Companhia de Bebidas das Americas (ABEV) Q3 2020 Earnings Call Transcript

Companhia de Bebidas das Americas (ABEV 0.88%)
Q3 2020 Earnings Call
Oct 29, 2020, 10:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and thank you for waiting. We would like to welcome everyone to Ambev's third-quarter 2020 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 download on our website, ir.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 and all participants will be in a listen-only mode during the company's presentation. After Ambev's remarks are complete, there will be a question-and-answer session.

At the time, further instructions will be given. [Operator instructions] Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ambev's management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Ambev and could cause results to differ materially from those expressed in such forward-looking statements. 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 third-quarter 2019 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, EBIT, and EBITDA on a fully reported basis in the earnings release.

Now I will turn the conference over to Mr. Jean Jereissati. Mr. Jereissati, you may begin your conference.

Jean Jereissati -- Chief Executive Officer

Thank you. Good morning, and good afternoon. Thanks for joining our call for the third quarter. If the second quarter was marked by resilience, adaptability, and agility, Q3 was all about building momentum.

The overall environment remained fluid and challenging, but the team did a fantastic job in terms of executing our plans. Thanks to them, we remain on course for our recovery path. So before diving into the results, I just wanted to thank my team. Great people have always been the foundation and driving force of our company, and I'm very proud of all of them.

The third quarter continued to be marked by the pandemic. Despite all the difficulties, our commercial strategy worked and reshaped the volume recovery trend that started back in May continued throughout the quarter across all of our markets. The trends by country also remain very similar to Q2. Bolivia, Panama, and Dominican Republic continued to recover more slowly.

Although the volume performance is improving gradually on a monthly basis, these countries continue to have more severe restrictions. Argentina, the pace of the recovery was impacted mainly by the macro backdrop in the country. Paraguay, Chile, and Guatemala recovered faster, thanks to market share gains. While in Canada, our volumes benefited from the strong performance of our premium, core plus, and beyond beer portfolio that led to market share gains amid a positive industry.

In Brazil, what we saw was our adaptability, operational excellence, and innovation all came together during this quarter. We estimate that the majority of our volume growth came from market share gains as our commercial strategy is gaining traction. The rest came from a combination of industry pricing calendar and tailwinds. We continued to see operational restrictions across the country, which varies between regions, with big cities and urban centers still being more affected.

The good news is that their own trade is gradually reopening and the small mom-and-pop off-trade stores continued to gain relevance. To give a dimension, we have ended the quarter with an increase of 10% in the number of total buyers versus the pre-pandemic. Also, I'd like to say that Brazil got gigantic geographically in this pandemic. As customers and consumers were less mobile, Ambev was the trusted partner to deliver volumes in the most remote areas of the country.

Following all safety and health protocols, our products were delivered from Oiapoque, the most northern city in Brazil, to Chui, the most southern city in Brazil. Just to illustrate this point, during this quarter, our fleet of trucks drove 22% more kilometers than the third quarter in 2019. Looking more to the long term, our strategy will continue to be built around two pillars, Ambev, as an ecosystem innovation as a mindset, and business transformation enabled by technology. Today, I want to spend more time on innovation.

We are making a deep transformation on our business to respond faster to customer demands and shifts in market trends. We are in the beginning of this journey to bring solutions to our clients and consumers, but I'm very happy to see that results are starting to come. We will continue to focus on consumer centricity, flexibility to create unique recipes with exclusive ingredients, a pilot testing and learning approach, the creation of an ecosystem that benefits clients, consumers, and suppliers, and the logic of creating demands ahead of supply. We have a framework for innovation where we are vetted on five growth avenues.

The first one, flavors and value propositions, looking for products such as Brahma Duplo Malte, which created its own space in the market and took over the leadership in the core plus segments and regionalization too with the affordable approach of the local supply chain. Second, health and wellness as the biggest opportunity for the future. Last quarter, we launched Stella gluten-free and continue to test and accelerate Michelob Ultra in different countries. Third, convenience for our consumers with initiatives such as Ze Delivery in Brazil, Appbar in Argentina, and Colmapp in Dominican Republic.

