Speaker 1:
From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome inside the ICE House. Our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision, and business. For over 230 years, the NYSE has been the beating heart of global growth. Each week, we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism here at the NYSE and ICE's exchanges around the world. Now, let's go inside the ICE House. Here's your host, Lance Glinn.
Lance Glinn:
The beer industry has transformed immensely over the years, expanding from local brews to iconic global brands and a rich array of offerings like craft beers, non-alcoholic options, and premium ready-to-drink cocktails. As consumers become more health-conscious, socially aware, and experience-driven, their tastes have evolved, favoring unique flavors and innovative alternatives that cater to modern lifestyles.
AB InBev, that's NYC ticker symbol BUD, has been at the forefront of this evolution, leveraging its global reach as the world's largest beer company and a portfolio of mega-brands, including Budweiser, Corona Extra, Michelob Ultra, and Stella Artois. The company has continually adapted to meet new demands, setting trends and pushing boundaries in the world of beverages.
Our guest today, Fernando Tennenbaum, has witnessed this journey up close over his two-decade career with AB InBev. Starting in 2004 with the company's Brazilian subsidiary, Ambev, Fernando has taken on key roles in finance, including treasury, investor relations, and mergers and acquisitions, gaining insights into the business from every angle.
Now, as AB InBev's Chief Financial Officer, a role he assumed in April of 2020, Fernando shapes the financial strategy for a company with over 500 beer brands, 21 of which each generate more than $1 billion in annual revenue.
Today, Fernando joins us here in the library of the New York Stock Exchange to reflect on the evolution of the beer industry and how AB InBev has adapted to the progress made. He will detail the company's approach to non-alcoholic beer and ready-to-drink cocktails, the critical role of water stewardship in brewing, and so much more. Our conversation with Fernando Tennenbaum, CFO of AB InBev, is coming up right after this.
Speaker 1:
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Lance Glinn:
Welcome back. Remember to subscribe wherever you listen, and rate and review us on Apple Podcasts so that others know where to find us. You can also now find full video episodes of the Inside the ICE House Podcast on TV.NYC.com and on the NYC YouTube channel.
Our guest today, Fernando Tennenbaum, is Chief Financial Officer for AB InBev, NYC ticker symbol BUD, and has been in that role since April of 2020. Joining the company in 2004, Fernando has held various roles in the finance function, including treasury, investor relations, and M&A.
Fernando, thanks so much for joining us inside the ICE House. Welcome to the New York Stock Exchange.
Fernando Tennenbaum:
Thank you, Lance. It's a pleasure to be here.
Lance Glinn:
Over 20 years ago, you started with AB InBev at Ambev in Brazil. Reflecting on that time two decades ago now as we sit here in the library, what originally drew you to the company? What initially ignited your passion to sort of work in the beverage industry? And what milestones or challenges over the course of your career journey have sort of shaped your rise to now CFO?
Fernando Tennenbaum:
It's a good and interesting question because the reason why I joined the company ... They're pretty much the same, why I still love the company today, 20 years later.
I remember when I was first discussing with people inside Ambev, or ABI back then, and one of the things that they said is that, at ABI, you could do a lot of different positions. You could learn. It's not that you start in a given position and are going to stay there for the rest of your life. And you have a lot of accountability. There is this ownership culture there was very important. It's not like you do a project, you deliver the project, and you move on to the next. You always have accountability for the things that you did over and over again. With that, you have added responsibility but also added autonomy. And for me, this was kind of a new world. When you could go to a company, very soon you could have a lot of accountability. You could have a lot of decisions that you can make, and you could live with the consequence, good or bad, of your decisions. And that I started when I was an analyst and is still true today as the CFO of the company.
Lance Glinn:
When you joined in 2004, I'm assuming many of today's innovations may have been unforeseen, right? It's really hard to predict the future. We try to do it in every industry. I'm assuming that a lot of what we see today in the industry may not have even been on top of your mind 20 years ago.
As your career has progressed, what do you consider to be the most significant changes within the beverage industry? And how have these changes influenced AB InBev's evolution over the last two decades?
Fernando Tennenbaum:
I think probably one of the most relevant changes was really the consolidation of the beer industry. If you go back in time, there are a lot of small players, and then a lot of consolidation happened. We were an important agent on that. If you think about, we had the merger of Interbrew and InBev, which created InBev. Then we had the combination with Anheuser-Busch. We created AB InBev. Then we had the combination of Grupo Modelo, and then we had the combination with SABMiller. We had a lot of combinations.
