our kind of recovery plan in a nutshell. And in terms of Panama, I think 2 main highlights that the team is working on there. First, returnable glass volumes. So returnable glass bottles are relevant presentation in a country like Panama. So there's a role for returnable glass bottles to play in terms of having the right SKUs at the right price and the right channel. So there's a big focus behind RGBs in Panama. And second, marketplace as well. We took BEES to Panama during the course of the year. And so there's opportunity to improve overall performance by serving clients better through the marketplace. Hopefully, I addressed question number 1 in sufficient detail. And then in terms of margins for the future, right? I think the overall levers haven't changed Marcella. We still believe that to continue on this journey of improving our profitability, not only in terms of returns, but also in terms of margins, we have to get the top line consistently right. So we've built good momentum in terms of top line growth over the last, right, 3, 4 years, I think since COVID pandemic lows. I think we've managed to build very good momentum and consistent for the most part, double-digit top line growth overall.
And we need to keep it up, okay, by balancing, right, volume and also improving net revenue per hectoliter growth. And to do that, we have to keep making sure that premium and innovation portfolios remain growing and healthy. We need to support the return of the on-trade. We need to keep focusing behind returnable glass bottles, not only in the out-of-home occasion, but also in the in-home occasion, which there is plenty of opportunity in many of our markets. We consistently try to improve our revenue management, right, market by market, the arrival of B2B tech capabilities, D2C tech capabilities also give us a better understanding of the client and consumer, right, needs and consumption desire. So that makes us potentially smarter in how we can offer better assortment at better prices for clients and consumers. So top line is, first and foremost, the most important lever to continue on this journey of improving margins. In terms of costs, we will share more during our full year conference call in the beginning of next year. But what I mentioned in July stands true in the sense that after 3, 4 years of everything going against us on the cost side, pretty much everything was a headwind, the BRL , right, depreciating against the U.S. dollar, the Argentina peso, commodities on the rise, aluminum and barley. 2023 is shaping up to be the first year in a while where we don't have, right, all these headwinds at the same time.
So given our hedging policy, we have a good degree of visibility at this point, right, end of October already. There's still some hedging to be done, of course, but we have a good degree of visibility and the visibility that we have today, subject to finalizing the hedging for the year and subject to obviously what we cannot hedge is that the BRL tends to be a tailwind going into next year. Aluminum tends to be tailwind going into next year, whereas the Argentinian peso should continue to be a headwind and wheat, barley, which is kind of peg to wheat prices should also be a headwind once again. Net-net, a better picture than how we entered 2022, how we entered 2021, how we entered 2020. So obviously, we cannot underestimate the challenges. There's always going to be risks and challenges in the markets where we operate. But given the visibility that we have today, the picture certainly looks better than it looked this time last year, okay? So that's the update on costs that we can give now. More to come early next year. And finally, on the SG&A side, different levers to pull in terms of sales and marketing, distribution and admin. But I think overall, you know how much we focus on making sure that we are as disciplined as we possibly can in terms of the management of our expenses. So we're constantly looking for ways to invest better with better returns in terms of sales and marketing, distribution. There are efficiencies in things like D2C, which as they scale up, we've managed to get more efficient on the distribution side of DTC in places like Brazil. In admin, we invested a lot over the last few years to build that capabilities. And so we're constantly looking at ways to be more efficient to keep growing these platforms but in a more efficient way. So we can perhaps discuss in more detail later. But overall, that's what we can share now.
That's very clear, Lucas. Just a quick follow-up, if I may, on the guidance of having a second half better -- not guidance, let's say, ambition of having a second half better than the first half. How dependent is this ambition on the recovery of the International division?
Jean may want to comment, but I think it's -- based on what we've seen so far this year, the good news is that Brazil has really carried a lot of improvement for the company at a consolidated level, and we see momentum going into Q4 for the reasons that we mentioned in our prepared remarks, we still see good momentum in Brazil. And as LAS continues to -- right to show resilience, Canada continues to improve sequentially, and CAC starts to rebound, this hopefully will all help us deliver our ambition for the year. But I think it's more about Brazil than the international operations. Jean?
If I could add, Marcella, we are confident on the statement. And yes, so we have really to get better on international operations. But this is -- I'm thinking about more on the long term on this statement, we are confident that H2 will be better than H1.
Our next question comes from Lucas Ferreira with JPMorgan.