Fourth, innovation in services for our clients. Dominican Republic continues tricks in BEES serving as our laboratory market for the marketplace service. More than 75% of the net revenues there already come from the platform. And fifth, beyond the year, we are exploring new territories in the ready-to-drink wine among other beverages.

As I said in a letter to all our colleagues in Ambev in June, we are rejuvenating ourselves. Our market share in the new products that have been launched in the last three years is greater than our total market share in Brazil. This shows that innovation has been over-indexing and will continue to be a key growth driver for us. Finally, as I mentioned in the beginning, the word that defines this third quarter is momentum.

We are strengthening our bonds with our ecosystem and opening new perspectives for the future. Thank you for your time and attention. I will hand over to Lucas.

Lucas Lira -- Chief Financial Officer and Investor Relations Officer

Thank you, Jean. Hi, everyone. After a very tough Q2, it was good to see our financial performance bounced back in Q3. EBITDA grew organically year over year in three of our four regions, despite everything that COVID threw away, and how EBITDA grew was also quite positive with our four regions delivering organic top-line growth.

In Brazil, LAS, and Canada, top-line performance was driven by consistent volume recovery and impact net revenue per hectoliter performance made the difference. We delivered a consolidated 12% volume growth, with improvements from all our operations since Q2. More importantly, volume recovery also translated into improvements in our financial performance. Gross margins and EBITDA margins improved sequentially since Q2 in virtually all our business divisions.

Normalized profit also grew year over year, even though net financial expenses increased given exceptional gains in Q3 of 2019, increased carry costs in Argentina, and the impact of tax litigation regarding the ICMS in the tax basis of the PIS and the COFINS taxes. And finally, cash flow generation nearly doubled, thanks mostly to our working capital performance and operational cash flow. These results further strengthened our solid liquidity position. Profitability, though, remained a challenge.

So let me comment on the main profitability drivers by business. Brazil beer EBITDA margin improved sequentially, mostly driven by the operating leverage resulting from our 25% volume growth, reopening of the on-premise channel, growth of RGB, premium , and core plus brands, and margin accretive innovation. Year over year, however, performance was still negative. Channel mix remained a factor, one-way mix led to under hedged costs, primarily FX and aluminum, and SG&A was impacted by a combination of a tough cost given 2019 phasing, our decision to reinvest some of the savings from Q2 that made sense, given the strong volume recovery, and also our desire to invest behind our key brands as we approach the summer.

NAB Brazil was also able to increase EBITDA margin. The main reason for that was an easy comp from last year's phasing of tax credit, but it's most important to see the mix of single-serve improve as the on-premise gradually reopened. LAS was where margin performance continues to struggle the most. In Argentina, the combination of price controls in food and beverages and hyperinflation continues to take its toll.

And on top of that, Bolivia's slower recovery of the on-premise channel was also a factor. And finally, in Canada and CAC, we were able to increase EBITDA margin this quarter year over year. This was primarily a result of volume trends and improved cost efficiency in Canada and revenue management and disciplined execution of our SG&A savings impact. The name of the game going forward will remain continuous and consistent improvement.

The pace of our profitability recovery, however, will take longer because of the FX headwinds coming our way in 2021, but this is a priority for the entire organization. We know what we have to do in terms of top line, continue to grow volumes, the broad recovery of the on-premise and drive returnable glass bottles, grow core plus and premium brands and invest behind margin-accretive innovation, both in beer and beyond beer. As for costs and expenses, we need to remain with our heightened financial discipline behind working and nonworking money and leverage our technology investments in our supply chain and sales organizations. More broadly, COVID generated a greater level of mobilization of the team, increased visibility, and is challenging us to rethink how we run many aspects of our business, from discounts management and cost management through resource allocation and return on invested capital.

We still have lots to do, but after surviving Q2 and building momentum in Q3, we're definitely up for the challenge. Time for Q&A, and thank you very much.

Questions & Answers:

Operator

We will now begin the Q&A session. [Operator instructions] Our first question comes from Marcella Recchia, Credit Suisse.

