Anheuser-Busch InBev SA/NV (ABI) Earnings Call Transcript

Welcome to AB InBev's Third Quarter 2026 Earnings Conference Call and Webcast. Hosting the call today from AB InBev are Mr. Michel Doukeris, Chief Executive Officer; and Mr. Fernando Tennenbaum, Chief Financial Officer. To access the slides accompanying today's call, please visit AB InBev's website at www.ab-inbev.com and click on the Investors tab and the Reports and Results Center page. Today's webcast will be available for on-demand playback later today. [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 AB InBev'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 AB InBev's future results, see risk factors in the company's latest annual report on Form 20-F filed with the Securities and Exchange Commission on March 3, 2026. 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. Michel Doukeris. Sir, you may begin.

Thank you, and welcome, everyone, to our third quarter 2026 earnings call. Today, Fernando and I will take you through our operating highlights and provide you with an update on the progress we have made in executing our strategic priorities. After that, we will be happy to answer your questions. Let's start with the key highlights. The momentum of our business continued in the third quarter. Consistent execution of our strategy enabled us to deliver solid top and bottom line performance while investing in our brands and capabilities to fuel future growth. Volumes grew for a third consecutive quarter, with market share growth globally and record high third quarter volumes in 15 markets, including Colombia, Peru, Ecuador, South Africa, India and Dominican Republic, amongst others. Revenue increased by 4.9% with solid revenue per hectoliter growth of 4.2%. Underlying EPS increased by 22% to reach $1.21. We stepped up sales and marketing investments to activate key mega platforms this quarter, strengthening our brand power and supporting increased participation with our portfolio. Our performance was driven by our replicable growth drivers with continued momentum across our mega brands, nonalcohol beer and beyond beer. This marketplace continued to scale, with GMV increasing by 45% to reach $1.4 billion. Given our strong balance sheet and increased capital allocation flexibility, the Board has approved an interim dividend of EUR 0.40 per share. Turning to our operating performance. Total volumes grew by 0.4% in the third quarter, led by growth in our soft drinks business. Beer volumes were flattish as growth in 2/3 of our markets was offset by a challenging industry in China. Our best-in-class revenue management capabilities, combined with positive mix contribution from our mega brands, delivered a revenue per hectoliter increase of 4.2%. EBITDA increased by 3.9% with flattish margins as higher sales and marketing investments and commodity headwinds were partially offset by disciplined revenue and cost management. U.S. dollar EBITDA increased by 6.5% in the third quarter and by 10% year-to-date. EBIT increased by 6%, and underlying EPS grew by 22% as we continue to optimize the business and drove operating leverage through the P&L. Our geographic footprint and global scale continue to enable us to deliver consistent results across different operating environments. Our footprint is both well diversified and balanced. With around 70% of our EBITDA generated in emerging and developing markets, we are well positioned to capture future industry growth with a mix of currencies. Now let's review our key regional highlights, starting with North America. In the U.S., our portfolio momentum continued with share gains in both beer and beyond beer. We have gained share of total alcohol for 10 consecutive quarters and are the #1 share gainer year-to-date. Our beer performance was led by Michelob ULTRA and Busch Light, which were the top 2 volume share gainers in the industry. Our beyond beer portfolio continued to expand our total addressable market and delivered revenue growth in the low teens, led by Cutwater and Nutrl. Now let's turn to Middle Americas. In Mexico, market share gain and margin expansion drove mid-single-digit volume growth and double-digit bottom line growth. We grew revenue in mainstream, premium, nonalcohol beer and beyond beer and continue to increase our portfolio brand power. In Colombia, record high third quarter volumes drove double-digit top and bottom line growth. Volume and revenue grew across all price segments, with our portfolio gaining share of alcohol beverages. In Brazil, market share momentum and volume growth drove a mid-single digit top and bottom line increase. Our premium and super premium beer portfolio led our performance and delivered high teens volume growth, and strengthening our leadership position in the segment. In Europe, market share gains and premiumization drove continued top line growth. Volumes were flat, estimated to have gained or maintained share in the majority of our key markets, with our performance driven by our mega brands and nonalcohol beer. In South Africa, record high volumes and premiumization drove high single-digit top line growth. Our premium beer portfolio led our performance, delivering [ mid thirds ] volume growth. Now moving to APAC. In China, revenue and volumes declined by 16.8% as we underperformed a challenging industry. We estimate the industry declined by low teens in our footprint, impacted by abnormal weather and continued weakness in the on-premise channel. While our overall results remained below potential, we made progress in areas of strategic focus. We continued to invest in our mega brands, innovations and strengthen our portfolio brand power. Our in-home channel market share trend improved versus last year, supported by continued momentum in our core plus and super premium brands and growth in the O2O channel. There is more work to do, and we are investing to improve our execution and rebalance our portfolio towards growing segments, channels and geographies. Let's now turn to our strategic pillars, starting with lead and grow the category. Our mega brands continue to drive profitable growth across our markets, with net revenue increasing by 7.7% during the quarter. Corona continued to drive premiumization, growing revenue by 20% outside of Mexico and growing volumes by double digits in 37 markets. The combination of our mega brands and platforms is a powerful opportunity to connect with consumers through key moments of culture and celebration. Following successful activations in the first 9 months of the year, we have a strong lineup for quarter 4 and into 2027. These mega platforms, including our partnerships with Live Nation and Netflix, are placing beer and our brands at the center of culturally relevant moments for consumers. Our strategic investments strengthened the connection with consumers and supported a continued increase in our portfolio brand power. Consistent execution of our category expansion levers drove increased consumer participation with our portfolio this quarter, with growth across our core, premium, balanced choices and beyond beer brands. In nonalcohol beer, our portfolio outperformed the industry and delivered a 35% revenue increase, led by Corona Cero and Michelob ULTRA Zero. With an estimated 60% of the volume coming from new occasions and new consumers, non-alcohol beer is an opportunity to develop the category and drive incremental volume growth. Let's now turn to our second strategic pillar, digitize and monetize our ecosystem. In the third quarter, this captured $15.9 billion in gross merchandising value, a 12% increase versus last year. This marketplace continued to scale, with GMV from third-party products increasing by 45% versus last year to reach $1.4 billion. Our digital D2C business is growing and enabling us to further monetize our ecosystem. Our digital platforms served 13 million consumers and generated $158 million in revenue. We are also commercializing third-party products on our D2C platforms and now have a growing marketplace with annualized GMV of $200 million. With that, I would like to hand it over to Fernando to discuss the third pillar of our strategy, optimize our business.