First one is on your whole per hectoliter of pricing. So how to think about that going forward getting into the fourth quarter? First of all, have you done all the necessary adjustments you thought of doing? Is there anything left to be done still? And how to think about the environment in the World Cup, should it be like eventually some more of -- some discounts coming in punctually, how do you see the market, the competition, so how to think about pricing in general? And then the second question about the exact the same issue by looking at 2023, Lucas just was talking about managing the top line. So with very strong pricing this year, what's the expectation for next year? Do you guys think inflation is something to aim for or just a carryover of the heights that it is done this year would be enough for you. So how to think about the pricing in 2023, please?
Okay, Lucas, it's a good and sensitive question, I think, that you are mentioning, let's see what can I mention about that. So when we started the year and we mentioned that we wanted to accelerate EBITDA organic growth that we were more prepared with the momentum that we have in that revenue per hectoliter through this year because we were structurally better, the portfolio is trading up, the high end is working and the channels adjustment that we needed to do, it was behind us. So I mentioned at that time that the big question of the year would really be like the volumes because I was confident on the LAS revenue per hectoliter with -- based on all the adjustments that we have done on the channels and my portfolio was much better. And this, I think, has been confirmed and somehow we are foreseeing a better-than-expected elasticities that we've been able to have really good volumes and with a resilient elasticity. And then we are heading into this Q4 that is -- that my peak focus is really -- will be on service level, right? Because I think the demand will be high. We never had a World Cup in the summer. So it's -- we are super prepared to do a great World Cup in terms of consumer bonding and somehow my mind is really on logistics and service level because my commercial plan is really, really good. So we are really betting on 5 brands, Brahma, Budweiser, Guarana, Antarctica, Mikes -- that is a new one, and Ze Delivery, too. So somehow my mind is really there. I really believe that this equation, this elasticity will be very resilient. And that doesn't worry that much. It's hard to mention what's going to happen beyond that 2023 levels. Somehow we feel that our main market, Brazil, has momentum, right? So somehow consumption has momentum overall. The unemployment is really low. We are very well positioned, ending the year, we believe because of the World Cup in a strong note. So somehow -- I think I mentioned what I could mention is that the elasticity has been resilient.
And just to add here, Lucas, as I mentioned in the prior answer, to the extent we managed to continue to grow the weight of the core plus within our total mix, premium volumes within our total mix as has been the case over the last 4 years; to the extent returnable glass bottles continue to grow their weight, not only because of the recovery of the entree, but also starting to go more and more into the at-home occasion; and to the extent we managed to innovate, right, in an accretive way, all these levers, they also help net revenue per hectoliter performance, right, keep the momentum we have been building over the last few quarters.
Our next question comes from Thiago Duarte, BTG Pactual.
Yes, 2 things on our side here. The first one, trying to think a little bit more longer term and looking at the beer category in Brazil. Looking at volumes and per capita consumption, it seems to be -- seems to have recovered really well over the last 2 to 3 years. I don't know exactly where we are, but I think we are very close to historical highs in terms of per capita consumption of beer in Brazil. It's also not a secret that that Ambev obviously has repositioned itself, as you mentioned earlier, since 2019 and partially to foster the industry growth and it seems to be working.
So my question is really what do you think is the long-term potential of the category considering everything that you're doing to foster growth and innovation and where you see per cap consumption in Brazil now and where you think it can get or as high as it can get looking a few years down the road? I think that's an interesting and important discussion given how strong it has already been in the last couple of years or so. So that would be the first question. And the second question is actually a follow-up to trying to understand a little bit more on the breakdown of the different segments within your volume performance in Brazil beer. You mentioned premium. You mentioned core being resilient, premium growing. You mentioned value is declining. But I still don't get exactly where the core plus and how the core plus, which is as we know, one of your biggest bets for your portfolio, where the core plus has been performing. I think it seems to be a very similar situation in terms of performance per segment relative to what we had in the second quarter. So just wanted to get this final clarification, that would be great to hear as well.
Okay. Thanks for the question, Duarte. So let me try to elaborate on the category, right, and long-term view. What is amazing is that beer is really part of the Brazilian culture, right? So it's -- so it's there. And it's -- we feel somehow that that is stronger than ever. Our category, the beer one has reinvented itself. Like 10 years ago, we had like pretty much one style of beer that it was like light lagers, right? So somehow like Brahma and Skol, they have like 10 IBU and some type of body. So what we are seeing is that from the last World Cup, 2019 to today, the market changed so much, we brought so much new news and recipes and innovation and flavors that -- and we maintained ourselves culturally relevant like on the context of the new generation in Brazil.