Marcella Recchia -- Credit Suisse -- Analyst

Hi, Lucas. Questions here. First one, basically, surging volumes of aluminum can this quarter puts you in an unhedged position in terms of aluminum and FX, right, which resulted therefore in higher-than-expected costs to increase. So I just would like to understand if we can isolate the magnitude of this cost impact that your gross in EBITDA -- or EBITDA margin.

So meaning, in other words, what was your unhedged cost position this quarter and how much of this cost was above your hedged cost? And materially, if we can connect that with your outlook amid the current constrained aluminum can and gas bottle supply environment.

Lucas Lira -- Chief Financial Officer and Investor Relations Officer

With respect to the cost for Brazil beer in the quarter, a few things we already expected. Right? So we already anticipated that the FX headwind would hit us, right, based on our hedging policy since last year, number one. Number two, we already anticipated that the mix would also be a factor because as we saw in Q2, in Q3, we also saw a year-over-year increase of mix of one-way packaging, particularly cans, and that brings along with it an impact on our costs. And then finally, what was unexpected was really that the weight of the growth in on one way year over year was greater than what we had hedged going into the year.

And so we ended up having to face an additional cost because it was not hedged in advance. OK? Net-net, we estimate that the impact was around 90 basis points. OK? Just to give you a reference. OK? But for this additional impact, our EBITDA margin for beer Brazil would have been 90 basis points better.

OK? And could you repeat again the second part of your question, please?

Marcella Recchia -- Credit Suisse -- Analyst

Yeah. How -- what's your outlook amid the current constraint in the aluminum can and glass bottle supply environment?

Lucas Lira -- Chief Financial Officer and Investor Relations Officer

Sure. Well, I think, number one, we're still ramping up our can plant. Right? So we launched during the quarter our can plant in the state of Minas Gerais and is currently ramping up. So as it continues to ramp up during the next couple of weeks and months, we expect that to play a role in helping us alleviate the supply chain pressure.

OK? Having said that, we do acknowledge that the supply change pressure overall will continue, OK, in the country. What we're doing about it is we're planning ahead and we're planning ahead trying to leverage our global footprint and our global footprint of suppliers to really -- to be as prepared as possible for a summer that we anticipate will remain putting pressure on the supply chain.

Marcella Recchia -- Credit Suisse -- Analyst

Got it. Very clear. And secondly, very quickly, if I may. Can you give us some color on how much innovation or recent launch of products such as Brahma Duplo Malte were relevant for your gains of market share this quarter?

Jean Jereissati -- Chief Executive Officer

So hi, Marcella. I can take this one. Yes. So innovation is really a big part of our strategy.

So we have been working on this for 18 months now. So building the capabilities, hiring people, redesigning the organization to have squads and to have an innovation team working in each avenue of growth. And Q3 was particularly very strong where innovation really played a very important role. We believe that our volumes, the majority of it really came from our commercial strategy, and a big part of it is innovation.

And as you know, we just mentioned, Brito mentioned in the other call that Brahma -- I mentioned that Brahma Duplo Malte to cover the leadership on the core plus segment. So what I can say, is that majority, more than half of our growth really came from our commercial strategy. A big part of it is the acceleration of innovations and Brahma Duplo Malte is the No. 1 brand on the core plus segment.

Marcella Recchia -- Credit Suisse -- Analyst

That's very helpful. Thank you both.

Operator

Our next question comes from Luca Cipiccia, Goldman Sachs.

Luca Cipiccia -- Goldman Sachs -- Analyst

Hi. Good morning, Jean. Good morning, Lucas. Thanks for taking my question.

I hope you're well. I wanted to also ask something about beer performance in Brazil. Evidently, 25% growth was a quite dramatic move. I went back and I couldn't find the growth above 20% since the early 2000s.

So definitely a standout. But even if I look at it in absolute, actually, there's nominal levels, 20 -- almost 22 [Inaudible]. It's something that typically we see in the fourth or in the first quarter in the summer quarter. So my first question would be, I understand some specific tailwind and some exceptional levels.