Thank you, Michel. I'll take a few minutes to discuss the progress we have made on 3 areas in optimizing our business: superior profitability, compounding EPS growth and increased capital allocation flexibility. Let's start with superior profitability. Our margins are best-in-class, reflecting the fundamental strength of our business, our brands, scale, leadership positions, efficient operating model and ownership culture. Disciplined revenue and cost management enable us to offset commodity cost headwinds and maintain our margins while we're stepping up investments in key mega platforms this year. Over the last 12 months, we have invested $8.1 billion in sales and marketing to support our growth priorities as we move into the next phase of our strategy. While each year has unique dynamics, we are confident we have opportunities for further margin expansion over time. Moving on to EPS. Top line growth, effective cost management and the continued optimization of our business drove constant currency EPS growth of 13.9%. With translational FX tailwinds, dollar EPS increased by 22.4% to reach $1.21 per share. We have a strong balance sheet. Given the proactive management of our bond portfolio, our last 12 months free cash flow is greater than any of our annual bond maturities, putting us in a position where we have no relevant refinancing needs. 98% of our debt is fixed rate with an average coupon of around 4%, and there are no financial covenants on our bonds. Given the strength of our balance sheet and free cash flow generation, we have increased flexibility on our capital allocation choices. The objective of our capital allocation framework is to maximize value creation for our shareholders. Consistent with our ambition for a progressive dividend over time, we have announced an interim dividend of EUR 0.40 per share compared to an interim dividend of EUR 0.15 per share last year. We also continue to execute on the 24-month $6 billion share buyback program announced last year. And to date, we have repurchased $2.6 billion of shares. Looking ahead, the strength of our ownership culture and execution, together with our best-in-class brands and solid year-to-date results, reinforce our confidence in our ability to deliver our 2026 outlook. With that, I'll hand it back to Michel for some final comments.

Thanks, Fernando. Before opening for Q&A, let me recap on our performance this quarter and the opportunities we have ahead of us. Our continued momentum reflects the resilience of our strategy and our ability to deliver reliable compounding growth across different operating environments. We continue to invest to strengthen our capabilities and brand power to lead and grow the category. Revenue grew by 4.9% with continued volume growth and a revenue per hectoliter increase of 4.2%. Underlying EPS momentum continued, increasing by 22% in both the third quarter and year-to-date. With our strong balance sheet and increased capital allocation flexibility, we announced an interim dividend of EUR 0.40 per share. As we progress through the next phase of our strategy, we are well positioned to deliver superior value creation. With that, I'll hand it back to the operator for the Q&A.