So somehow, beer category is health in Brazil, and we believe that is being resilient. So this year, it was like a year that we were questioning, but industry shows that is there, right? So we have this question. So we have this view that a way to -- there is 2 main engines of growth of the Brazilian beer industry that frequency going up is still low when we compare with mature markets. And then we have these new occasions at home being created like drinking some beer on Tuesday night, that it gets really the residual was there after the pandemic and then the bars came back. We still have a lot of opportunities to grow on North, Northeast and Midwest, right? So there are areas that are below average of the Brazilian country. Beer somehow, as the income go up and this equation of affordability and -- we still have plenty of room. So if you go countryside of Brazil, and we see that like if you do your birthday, it's still not affordable for you to buy beer to giving your party to everybody. So we still see that per capita consumption has room. On top of that, we are working on beyond beer.
There is a round of growth that we really believe that it's -- that we're going to have -- that will be very good for us in the future. So Mikes is a brand that we are elevating during the World Cup really to hijack together the Budweiser initiative. So Budweiser and Mikes will be together talking about the World Cup. So somehow, there is a big avenue for growth on beyond beers too. So somehow, I really believe, I'm really confident that our category is really resilient and still has space for growth in the long term. So this was the first question. The second question was about the portfolio. So in the end, we made a conscious call of take some resources and some affordability of Bohemia that is in the core plus segment, it was for us, and really concentrate on Spaten and Brahma Duplo Malte, so the 2 may blend over there. I still believe we can have -- we should bring more innovation in the segment. But when we put all the things together -- Bohemia really is a drag. When we put Brahma Duplo Malte and Spaten together, they are pretty much growing high single digits combined and still growing with a lot from -- we are very excited about the Oktoberfest that we did with Spaten. It's doing very well. Brahma Duplo Malte is healthy, helping the mother brand Brahma. So that's an avenue of growth that is there, and we are working on it.
Our next question comes from Carlos Laboy, HSBC.
JJ, Lucas, a substantial portion of your portfolio, right, is now core plus and premium just to stay with this topic a little bit. Can you give us a sense of what you've learned from your market maturity model about where you are in terms of exposure to core plus and premium and where it can go? What are maybe some of the examples of growth and how high core plus and premium can go? And while you're at it, can you give us an update on Spaten, which falls in that core plus category. You just went through Oktoberfest. I know that you were planning to do some big things with that brand this past month. Any update on that? Any learnings that you took from that experience would be helpful.
Thank you for the question, Laboy. So yes, so when we -- like in 2019, when we mapped the white spaces and what would be successful in terms of portfolio 10 years from now, we mapped a lot the market maturity that we learned with other countries. We studied a lot Mexico. We studied China. We studied what's going on in the U.S. for us, really should do the right moves and really get a better portfolio with ability to win with win ability, right? And it was clear for us that where we were in this stage, we were like betting on the high end, for sure, but there was a core plus segment over there that should be developed faster than the long-term bet on the high end. So -- and this was a completely open space that we saw in our portfolio. So we really went on that direction. We believe somehow that it's very underdeveloped today when we see countries like China, U.S., it really has a full potential of beyond 20% of the industry. And it was pretty underdeveloped. And then we went over there. We looked at what we could do. And then we had the combination of line extensions with new brands that is now in place. So we have Brahma Duplo Malte, we have Spaten, we have more to come on that segment. And -- but we are happy with this performance that we are having. So if we -- I was using sometimes the comparison of 2019, sometimes the comparison with the World Cup that we have in 2018, but somehow the core segment, there is 5 million hectoliters, new 5 million hectoliters when we compare one cup to the other, one World Cup. And that was really a work that we are doing and we really believe it can be 20% of the industry. And Spaten is doing amazing. So Spaten is a brand that we just started. And it's really -- there is this great case that it was like Brazilians really love the quality of the product and how it is a combination that is a little bit strong and easy. It's actually translate, but it's a brand that like everybody that drinks, loves; has a great history. And then we brought all this heritage to work.
And then we did the Blumenau Oktoberfest this year that has a great correlation with the one that we do in Munich. And it was just mind blowing. And so everybody is kind of in love, everybody that's getting touched with the history of the brand, with the liquid and the concept what we are doing is really excited about. There's a big avenue of growth there. It's growing very fast, and we are expanding. So still a lot of distribution to do, still a lot of brand to build too. But it's really doing very well. I think these were the 2 questions, right? So about the market maturity and specifically about Spaten, doing very well.
Our next question comes from Ricardo Alves, Morgan Stanley.