Then we got a lot of scale where we were able to do things that in the past we were not able to do. Then leverage on technology. One good example is Bees. I don't know if you ever heard about Bees. Bees is our B-to-B platform. It's something that you need to have scale to be able to deliver on that. We have 2,000 software developers in the company. But not only global scale. You need to have local scale. You need to have operations and lot of markets with distribution so you can really deploy Bees.
Once you have that, it change the way you do your business. You are much closer to your customer. You can serve your customer much better. I think the key insight on Bees is that our customers were underserved 'cause there's more medium entrepreneurs that you couldn't have enough focus on them, but now with Bees you can. You can serve them much better. You can improve their business. And when you improve their business, you improve our business as well.
But I think the things that we can do with the scale that we have today and how that can help the community where you are present ... That's kind of a huge, massive transformation comparing to where we were 20 years ago.
Lance Glinn:
And we're going to speak more to that Bees platform a little bit later in the conversation. Michel Doukeris became CEO of AB InBev in July of 2021, following, like yourself, a lengthy career with the company. In what ways has his leadership in the past three years contributed to the company's growth and its continued status as an industry leader?
Fernando Tennenbaum:
Well, there is a lot of continuation in the company. You don't see many disruptions at ABI. Interesting enough, the first time I worked with Michel, I think it was 2010 or 2011. We worked together in different capacities. We worked together, but he's been working the company for almost 30 years. He knows inside out how it works.
But actually what he brought to the company, which I think created a lot of value, is simplifying the strategy. We have a very clear strategy today, which is one, two, three. Lead and grow the beer category. One. Number two, digitize and monetize our ecosystem. And number three, optimize our business. No matter where we go within the organization, you ask everyone, "What are you doing?" "I'm doing for pillar one. That's what I'm doing. That's how I'm creating value," or, "I'm doing that for pillar two," or, "That touches pillars two and three." This simplified the strategy in a moment that acquisitions or large acquisitions are likely to be behind us, and we need to focus on organic growth. Makes a lot of difference for everyone around the world in the company, and we have 150,000 people around the world. Having a clear view of what they need to do makes a massive difference.
Lance Glinn:
And you assumed the role of CFO in April of 2020, as I mentioned earlier. Since then, how would you describe your approach, your guiding philosophy, in the role, especially in balancing financial discipline and the necessity, obviously, for innovation and growth alongside it?
Fernando Tennenbaum:
I joined the ... All right. I was appointed CFO in a very interesting moment in time. I was appointed in February 2020 with a starting date in April 2020. We just had a COVID happening right in between.
Of course, you have a lot of ideas of what you want to do, but in the first few months or the first year or so, it was a lot about creating optionality and dealing with everything that was coming from COVID, like different disruptions happen in different markets, how you best prepare the company to come out stronger, and I feel we ended up doing a good job as a company. We gained market share in a lot of markets. We really deployed B some D-to-C platforms in this very volatile period.
Once that was over, then we could go back to more of a ... I wouldn't say a traditional CFO role, but the focusing more on resource allocation on how can you be efficient. I don't mean reducing costs, but making sure that, whatever investments you're making, you get the better return out of that. And that is true for your overhead investments. That is true for your CapEx. If you look, for example, CapEx, which is a very important KPI, our number for 2022 was $5 billion.
Last year, we had an outlook for four and a half to five, and we finished around four and a half. It's an improvement versus the previous year. And this year, our outlook is four to four and a half, another improvement versus the 2023, and we are doing all of that delivering the same or more EBITDA growth or the same or more revenues growth. It's not that we are taking resources of all of the business, but we're being more efficient and getting a better return out of the investments that we have in the business. This financial discipline is very important, and this is pillar three of our strategy, optimize our business.
Lance Glinn:
And you brought to the CFO position global experiences, diverse career stops, within the company over the last two decades.
How have these varied responsibilities that you've been through ... How did they sort of prepare you when taking over this role, especially when taking over the role during such a turbulent, unexpected, unanticipated time that was really the beginning of COVID?
Fernando Tennenbaum:
I believe any experience that one would have always adds up, and there's only certain that you have that the next challenge is not going to be the same as the previous one. You need to make sure you leverage on this experience. You know what you know. You know what you don't know, and what you don't know you try to find out, you try to create what are the best outcomes, and then you plan and prepare for it.