[Operator Instructions] Our first question is coming from the line of Edward Mundy with Jefferies.

So my first question is a pretty big picture question, if that's okay. So in 2026, you've got a pretty healthy balance between volumes, price and mix, and the replicable growth drivers are clearly working. I'm not looking for explicit guidance for 2027, but how are you thinking about those three buckets going into next year, especially as there's a bit more commodity pressure sort of creeping in? And then my follow-up question is really around nonalcohol, which accelerated in the quarter. What is it do you think you're doing differently relative to your peers that's driving this outperformance? And do you really feel like you're at the tipping point now where zero alcohol can really scale and become a meaningful growth engine?

Michel here. So two questions there. I think that they interconnect in a way. But I think you mentioned -- and just to reinforce that we are not providing any guidance so far for 2027. During the Capital Markets Day, we talked about this midterm outlook evolving from EBITDA, 4% to 8%, to become EBIT, 5% to 9%, as we now get into what we call the second phase of our 10-year plan. And as we look at the components of the results this year, year-to-date, now 9 months gone, volume is growing, very healthy net revenue per hectoliter. Of course, it comes from two different areas. We've been pricing, as we always do, in line with inflation. And our revenue management capabilities, which we discussed during the Capital Markets Day, is something that we are investing a lot. They continue to evolve. And due to the strong brands that we have and the capabilities that we have, we are topping up what we put in terms of price with very healthy mix, mix that's coming from premiumization, right pack price strategy and also from the growth engines that we referred to because non-alcohol is at the premium margins for us, ready-to-drink beverages, higher price per hectoliter, incremental net revenue there. And we continue to, of course, in a very detailed way, using all the tech capabilities that we have, to optimize the way that we promote, discount and go to market. So as we look forward, this type of algorithms, which is positive volume, healthy net revenue per hectoliter, gains in mix, optimization of the cost lines and the right growth engines is what we anticipate will drive our momentum moving forward. On the non-alcohol, I think that we've been investing on this now for 5 years, and we've been very clear on why we are investing. The key reason is because it brings new consumers to the category, and we are seeing today participation for our overall portfolio growing globally across the vast majority of the markets. It brings new occasions because it's very flexible as a liquid. It can be during the day, during the night, weekend, weekday. And it covers a very wide range of consumers from LDAs to adults that want to continue to entertain and enjoying beer but want to try in some occasions, nonalcohol beer. And what we are doing, I think that it is investing in the right brands and platforms. You remember, we made a massive investment with the Olympics. Our technology for the liquids is huge breakthrough. So today, the taste and the quality of the liquids that we are putting in the market is second to none and the best that we have had so far, but we don't stop investing in fine-tune the technology and improve taste and quality. And this, of course, is getting traction. It used to be less than 1% of our business. Today, it's more than 1.5%, approaching 2% on a run rate. And the growth rates are very good across the globe, double digits in most every market. We are taking leadership on this segment in many markets, but now it's stretching the this leadership up, and we see this continue to grow. It's very early stage. We'll continue to see more coming there. I think that the third component on this question on the same lines is how we are leveraging the business beyond this growth. You just saw the EPS growth of 22%. I think that Fernando can add a little bit on that because the optimizing the business is also a component on how this strategy is coming to life.

Thank you, Michel. You mentioned volume, price and mix. But at the end of the day, it's all connected. We are investing more into our business. You saw our sales and marketing. We're investing behind the mega platforms and doing all of that while managing to maintain the EBITDA margins. And then when you start going below the line, kind of all the things that we've been doing, this, for example, you are improving cash flow improving cash flow, you have a higher average cash balance on your bank accounts. You have better interest income that helps net interest income. Some of the different mix of countries that are performing, we see like Middle Americas, very strong performance. Just to give some examples, countries like Peru or Colombia, they are bigger than China today, and they come with a higher EBITDA margin and very good profitability. So when you start adding all these components, we make sure that we are investing enough to support the strategy. Top line is in a healthy place. Price is in a healthy place because we're investing behind our brands. And then you have a lot of leverage to your P&L, then you can deliver a solid EPS. Of course, this year, you had some tailwinds from FX on your EPS. But even without the FX, we are growing at 13.9% at constant currency, which tells a lot about the efforts that we are doing to optimize our business. And then again, we see opportunities to do more as we continue to delever, as we continue to further optimize our business.

Our next questions come from the line of Sanjeet Aujla with UBS.