I understand that Q3 didn't grow for the last five years. But even if I look compared to 2015, these numbers were about 77% higher. Can you help us understand how much the pricing discussion also played a role in relative terms compared to what the others have done in the market, but also whether there's an element of anticipation of orders if you've been eating into some of the fourth-quarter volumes, if you can quantify that? And then secondly, on the pricing specifically, you make reference to the changes that you've made and more dynamics. What do you mean exactly? Price changes have been more targeted or more regional? Or you haven't done them at all or not much? And how should we think about this going to the end of the year? Is it reasonable to assume that this year is about volumes, it's about mix, but it's not gonna be about pricing? Or it's something that you leave open to changing market conditions or other factors? If you can comment first on these two points, it would be great.

Jean Jereissati -- Chief Executive Officer

OK. So let me start with the last one. Let me start first with the pricing. OK? So I've been saying that we have been studying the previous Q3 in our pricing strategy.

And we -- in the past, we have been very disciplined, very rigid on our strategy. And we just believe that we should kind of move to really have a strategy that could, in the long term, bring more value for us. So we are being more flexible in general. If you see, we are playing a different playbook across the countries.

If you look at Dominican Republic, we are playing a playbook. If you see Canada, it's another one. Paraguay, a different one, and Brazil different, too. So we are being really looking with more variables to really understand how can this lever really bring values to our company.

OK? So coming down to Brazil, what happened, it is really that we were in the middle of the pandemic, and we really try to find the best moment for us really to go and recover a little bit of net revenue per hectoliter in a way that it could stick and it could be manageable by our customers and our consumers. But in the end, this looks like more a little bit outside of the pandemic closer to the peak season. I think it was the right moment. But even though, I really don't think that that was a major change on the volumes of the quarter.

So anything that we talk about the elasticities of pricing and volumes, I don't think that that was the major motive of the volumes of discount of this quarter, mainly because it was really finding one week -- some weeks after what we did last year. But it was important really to make it more close to the peak season to really see in a way that it was more flexible, in a way that it was like protecting a little bit the own trade that is needing to get traction still. And so we are very happy with this strategy that we are taking. OK? So having said that, the volumes, I think that this call, we are talking about momentum.

So the volumes that we did is not really -- a part of it is when we compare. It's about easy comps, but the point is that we really believe that our commercial strategy is really working. And in the end, if you see this type of volumes compared, they are more close to Q4 volumes. And if you see in a deseasonalized way, they are really, really strong volumes that we have seen in the Q3.

So majority of this growth really came from our commercial strategy. Our portfolio is really in a much better shape than we had before. I point out the fact that we have seen the core very resilient. The point is that the consumers and the occasions that we are seeing that are rising during the pandemic, there's more relaxation, more in-home with friends.

They are really benefiting the core so it's really a big chunk of it is our core is really getting more consumers and occasions than losing. Our value strategy is really working to with this market affordability that we have now going for five states. So the value, it is not -- so we are not seeing a trade down, but we are performing well in the value. What we are seeing is really the core resilience.

And then on top of these two things, global brands growing 40%, and the innovations are bringing differentiation to the core and really creating these core plus segments. When we put all of this together is really what we believe it is doing the 25% growth that we had.

Luca Cipiccia -- Goldman Sachs -- Analyst

Clear. So just to clarify, so you don't think there was a meaningful element of Q4 volumes going to Q3 because there's an expectation that you're gonna hit with a price hike and a better stock up now? Or if there was that consideration, it was not material. Is that the right position?

Jean Jereissati -- Chief Executive Officer

So we monitored the level of inventory stocks in the market, and that's definitely not what happened.

Luca Cipiccia -- Goldman Sachs -- Analyst

OK. And if I may, just a quick one, more of a holistic question, maybe an unfair one, but I wonder if a 25% growth in beer volumes doesn't move the share price, I don't know what will. And my hunch would be aside from market conditions and other factors, is that people are worried about margins or questions on where the margins will land as we move forward. We know that you're going to get it by FX, mix, and some other elements, but maybe there is less clarity on how much pricing or operating leverage will be able to offset that.

So anything you can give us to, let's say, and core margin expectations within a reasonable range as we think about 2021, 2022, that I think is what remains a major concern for investment.