If you look at my career, I feel some of my positions ... They helped a lot. If you think about between InBev and AB InBev treasury, I spent 10 years in treasury. In treasure, one of the key capabilities ... Risk management. Of course, you need to know how to raise debt. You need to know how to issue bonds. You need to know how to trade, but more important than anything is the risk management capabilities. And then when you get a situation like COVID, risk management is very important to that.
The other one that was quite interesting was investor relations because investor relations ... It's a very interesting area because you don't make too many decisions. In treasury, you make one decision every day. Investor relations you don't make, but you have a huge responsibility because if you don't communicate well, there is a lot of value that can be either created or destructed with the shareholders. You need to be very, very careful to make sure you communicate in a very clear and direct way following all the different regulations, which is very important as well. And I think this is another thing that is very important for a CFO role.
All of these things ... They help you build until you get there. But of course when you are in the position when you need to make some decisions, the reality is always a little bit different, and then you need to learn and adapt.
Lance Glinn:
As we discussed earlier, the industry is obviously evolving. There are new innovations, like I said, that, when you took the role in 2020 and when you first started in 2004, may not have been on top of mind. But when it comes to customer dynamics and changing customer preferences, what significant trends have you observed over the course of your time with AB InBev?
Fernando Tennenbaum:
One trend that is a constant no matter which market you go to is premiumization. The market's getting more premium. And when the economy is good, the market's getting more premium. When the economy is not so good, the market is also getting more premium. And this is kind of how you say, "But this is true in developing market." Yes, it's also true on a developing market. This is impressive.
The other one and that is a good example here in the US is, for example, this active lifestyle, and then Michelob Ultra is spot on the trend. You see the brand growing a lot, gaining a lot of momentum. It's a more premium brand. It's what we call above core, and it's also one designed to active lifestyle. It's growing a lot.
The other interesting thing is what we call this fourth category or beyond beer. This is another development that is quite interesting and plays to the strengths of the beer companies. If you look, for example, we have two brands here in the US, NUTRL and Cutwater. NUTRL is like a vodka seltzer. Cutwater is canned cocktails, and they have been growing quite a lot to the extent that, if you look the hard liquor industry, we are not a player. We are a beer company, but given these brands, we have one and a half percent, if you look at Circana data, of this industry. But over the last quarter, we were more than a third of the dollar growth of this industry, just to show the potential of this new segment and how this can benefit the beer companies.
Lance Glinn:
And I'm glad you brought that up because you have these ready-to-drink cocktails, essentially. You have, obviously, non-alcoholic beers as well, too, sort of growing more niche segments within this general beverage industry, beer industry.
Can you go into more detail on how AB InBev is addressing these growing markets and how you plan on being more of a player and growing your already significant position within them?
Fernando Tennenbaum:
I'm going back to our strategy. Pillar one of our strategy is lead and grow the beer category, and we have some expansion levers that we can leverage on that. In the beginning, when you see a less developed market, it's about bringing consumers to the category. It's what you call participation. And then once you bring consumers, then the next step ... You start creating occasions. Then you have the new occasion. Other occasions. And then, for example, we were talking about non-alcoholic beer. It's a fantastic way for you to tap occasions. If you have someone that would love to drink a beer, but it's during a working day, during lunch, now we have an alternative. We have the non-alcoholic. It's target for beer drinkers, but then beer drinkers ... In occasions that they were not considering a beer, now they can consider.
Then once you go past occasions, you can start bringing more premiumization, which is another very strong opportunity. Then we have ... And then you keep going on the ladder. Another one that you have, for example, is beyond beer. Beyond beer on more mature markets ... You start seeing a lot of occasions which the same occasion where someone would be buying a beer. And, believe it or not, not everybody loves beer. There are some consumers that are in that occasion, but for whatever reason, they wouldn't have a product that they would like to drink. Then we have this beyond beer. It's the same occasions and same channels. If you go to a C store here in the US, a convenience store, and then you like to have a canned drink, then you can have a canned cocktail, while in the past you could not have.
We are listening a lot to the consumers. And as the consumer evolves, we also make sure that we have a more complete portfolio to address all the consumer needs in the different occasions where they're present.