A couple from me, please. I'd like to dig into China a little bit. I think on the call, Michel, you referenced the category down low teens in your footprint. Can you help us disaggregate how much of that is weather-related versus underlying consumer? And do you think the destocking will be done by the end of this fiscal year? That's my first question. My second question is on the strength in Middle Americas. You saw a nice acceleration there in Q3. I think the whole region is on track to deliver the strongest volume growth outside of COVID in the last decade. And so I'm just trying to understand how much of a -- how material is the World Cup impact there in the quarter versus what was just an underlying strong consumer backdrop?

Thanks for the question. Two very different parts of the world there in terms of not only geography, but momentum for the category and for our business. I will start with China. And when you look at the results in China, one can take this in a way that's very hard to understand, like 16% volume down. But when you dig into the numbers -- and we have like several sources to check these numbers in China. And one, we always say that the sources do not align 100% always. But you have production, you have production reported by the companies, which is different from the statistic bureau, and you have Nielsen. I think that they all converge on the quarter 3 to an industry that is high single digits down at national average. So depending on the source, between 8% and 9% down for the industry when you take this industry on our footprint. Because, again, we are more in the East Coast of China, expanding inland in a faster way now, but it is still very concentrated. We were very exposed to all this incredibly bad weather that landed in China and in the region over the summer. So our footprint, considering the channels, geographies, and the overall industry, was north of 10% down. So in this context, our performance, if you look through the quarters, just as an example, quarter 1, the industry was flattish. It was not too different in the quarter 3 than what it was in the quarter 1 in relative terms performance. If you go to the share was actually better because we started the year with a negative market share, 1 point, 1 point something down. And this share is getting closer to 0 as we go through the months and was below 0.5% in the quarter 3. So the actions that we have in place in China in innovation, the investments that we're making on the key brands being on the brand equity, power is growing, but also in distribution. Distribution is in good place, evolving. They are working. We are growing in the O2O channel. We are growing with the key innovations that we did in brands and packs, but the industry was really the big deal. And you are right on your question because take any market of ours where you have wholesalers more than one tier like China and the retailers after the wholesalers. When you get on the summer a 10% industry down, you are confronted with a choice that is not easy many times, which is you either leave your channels stuffed and then with too much inventory as you head towards the winter on an industry that is very negative, or you need to adjust your inventories. And a drop in the industry like 10% will push you to get inventories 2 to 3 days down in a month. You know that this is another big component on your shipments, which is, after all, what we report. So majority of the decline in China was industry and inventories driven, while we continue to underperform in sales to consumers, this industry that was very negative. I don't see a reason that is consumer driven for these industries to be too bad in China. Again, you go through the quarters, quarter 1 was -- quarter 2 was mid -- like -- yes, less than mid-single digits, down was like between 2 and 4, depending on the source. And then on the third quarter, we saw this big deceleration. We need to look more into the fourth quarter now and the comps for next year because after all, it's hard to believe that something like this will repeat itself. And we need to continue to make the right investments and continue to make progress there on what we want to do. The inventory thing is a moving target because if the industry is up, then you have, of course, a benefit on your inventory. If the industry is moving down as we saw in the third quarter, you need to adjust anyway, but we are planning and we're working very hard to get to the end of this year with normal inventories in China. That's our objective so we can have a more clean cut in everything that we do for next year. When you think about [ MAS ], I think this is just a fantastic performance. We host our Capital Markets Day there 3 years ago, so we could give you a picture of how relevant this industry is and how exciting the opportunities that we had ahead of us were in [ MAS ]. And I'm really happy to see how these opportunities are becoming not only reality, but the materiality of these opportunities are becoming even bigger than what we share over there. So I think that the team in Middle Americas, together with Jean Jereissati there, are doing a fantastic job. We saw participation growth across all the markets. We saw industry growth, the underlying trends that are driving that such as the economy, the health of consumer, the LDA population all playing in our favor, and this was boosted by a very good weather. You remember that we talked a lot about the bad weather last year in [ MAS ]. So this year was the opposite of that. We had some tailwinds coming from the comps and the weather, gaining share across majority of the markets where we have space in the beer share and gaining share of total alcohol beverage in the markets where our share in beer is already very high. So the beer category is moving ahead of the other categories. What's driving that? So very consistent execution of our strategy. All the growth levers, being nonalcohol, beyond beer, premium are growing well ahead of the industry. And the growth was broad-based. So in an interesting way, the overall consumer environment in this region is better than the average at global level. The inflation that is moving on the opposite direction than what we see across the globe, especially in Europe, Asia and North America. And this is bringing a little bit more affordability to the category when you compare the disposable income to the prices that are moving with inflation. And this is all supportive to the underlying momentum that we see in both the category and our brands.