Jean Jereissati -- Chief Executive Officer

So let me get the overall view of this question, and then I will hand over to Lucas for us to -- it's a good question for us to talk about. So as we highlighted before, we were really forecasting that we shape recovery. And we were really working on the volumes, stay focused in strengthening the connection with our clients, renovating our portfolio. Our commercial strategy is really working.

We believe we have momentum. So that's -- we are gaining momentum. So that -- we are confident on that. OK? So this was a particular Q3 in Brazil a quarter that we delivered.

Strong top line resulting with EBITDA growth year over year and sequentially, EBITDA margin improvement. So this was a quarter that we were very happy with it because we could overcome the pandemic and the impact of mix and the initial impact of the currency with our commercial strategy that really stick and we paid with the top line and had EBITDA growth year over year. So as you know, it's important. So we have significant transactional FX headwinds moving forward.

But in the end, we will continue and work with our long-term view, working on the volume recovery so you have to understand that I already had 10 million hectoliters more than I had last year. So that's a number that -- from our peak volumes in 2014 that will help us in this recover in a sustainable way of margins. So the own trade were opening, and so it's halfway still. So it is really something that we begin -- so it -- we believe it will come.

If not structural, we believe that it will come back. So the core plus and premiumization strategy will bring us a way for us to mitigate what we are seeing in the short term of FX headwinds and the continued of a strong innovation pipeline. On top of that, strategic CAPEX investment on technology footprint. We are working on all of that for us to mitigate the impact on the currencies.

But just to make it clear, so this Q3 was a shape that we like it, a strong top line, mitigating the profitability issue with EBITDA growth, and really having sequential EBITDA margin still with a lot of opportunities to move this forward. OK?

Luca Cipiccia -- Goldman Sachs -- Analyst

Great.

Lucas Lira -- Chief Financial Officer and Investor Relations Officer

Luca, as to the first part of your question, we really can't comment on the share price and share price movements and reaction. A multitude of effects go into that. It's ultimately for the market to decide what the price of the share should be. What we can comment on is what we're trying to achieve as management.

OK? And that is to continue to improve our results, right, consistently over time. This won't happen overnight. Q2 was very tough. We survived.

Q3, we think we're starting to build good momentum. We have to continue to deliver by executing our strategy. We're constructive on the business opportunities we see. We're constructive on our portfolio, where it is today.

We're constructive on our team and their ability to deliver. So that's gonna be our focus going forward. What the share price will be, the market will decide from time to time.

Luca Cipiccia -- Goldman Sachs -- Analyst

Absolutely. And I wouldn't expect you to comment on the share price. I was just channeling as a way to refer to concerns or questions around the margin outlook. So totally fair, and thanks for the questions.

Very clear. Thank you.

Operator

Our next question comes from Thiago Duarte, BTG.

Thiago Duarte -- BTG Pactual -- Analyst

Thank you. Hello, Jean. Hello, Lucas. Hello, everybody.

I've got three questions. The first one is circling back to the discussion on pricing. I think it's clear the flexibility that you're trying to implement on your price policy. But one aspect that called our attention here was as we try to combine effective price increase with your revenue management, particularly how you play the discounts over gross revenues.

Right? So looking at the financials, particularly when you look at the parent company level for Ambev, discounts were pretty low relative to the levels that we have been seeing for several quarters now. So just wondering -- we discussed that in the past. So just wondering whether you think discounts can go even lower as a way -- as a tool for you guys to play pricing with customers or whether they should be seen as a one-off or something like that. So if you comment on that would be nice.

The second part of my question is on brand performance. Right? You guys brought in the release of some comments about -- and I'm talking about Brazil beer here, some comments about international premium brands performing very well, core plus, the Brahma Duplo Malte performing very well. So just wondering how your core portfolio -- your core brands performed in the quarter. You mentioned it was resilient.

So just if you could situate us a little bit in terms of how they did relative to the average of the portfolio would be nice. And the third question is on dividends. Right? You guys, if I'm not mistaken, this is your all-time high net cash position that you guys reported for September. So Lucas, if you could comment on your dividend policy, whether we should expect it to be similar to what we saw last year when you guys paid the entire fiscal year related dividend onetime or something different, would be nice to update as well.