Lance Glinn:
And let's talk a little bit about that portfolio. AB InBev boasts over 500 iconic brands, including mega brands, Budweiser, Corona Extra, Michelob Ultra, and Stella Artois. While it's obviously essential to support the entire portfolio, all over 500 brands, what strategies are in place to ensure that these mega brands receive the attention they need while, again, also still supporting everything underneath?
Fernando Tennenbaum:
That's a very good question because you can have a lot of brands. You need to make sure that you don't spread your resources to thin. And then we created this mega-brand strategy, which is in every market you have three to five brands that are responsible for 80% of the growth in that market. And the idea is that you channel more resources to these brands so you can further boost their growth. And once you channel the resources, this brand ... They gain scale, and you also can bring what you call the mega platforms, and then that help activates the brand, and that's where the global scale helps.
Because I'm going to give you an example. Olympics. Olympics is a very expensive event, but when you spread out all of the country, then it's a very efficient way for you to leverage your products. We were sponsors with Corona Cero. And then in a lot of markets, we were able to launch Corona Cero. The brand grew triple digits during the third quarter. It's a very strong performance. We were also sponsoring the Team USA with Michelob Ultra. That's also a very good activation. The brand performed very well throughout the summer, and you can only do that if you have these global platforms, these mega platforms, which are global.
One thing is connected to the other. And at the end of the day, it's about financial discipline because, once you have that, you focus your resources. You can get much better return. You can get a much better ROI, and that's where kind of finance and marketing kind of meet together.
Lance Glinn:
And so, you have these four mega brands. And, look, beer drinkers like their beer. They like Michelob. They might not like Stella. How do you make sure that you support all these brands and also make sure that they don't cannibalize one another?
Fernando Tennenbaum:
They cater to ... They have different positioning, and I'm going to give you some examples. If you think about the US, let's just start with Busch Light. It's all about outdoors, farming, fishing, and hunting. It's very clear. When you think about Busch Light, you remember this guy with this striped-
Lance Glinn:
The plaid shirts and the-
Fernando Tennenbaum:
The shirts. Kind of on an outdoor, on a mountain, close to a river. Then if you go to the other spectrum, when you think about Michelob Ultra, you remember people running. People going to the gym. The active lifestyle. They have different positions which the same consumer can have them both in different occasions.
If you think about the Stella Artois, then with Stella Artois you think about an elevated occasion. You think about a beer that you can have together with a very good meal. It's the dining occasion. They always start having different positions.
If you think about Bud Light, Bud Light is more ... You think about concerts. You think about music. You think about [inaudible 00:20:29]-
Lance Glinn:
You think about game days.
Fernando Tennenbaum:
... people, game days-
Lance Glinn:
Game days and tailgates.
Fernando Tennenbaum:
... NFL. UFC. You think about ... You try to make sure that each brand has a different positioning. I'm giving examples in the US, but the same thing happen all around the world. Each brand has a unique positioning to make sure that they don't cannibalize with each other, but actually they add to each other.
Lance Glinn:
And I want to just talk broadly about capital and resource allocation as a whole. Obviously, AB InBev has a global reach, as we've been discussing. What just sort of key factors influence your decision-making process and how you sort of prioritize investments across these various regions and across these various products?
Fernando Tennenbaum:
We have a framework for capital allocation. We say priority zero. The first thing that we do before anything else is making sure that we invest behind our business. And then that's where financial discipline comes into play. We have no shortage of resources. We need to make sure that when we invest we get a very good return.
And then if there is an opportunity ... For example, we are building a new brewery in Colombia. Very good opportunity. The market's growing, so we are sending dollars there. We need to expand capacity in Africa. The volume is growing a lot in Africa. Then again, we deploy the resources. We can do things there.
Then once the business is taken care of, there is also cash that we continue to generate, and then we need to decide how to deploy this cash. And then we have ... If you look at our website, we're going to see that we always show what triangle, and a triangle is we can use this cash to leverage, we can use this cash to do M&A, or you can use this cash to do payout, like dividends or share buybacks. And the key decision factor is which combination creates more value. We call this a dynamic capital allocation because, in different moments in time, a different combination should be the one that maximizes value for our shareholders.
A good example is last year we did a $1 billion share buyback. We bought back $3 billion of debt, and we paid a dividend. This year, we increased dividend. This year we already announced a share buyback that is twice as big as last year. Then again, because we made some progress on the leverage, we have other flexibilities, and next year we're going to look at where we are. Or not necessarily next year, but any given moment in time, we need to look at where we are and what is the combination that maximizes value to our shareholders.