Wanted to go back quickly on the World Cup question and the potential impact. Should we be aware of any major mix effects, both in terms of channel penetration products, brands, when you go back and you look at your performance in World Cup historically speaking? So any kind of -- even if you cannot mention numbers, you mentioned it's kind of a delicate question, but if you can talk in terms of, qualitatively speaking, what the World Cup has meant for you in terms of revenue management, historically speaking? And also when you're thinking about SG&A, if there's some of the lines that you have to focus a little bit more on marketing? So just some qualitative comments on that as you go into the fourth quarter. And then second question probably for Lucas. When we look at the derivatives line, the BRL 1.1 billion number, it is explained, as you mentioned in the release by the higher hedge carrying cost. But when you look at the 69% number or the cost that you mentioned for Argentina, based on the numbers that we see from July through September in the country, we actually thought that would have been higher. So good to see that number. But just wanted to get your thoughts on if the move from the second quarter of 65% to the third quarter, around 69%, if there was anything specifically that you guys did to control or if maybe we should see higher costs go into the fourth quarter? But any kind of color that you could provide because it came in below what we expected, the 69% cost, even though the BRL 1.1 billion increase on a sequential basis. So any thoughts there? Any color would be helpful.
Okay. First question, Ricardo, so World Cup, yes, so I mentioned so how we are excited about. I didn't mention in the beginning, but like we are really launching Bud Zero. That will be the innovation of the World Cup in Brazil. So liquid is just amazing. It's really beating in the blind test the liquids that we have in the market. It really looks like a Budweiser. And so this is one thing that I would like to mention.
But talking about World Cup, in the end, mix, somehow the World Cup should be accretive overall, right? So because there is a scale, is one thing that is relevant. The size of the occasion somehow and the fixed cost, so somehow scale helps us. There is a big piece of it that happens in their own trade out-of-home occasions with draft, with RGBs. So somehow, of course, everything goes up, but somehow mix-wise, I'm more on the positive scenario than in the neutral one. And when we talk about SG&A, specifically sales and marketing, I think one thing to mention is that -- so we started the World Cup already. So we kind of front loaded a bit of sales and marketing in this quarter in Q3 to really get prepared for the conversation on the World Cup and the production costs and some media. So there is a little bit of frontloading now. There is a piece of the World Cup that is already in my numbers.
And then moving into Q4, somehow what we decided is to continue to invest on beer -- on soccer countries like Brazil and Argentina, but then really optimize the footprint. There is not that much into soccer. That is pretty much our international operations but Argentina, okay? So somehow I don't see an issue of -- I see SG&A coming back to me even during the World Cups. Once we already started and we're going to go resource our location moving forward, supporting the soccer passionate about countries, okay?
Let me take the second question, Jean. Thanks for the question, Ricardo. In terms of the losses on derivative instruments, 2 effects in the quarter. You mentioned Argentina, but there was also an impact in Brazil because the carry cost in Brazil year-over-year went from around 5% to nearly 10% over a larger exposure base. So that in and of itself also has a relevant impact in the higher costs associated with hedging in Brazil, number 1; and number 2, in terms of Argentina, we also saw a spike in the carry costs.
Last year in Q3, it was around, on average, right? It was around 40%-ish. And this year, it was around, on average, like 70% for the quarter. But if you look at month by month, right, like towards September, towards the end of the quarter, it was north of 100%. So the cost to hedge keeps getting higher and higher. And that's something that we track and monitor very closely. And as you remember, our hedging policy is such that we say we remain hedged on average 12 months ahead. But the reality is that pursuant to the policy, we have a window, a range to work with that goes from 10 to 14 months out.
And from time to time, we do take views if and when we feel that there's opportunity or more risk or the cost is higher in the short term. So I think the important thing to keep in mind, Ricardo, is really the range that we typically work with. And we always monitor very closely how attractive or not it is to hedge at a given point in time pursuant to the policy, okay?
This concludes our question-and-answer session. I would like now to invite Mr. Jean Jereissati for any closing remarks. Please proceed.
Okay. Thank you very much, all analysts and everyone who joined the call. Thanks for your time and attention. To wrap up, I really feel our industry is good and resilient, our business is structurally better, all the changes that we have been doing. We are really confident on delivering H2 better than H1, and we remain on track in terms of our main ambition for the year is really to get Brazil back to bottom line growth to have the consolidated organic EBITDA growth ahead of the organic growth that we had in 2021 and having an H2 better than H1 and to improve our ROIC, and we will continue vigilant on the short-term volatility and on cost pressures. So hope you will all enjoy these events, and I really looking forward to see you in our ESG Day next week, and have a great day.
Thank you. The conference call for Ambev is now ended. Have a great day.