Thank you.

Jean Jereissati -- Chief Executive Officer

OK. So let me get the one on the discounts and the resilience of the core. So yes, glass. So we are -- so when I mentioned that long-term wise, we really want to follow the inflation on the price increases is really our long-term view, so what we want.

And on top of that, you have many factors that did not -- does not affect consumers. So there is this part of the channel mix, this part of packaging mix, discount optimization. So we have -- we are working a lot on other levers to guarantee that our price conduct is the one that we really be inclusive with consumers, guarantee a healthy industry, but we are working a lot on other levers for us to have a better profitability in the future. And so we are studying the price.

The decision of the price much more on the macroeconomic scenario, elasticities, mix trends. But in the end, what we have another levers moving forward that we believe that will begin to play in our favor, that is the channel mix moving forward should be something that would be positive for us. And the brand mix, that is something that we've been talking, but it -- we are really seeing it with more strength right now, mainly because, as I mentioned before, the core is resilient. So what we are seeing -- so if I can give you some numbers, so we had 25% of our volume growth.

So the core was pretty much when we put core and core plus together, they were pretty much in line with that. The premium was global brands growing 40%. And then we -- the value, it was really under-indexing in growth, but gaining market share. So this is the equation that is a good equation for us, core resilient with innovation, core plus helping on this equation, and then premiumization on top of everything and a healthy value, gaining market share but do not really impacting that much down.

The mix -- the part of the mix and discount is an opportunity. So I mentioned to you. So it's a broader view of that. OK? So what we see is that we are already selling to 10% more customers that we sold pre-pandemic because we are really getting linear.

So we have been the reliable supplier, and we are, across the board, looking for more customers, smaller cost of customers. So there is less of intermediates on this process, and then you have opportunity to -- on the discount optimization when we have this mix of customers really moving in the right direction. Core plus is positive. And region mix is something that usually it is less accretive because we are really growing in Northeast, North, and the Middle East.

So opportunity in discounts, opportunity in core plus. So the resilience of the core performance when we put everything together in line with the total volume and in the decision on prices that affect consumers really we're looking at more variables and really having the right moment to do it.

Lucas Lira -- Chief Financial Officer and Investor Relations Officer

Hi, Thiago. With respect to your last question, starting first with the cash position. The cash position that we ended up in the quarter is the result of, I would say, three main factors. Number one, the liquidity cushion we built during the second quarter because of COVID.

OK? And that liquidity cushion is something that we're constantly assessing, right, based on what's going on in markets and in our business and the needs. So that's something that we will continue to monitor very closely. We still live in a fairly volatile, uncertain, and fluid reality across our markets. So even though we survived Q2, building momentum in Q3, we're not out of the woods yet.

Right? A lot can still happen, and a lot can change rather quickly. So we think a good dose of prudence is still warranted. OK? But that's something that we'll continue to keep on our radar and monitor. The second thing is currency translational adjustment, sorry.

This is basically a result of the cash positions in our foreign operations and given the devaluation of the real versus the U.S. dollar, when you translate the balances. Right? It creates an impact. OK? And then the third one is really the strong cash flow generation that we had in the quarter, which was great to see.

OK? So that's kind of where we ended up in terms of cash and the main drivers for it. As for dividends, as you well know, the Ambev bylaws do provide for a mandatory dividend of 40% of our adjusted annual net income. OK? So it's always good to remind folks of that. When we think of use of cash, our thought process remains the same.

OK? So number one, reinvesting in the organic growth of the business. We continue to see opportunity, and we will continue to invest behind growth, be it CAPEX, be it investing behind our sales and marketing to further strengthen the portfolio that we're trying to create and strengthen and can further develop. Number two is investing in nonorganic opportunities that may pop up from time to time. Obviously, hard to pinpoint this and when they will happen, but we see value in retaining the flexibility to be able to pull the trigger and invest resources behind that.