Lance Glinn:
And we talked earlier about AB InBev's over 500 brands and, of course, the mega-brand strategy along with it. You mentioned earlier all the numerous acquisitions that have happened during your time within the company. But over recent years, how have you and the AB InBev leadership team balanced the decision between pursuing other acquisitions or fostering more organic growth over the last five, 10 years?
Fernando Tennenbaum:
The best way to look at that is take a step back and see how the company was created and where we are and how can we move forward, and that connects somehow to the one, two, three, our strategy. Because if you look between 2000 and 2018, '17, '18, we were growing a lot, doing a lot of acquisitions and capturing a lot of synergies. And in this process, we create a large company with a lot of brands, a very strong company, but there are what we call some side effects.
One of the side effects is that we are so focused on consolidating the integrating the companies that probably we didn't develop the beer industry to the full potential.
Another one is that, then again, we are building this company. We didn't stop and look all the footprint that we create. What else can we do with the footprint? The warehouses? The route to market?
And the third one is that, as part of this process, we ended up with a lot of debt because we borrowed a lot of money, so we were leveraged a lot. Then once we unveiled the one to three, the lead and grow the beer category, digitize and monetize our ecosystem, and optimize our business, this is actually to tackle each one of these three things. None of them are fundamental issues, but there are more on opportunities given where we were. Then when we look forward, it's very likely that we have transformation acquisitions like we had in the past. You can have smaller M&A's but not necessarily the sort of transformational, but the good news is that we are in a industry that is growing. It's growing around the world. We are gaining share of growth, and there is a lot of potential to grow organically.
And then once we have this industry that is very nice, we also have a unique thing is that we have a lot of local scale. We have global scale and local scale. And for beer, beer is a very good business as long as you have scale. And we have both. With the scale, we have the replicable tool kits that we can use all around the world. And with this scale replicable tool kits in a grow industry, we can generate a lot of financial returns. A lot of cash. Then we can use that to grow the industry but also to provide a very nice return to shareholders.
Lance Glinn:
Fernando, let's talk about the Olympics. Now, the International Olympic Committee recently signed AB InBev as its first beer brand in the 40-year history of its sponsorship program. Just what was the strategic rationale behind the Olympic partnership? And as Italy prepares to host the 2026 winter games, what's next when it comes to advertising with the Olympics?
Fernando Tennenbaum:
I'm going to be broader than the Olympics. It's about the mega-brands, mega-platforms, strategy because you can talk about the Olympics, and the Olympics is probably the biggest sport event on Earth. You get a lot of visibility, and it connects very well to Corona values, but also you can think about the FIFA World Cup with Budweiser, which is another mega platform. You can think the UFC with Bud Light. You can think about the Copa America with Michelob Ultra. You can think about the NFL with Bud Light. You can think about the NBA with Michelob Ultra, and I can keep going on and on. We have these music platforms. Country music.
All of these are, at the end of the day, fantastic events that they have a global reach. They connect to the values of the brands which we are using to expose to these events, and then we can kind of leverage our global footprint to activate this event. Another nice example is the tennis platform with Stella Artois. We have what we call the Perfect Serve. Perfect serve. You have the tennis player doing the serve, but you also the Perfect Serve for a draft beer. And Stella has this Perfect Serve platform. We have all the rituals, when you put your beer on a Stella chalice, and then we could leverage Wimbledon and Roland-Garros with Stella all around the world as well.
Lance Glinn:
Now, I do have to ask before we go on. Fernando Tennenbaum goes home. Wants a cold beer. His cold beer of choice is?
Fernando Tennenbaum:
My cold beer of choice is a different one depending on the moment. If I'm having a meal, my favorite one is Leffe Blonde, which is a Belgian beer.
If I want to relax, probably I like a lot Budweiser. Budweiser. If you look about how hard is to brew, Budweiser probably is one of the most challenging brands we have to brew. The quiet and all of that. I love Budweiser.
If I finish a run, or I finish a bicycle ride, then it's Michelob Ultra. And if I'm in Brazil, there is one type of beer, which is a draft beer there, which is a non-pasteurized beer. It's called Chopp de Brahma. It's my favorite when I'm there in Brazil on the beach. It's kind of a very good one as well.
Lance Glinn:
I want to turn to the Bees platform that you obviously mentioned earlier in our conversation. It launched four years ago to empower small and medium-sized partners through a business-to-business e-commerce solution. Since launch, it's expanded to dozens of markets, millions of active users.