Our next questions come from the line of Andrea Pistacchi with Bank of America.

My first question is on Brazil, please, where the industry, I think you said grew mid-single digit in sell-out based on Nielsen. And you gained share, but your beer volume was up 0.5%. So could you possibly help us bridge the gap here between sell-in and sell-out? And with the comps becoming a bit more demanding going forward, how do you see the consumer and the industry environment evolving over the next few quarters with the elections also now behind? And then I'll have a follow-up question for Fernando on the dividend, which you obviously increased the interim dividend quite meaningfully, as you said. Previously, I think you'd indicated that dividend increases would likely be relatively gradual over time. So should we see today's increase mainly as a rebalancing between interim and final dividend? Or does a stronger balance sheet give you -- you say it gives you more options, but does it give you scope to accelerate the increase in the overall payout?

Andrea, Fernando here. Let me start by your second question, and then I'll move to Michel. So on the dividend, we said before that we have this ambition to grow for a progressive dividend over time. We also said that our cash flow is skewed towards the second half of the year. So you're right, with the strong balance sheet, now we have increased capital allocation flexibility. So as business performing, you see our EPS continues to perform. We announced this dividend -- this interim dividend with EUR 0.40, which compares to EUR 0.15 in 2025. And I think this is, at the end of the day, consistent with our stated ambition of a progressive dividend over time. And Michel?

Andrea, on Brazil, I think that is not that complicated to triangulate the numbers. But of course, it demands clarification on the sources and how we look at each of these components, right? So you have in Brazil, the supply data, let's say, what goes out of the production in the breweries. And when you look at this data in the year-to-date, we are gaining share, and the industry is performing relatively well. And then I'm not using the comps of last year here, but the year only. When you look at the sales to consumer data, Nielsen, the industry on the quarter was also relatively good. Perhaps one would say under expectations versus the comps last year, but the weather that impacted Brazil last year was not really much better this year. And the economic situation in Brazil is still resilient, but it's not one at least on the middle of the year that was supportive for the overall consumer and consumption power. And in this environment, the difference between production shipments and sales to consumer is the way that people ship and control inventories through the channels and the comps. When you look at all of that, so the underlying demand for the brands and the market share in the different sources is positive. It's being driven by our premium brands that are growing well ahead of the industry, but a very strong performance from the balanced choices portfolio that we have and the core. And the market share is very healthy. Nielsen in production data also have a mismatch in terms of when you do the cut for the data, right? So a little bit of the Nielsen quarter 3 data is skewed towards the World Cup period. And therefore, in production would be more second quarter than third quarter. But at the end of the day, when you look at the accumulated of the 9 months and the cut only of the quarter 3 sales to consumer, they are both very healthy. I think that as we look to the fourth quarter in Brazil, we will see a little bit of the consumer environment, on your question, improving. Because you are aware that we had the elections this year in Brazil in October, right at the first month of the quarter 4. And usually, during this period, there is more money into the economy. So people received some of the adjustments in the salaries and the benefits that go to the overall population. And we are now phasing from the winter period towards the summer in Brazil, where if all the forecast is correct, we're going to have a little bit of the bounce back from the El Nino that was more on the negative side from half year last year to half year this year. And that should be a little bit of an inversion now as we go to the summer in Brazil. It's going to be a little bit hotter. It's going to be drier. We will see a little bit of better weather to the big regions in Brazil, especially Southeast and the Northeast regions in Brazil that should benefit for our industry from better weather than what we saw last year. So after that, then we need to see how the year ends and the next year starts to then measure how the consumer environment will be for next year. But this is for quarter 3 and what we are seeing now as we face from quarter 3 to quarter 4.

Our next questions come from the line of Robert Ottenstein with Evercore ISI.

My first question is on the cost outlook. It's changed a lot since the beginning of the year. So I was wondering if you could touch on the incremental pressures that you're seeing going into Q4 and '27? And how comfortable are you that you have the operating levers to deal with that environment and still hit your medium-term guidance? Maybe touch on what actions you're doing now to meet those challenges? So that's the first question. The second question, a little bit longer term, is fairly recently, you've added Michelob ULTRA to your global brands. And I love to get a sense of a little bit more detail on the strategy there, what kind of traction you're seeing and reasons to believe that Michelob ULTRA deserves to be a global brand and can make a meaningful difference to the top line longer term?