And then last but not least, return excess cash to shareholders. And this -- and in doing so, we will continue to focus on maximizing the IOC payout given the deductibility that comes along with it. So that remains a priority when it comes to returning excess cash to shareholders. And the balance is going to be a combination of potentially dividends and share buybacks depending on kind of a multitude of conditions that we evaluate from time to time together with the board.

So this is an ongoing discussion toward the end of the year. Once we have finalized our budget, have a clearer view of our plan for 2021 and beyond and taking stock of kind of where we see the environment going forward, we will make a recommendation to the board and update the market as needed.

Thiago Duarte -- BTG Pactual -- Analyst

Thank you so much.

Operator

Our next question comes from Rob Ottenstein, Evercore.

Rob Ottenstein -- Evercore ISI -- Analyst

Great. Thank you very much, and terrific progress. I'm wondering if you could go into a couple of things and just trying to get a little bit of a sense of the sequential improvement or changes. And that is, number one, returnable glass bottles as a part of your mix.

I don't know if you can kind of give us a sense of what they were in Q1, Q2, Q3, really trying to get a sense of that sequencing. And then, second, any color on Ze Delivery? I mean, you gave us some numbers in prior quarters. I'd love to kind of see where that is, how that's growing and progressing. Thank you.

Jean Jereissati -- Chief Executive Officer

OK, Robert. So talking about returnable bottles and cans. So we saw a sequential recovery in RGB mix in this quarter, driven mainly by the strategy that is really picking up of small RGB for in-home consumption in moms and pops and small off-trades that continues to gain traction. And this is just to make a comment to the question of Duarte too.

This is an important piece of the resilience of the core. There's more RGB 300 ml strategy to go over in-home occasions. So in September, the 300 ml RGB is already growing and getting more traction than cans, for example. And on top of that, we foresee that the reopening on the on-site channel that will really help us to continue to grow on the RGB.

So what can I say? We are more or less halfway what we lost and -- but gaining traction with the reopening of the on-trade and the RGB strategy moving forward. So that's pretty much where we are in the RGB. Delivery is doing very well during this pandemic. We have a great window of opportunity in Brazil to really take customer engagement to the next level.

Consumer engagement to the next level is really something that we have been working for five years on that and we are seeing all coming together with a big window of opportunity for us. The Ze Delivery, particularly delivers cold beer one hour at home. It was really important in this moment of the pandemic, really solves our consumer pain points. We are in more than 27 states right now, and we reached 200 cities in aggregating cities more and more.

And what I can say, it is that we did in this quarter, six times what we had in the previous year. So it's really accelerated, really something that's solving a lot of of consumer issues. On top of that, I think that we are really, again, talking about technology. So we have the marketplace coming.

It's -- we call BEES. We are really piloting it and using Dominican Republic as a laboratory, but it's already arriving in Brazil. So we are really enhancing our platform with our customers, digital connection, customer satisfaction in another level, we are really seeing the engagement of our customers in Brazil, really going up with the arrival of BEES. That's the marketplace that we're going to bet for the future.

There's other great opportunities that we will be talking in the next quarter.

Rob Ottenstein -- Evercore ISI -- Analyst

If I were to kind of guess Ze Delivery in terms of getting to 5% of your business in five years, would that be low or high based on your best assumptions?

Jean Jereissati -- Chief Executive Officer

So Robert, what I mentioned, I mentioned this in another call. Our DTC strategy should lead us to 10% of our total net revenue in five years, and Ze Delivery is a very important piece of it. It's not alone, but it's a very important piece of our strategy.

Rob Ottenstein -- Evercore ISI -- Analyst

Great. Thank you very much.

Operator

Our next question comes from Lucas Ferreira, Bank -- J.P. Morgan.

Lucas Ferreira -- J.P. Morgan -- Analyst

Hi. Good afternoon, gentlemen. I have two questions on the consumption environment in Brazil. The first one is about the Coronavoucher.

You mentioned this in the release. It's been one of the supporting factors of decision volumes. We are seeing already a decline in the voucher. It went from BRL 600 to BRL 200.