What role does the platform play in AB InBev's broader digital strategy? And how does it create value for both the company and the retailers that use it?
Fernando Tennenbaum:
Bees, when it started ... The whole idea was for you to digitize the relationship with the point of sale because, by doing that, you could spend more time, invest more time, fulfilling their needs. And let me try to give some color on that. On our own model, we would have a salesperson that would be visiting their point of sale on a weekly basis, or our customer on a weekly basis. But given that it doesn't have infinite time, they were spending ... Each salesperson was spending anywhere between five to seven minutes with a given customer. And they were visiting once a week. At that time, there was on their schedule not necessarily the most convenient time for the customer.
Once we move to Bees, this interaction with our customer increases from five to seven minutes per week to more than 30 minutes per week.
The other thing that we were able to do ... We were able to do algo selling. Algo selling. You are able to tailor-made the portfolio for what is best for your customer, which means that is the one that is going to get more profits for his business.
Let me give you another example. If you think about a customer that is a restaurant in a business neighborhood, probably there is a lot of people going there for lunch. It's good that you have the beer portfolio, but it's also good that you have our soft drinks portfolio there and the non-alcoholic beer portfolio because there is a lot of people that are having lunch, not necessarily they are going to have a beer. Then you have another point of sale that is actually a nightclub. Then you need to make sure that you have all the premium portfolio, the different offering, different sizes because that's what the audience that is going to be requiring.
With algo selling, we can compare in different types of point of sales and then optimize for this given one, and technology allows us to do that.
The other thing that we can do ... And this is quite interesting. You have what we call execution at the point of sale. And what is execution? You go to a point of sale. You see the cooler. You need to have the brands displayed in a certain way. And it's very, very clear. When you go to a very nice executed point of sale, you see the brands. You'd see them kind of elevate the brands. When you see kind of brands all over the place, it kind of diminishes the brand. Execution helps the point of sales sell more and helps the brands being properly positioned.
In the past, we'd have the salesperson that only had seven minutes go in there and trying to do the execution, and most of the time was order taking. Very little time for the execution.
Today, we have not a salesperson. We have a relationship manager that goes there and do the execution. But more interesting, now the point of sale owner can do the execution. Then it'll take the picture, send, and through AI will recognize. If the execution is the correct one, we are going to give some mileage points or the equivalent of mileage points, and they can use that to get discount into beer. It's much more efficient and gives much more autonomy to the point of sale owner, just to give some of the examples.
And then once you have these pipes, or this channel, with the point of sale, then you can start doing other things. For example, we have the marketplace. Marketplace is too is more share, but it's growing a lot. The growth from the third quarter was more than 50% of GMV. We had $650 million of GMV, which on an annualized basis is $2.5 billion. And this is only thirty-party products. Nothing to do with our products. Our annualized GMV of our own products ... More than $35 billion.
We are delivering more and more things to the point of sale, and then you can keep going on and on. For example, in some emerging markets, people needs to pay their utility bills. Sometimes they don't have bank accounts. Through Bees, they can pay their utility bills at the point of sale using this. They can buy cell phone minutes. All of these things is really to make sure that the point of sale is better serve, there are more customers going to the point of sale, and their business can be better. Once their business are better, our business better as well.
Lance Glinn:
And so many of these customers are mom-and-pop shops, right? These small retailers. These bodega-like places. And while the platform has grown significantly since inception, it obviously can continue to grow. How are you and your team approaching that next step to increase its size and increase that amount of customers, increase that amount of locations?
Fernando Tennenbaum:
The key here is the platform. Once you start in a country, the platform's reach kind of pretty much all clients very quickly. Now that the platform is more mature, the product is a good product. The adoption is very quick.
Then what you need to do is make sure that you keep developing features to add value to customers so they can enjoy even further the platform. We started digitizing our sales. Then we started bringing marketplace, and then we see the marketplace adoption going up. Then we start bringing more products to marketplace, and then we start tracking all of different KPIs. For example, one that we track a lot is the NPS. The NPS used to be 10. 20. Now, it's more than 60. Kind of it was 66 on the third quarter. One year before, it was 60. It means that not only it helps the consumer, but it helps our relationship, and we keep developing new features. Every other week, there is a new feature being released all around the world for this.
Lance Glinn:
And so, you have to keep adding these features, making it a more attractive platform to the consumer. That all points to innovation, and we sort of talked about innovation earlier when talking about the trend of non-alcoholic beers, the trend of ready-to-drink cocktails. But when it comes to technological innovation, how frequent is the company focused on that?
Is it constant innovation on a weekly, monthly, obviously annual basis? What's the process to finding a problem or seeing what a problem is and then ultimately finding a solution to then better the customer experience?
Fernando Tennenbaum:
It always starts with the customer. We need to be customer or consumer focused because you need to understand what are the consumer needs. Then you can develop innovations for the consumer.
And the interesting thing is that the part of the process of innovation ... Believe the first step is actually killing what is not working because otherwise you keep innovating, innovating, innovating, don't know what is working, what is not. The first thing you need ... Let's see what is not working. Let's shut it down. And then once you open room, then you can start innovating. And a lot of people believe that innovation is only launching a new product, but there is a lot of innovation in terms of packaging. In terms of sizes. There is a lot of innovation that happen even if the current products, and of course there is this new to the world.
And then you have the NUTRL, the Cutwater, the zero alcohol. You'll have a lot of this innovation, but it's fair to say that the bulk of innovation is the things on the current products. Sometimes a new label. Sometimes a new packaging, a new bottle, a new size that is more friendly, different price points, or Bees, as we mentioned. The other digital innovation, digital product, is our D-to-C platform where we can have a cold beer in 30 minutes at your home. If you are at home in the middle of the football game, in the middle of the soccer game, and this is life in pretty much most of Latin America, then you find out that you run out of beer. You go on your app. In less than 30 minutes, a cold beer arrive at your home. You don't even need to bother putting the cooler because it arrives kind of at the right temperature for consumption.
Lance Glinn:
And you mentioned the first part of innovation being sort of killing what's not working. How much of innovation is failing fast and making sure that, if something's not working, you move on, and you move on to the next thing? And that next thing may not work either, but at least you're constantly cycling through these things of this isn't going to work until eventually you reach what does work.
Fernando Tennenbaum:
I feel it's a combination of how you're saying failing fast, but more important is this whole discipline of growing pilots, learning, and then moving forward to the next step. It's more about the whole process because, if the pilot doesn't go well, then it's over. Then you can rework and see if there is another angle, but then it's kind of not only killing fast but without costing too much, without wasting too much resources, and resources can be costs but also can be people focusing on that because if you have your team focusing on innovation that is going nowhere, it's better to redeploy this team to another thing that makes more sense rather than kind of over and over again on something that doesn't work.
Lance Glinn:
I want to talk about the brewing process, and water is obviously essential for brewing. How is AB InBev addressing water conservation in high-risk communities, working to reduce water use per hectoliter, and promoting water stewardship both within its operations and local communities?
Fernando Tennenbaum:
We are talking about sustainability here, and that's a very interesting question. When I joined ABI 20 years ago, in the first week you have this integration where you go and visit a sales operation. You visit your shared service center, and you visit a brewery. And I was visiting the brewery. And I remember the brewmaster was showing some KPIs. "This is our water consumption. How many liters of water to make one liter of beer, and I'm reducing that year over year, and my target for this year is to reduce even further. Then this is my energy consumption. This is where I'm coming from, and this is my target. This is my extract loss number. I need to reduce that year over year. This is the rationalization of all the leftovers. And it was 97. I want to be 98 next year." And I said, "Very interesting."
Then 10 years ago, everybody started talking about sustainability, and I said, "We've been doing that for 20 years. We probably not talking about it as sustainability, but it was always core to our business." And what I'm saying that ... I'm saying that, for us, sustainability is actually making your business better than kind of something that is going to cost more for your business than you need to do. The more sustainable we are, the better our business model.
We are an operation that is very local. Making sure that, both starting from the farmers, they are more sustainable, which means that ... Especially if you think about small farmers, they can live from the farming. The more efficient they are, they make more profits, which is better for the development of this local community there, and it's more efficient for us as well.
Once you bring the products inside our four walls, we need to be as efficient as possible in brewing because then you don't have waste. But not only that's good for environment, but that's good on the finance side as well because you also save money. And then when you go sell your products, we sell to local communities. If the communities are performing well, and that's, for example, where Bees come into play, we make sure that our point of sale is very healthy, having all the tools to develop. Once they can develop, we also can develop the local communities. It's our consumers at the end of the day. If they're in better shape, we are in better shape as well.
And that is true for every KPI. Water consumption. I remember when I was there 20 years ago. I think our number was five liters of water per one liter of beer. And again, I might not be 100% precise on that, but this is more or less the ballpark. Today, our goal is to get below two and a half. And in the third quarter, we already below that goal. We were at 2.47. That's a massive improvement.
The other thing that we need to look at is that it's not only making sure that we are reducing our water consumption but where we get the water from. The watersheds. They need to be even a very healthy place. Given that our business is very local, sometimes you are in a place you have a lot of water. Sometimes you have a place that has more of a challenging water environment. Then we need to make sure we work with the local communities, and we have a very structured approach to see how we can make sure that the watershed is healthy. And if it's not healthy, how make sure that it's improving to a place that is sustainable in the long run?
Lance Glinn:
You mentioned the work with farmers before as well, and AB InBev prides itself on using simple, locally sourced ingredients within its beer to maintain freshness, simplicity within these ingredients. Obviously, it's important to have sustainable agricultural practices.
How is AB InBev working to support these farmers in developing resilient value chains, developing these sustainable practices, and obviously and ultimately these sustainable food systems?
Fernando Tennenbaum:
One of the benefits that we have of being a large company is that we are exposed to best practice all around the world. Then once you learn about this, you can share that with all the farmers. Sometimes they don't have the visibility. Sometimes they don't have the technical capabilities. But if we can share that, they can improve a lot their farming. They can be much more efficient in their crops. They can have better yields, and that helps them a lot. Or they can do that in a way that they have a good crop not only this year but next year, the following one, in a much more sustainable way. Sharing this best practice help a lot our farming network.
Lance Glinn:
Fernando, as we begin to wrap up today's conversation, let's look ahead with 2025 approaching. What do you and the AB InBev leadership team identify as the company's top priorities, top goals, objectives for the upcoming year?
Fernando Tennenbaum:
When I look at my top priorities, it's very clear. One, two, three. Lead and grow the beer category. Digitize and monetize our ecosystem. And optimize our business. And I feel we have a lot of good opportunity in these segments.
On the lead and grow, as I said, the beer category is the one that is growing. Gaining share of growth is gaining around the world. We can keep growing. We should be aiming to keep growing the industry. Keep doing our leadership role. And for that, you have the brands, the innovations that we're talking about.
On the digitize and monetize our ecosystem, we talk about this, but we have our breweries. We have the farmers that work with us. How we can making sure that we improve all this ecosystem? What else can we do there?
And with optimize our business, it's keep aiming for creating value, kind of all the efficiency, but more the efficiency is making sure that whatever we are doing is really adding value to the company.
And I feel not only for 2025 but for several years to come, there is a lot of things that we can do on these three pillars.
Lance Glinn:
We've discussed various topics, whether it be sustainability, innovation, company growth. When you, Michel, other members of the AB InBev leadership team come together and convene, how are you mapping out the next five, 10, 15 years of AB InBev?
Fernando Tennenbaum:
We have a planning process that we call the 10-YP, or 10-year plan. And the idea is that you look at ... You start to find demographics, economic trends, see where the world is growing. That's why I can say that beer is a growing industry. When you look at the demographics, you know that there will be growth on the beer industry.
And then once you have the demographics, what are the things that you can do? What are the trends that you need to do to make sure that you prepare yourself for the next five, for the next 10, years? And this is very powerful because some of the trends ... They are very small today. But once you project then in the future, there is going to be a very, very relevant trend. If you can prepare yourself, you can start investing now. Then you can really reap the benefits when the trends they come to fruition when they become relevant.
A good example on that is, in China, when we look at the plan in 2010 for the next 10 years, looks like there was an opportunity for the middle class to grow a lot. And if you middle class, premium can grow a lot. And then we decided to make an investment in premium. Fast-forward 10 years. We were the number one player in premium. Premium segment was growing a lot, and we had this very good tailwind in China, and we are doing that for every single market around the world where we operate, and then we have a lot of opportunities to grow going forward.
Lance Glinn:
Well, Fernando, I hope our next conversation comes with a couple of cold Budweiser's in hand. Thanks so much for joining us inside the ICE House.
Fernando Tennenbaum:
Thank you very much, Lance. Pleasure to be here. Cheers.
Speaker 1:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X at ICE House Podcast. From the New York Stock Exchange, we'll talk to you again next week inside the ICE House.
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