And we're starting to see some of the supermarket association, explaining that this is already vaccine sales. So -- and also, we'll be seeing a very high fluid inflation. So wondering if these two factors are already having some sort of impact in sales as of, let's say, October, September, which is a sense that this is an issue. And then my second question, you also mentioned in the release that the number of active clients you have right now is the same as the pre-pandemic.

And I remember discussing a lot of this with the association of a lot of restaurants that there be expecting initially to sort of a 30% reduction in the number of point-of-sale or something like that. So wondering if you can comment on sort of the financial health of the [Inaudible] channel, how that has been behaving in the context of a loss? And if you can talk a little bit about it, if this is kind of surprising you to the upside or not. I wonder if you can comment on the environment, please.

Jean Jereissati -- Chief Executive Officer

OK. So first of all, so as I mentioned before, this quarter was a quarter that we are very, very happy with the volume performance and the momentum that we have. And we are really focusing on things that we can control. And majority of our performance more than half, it was really about our commercial strategy, things that were in our hands, so the acceleration of innovation, the resilience of the core.

So the new positioning of Bohemia is really gaining traction in the North and Northeast. So global brands really, really, really growing fast, 40% operational excellence and improving service level across the country. So these are the things that really brought the majority of our volume growth in Q3. When we put together the Coronavoucher, together with the disposable income that went down in the shutdown of bars, so this thing is really something that is important, but it's not net-net that big.

The Coronavoucher alone is important. But when we put all these things together, it is important, but it's not that big. Another thing that really helped the industry, it was really our pricing calendar, our flexibility in doing the right moment I think somehow expanded the industry a little bit. But when we put the quarter together, majority is 60% -- more than 60% of our performance, we really attribute to the -- our commercial strategy, things that is in our hands.

OK? So that's one thing. So talking about channels and customers. So yes, I mentioned that we are already selling for 10% more customers that we usually sold pre-pandemic. So we are really seeing the moms and pops is really and the small formats of trade are the big winners.

So they are really with volumes up, more clients, so we are reaching more. So we are more prepared to deal with them. Our strategy of digitalization and getting orders online is really something that is helping on this process is really a competitive advantage that we have. We already see bars on the same level that we had pre-pandemic, but still with the occasion that has a number of tables and restrictions in terms of opening hours, really still making less of volumes in the channel, but we see a number of clients in the channel already in the level -- on the same level of the pre-pandemic.

Operator

Our next question comes from Ricardo Alves, Morgan Stanley.

Ricardo Alves -- Morgan Stanley -- Analyst

Hi, Jean, Lucas. Good morning, everybody, and thanks for the call. A couple of follow-up questions. The first one, back to the channel mix, kind of related to this last topic, based on the chart you showed in the release, it seems that Brazil went from 70% off-trade to slightly below 60% now in the third quarter, if I'm not mistaken, which is 's a pretty big move.

So could you talk a little bit about that? I mean, you talked about how the buyers and restaurants are kinda ramping up, but talking specifically about your exposure to the on-trade. I think that that would be helpful way to train is -- perhaps you saw a major improvement in September versus July and August or we may need to see more of that now in October. I think that that would be helpful. The second question is also a follow-up on the premium side, also in Brazil.

You mentioned the lean premium growing in the double digits. And now on the call, you mentioned a 40% growth for global brands. So just wanted to see if you can give a little bit more color on the other stuff as well to the domestic brands, how they're performing, on the margin with everything that you just said, right, on the restaurants and bars, if you see some signs of improvement on that specific segment as well. Thank you so much.

Jean Jereissati -- Chief Executive Officer

OK. So let me get a little bit more information on that. So our sales mix for Brazil beer in Q3, it was divided in 42% on-trade including moms and pops and 58% of trade. So by comparison, in 2019, on-trade was around 55 and off-Trade 45 in the same metric.

And in Q2 '20, on-trade was around 30% and off-trade, 70. So we are more or less halfway in the mix than we had in the past. Even though we have seen the on-trade gradually reopen in the number of clients of the on-trade already in line with the pre-pandemic, bars are not operating at full capacity due to social distancing safety measures. And mainly, and most important, the VIP, so the more -- the bars that are more in important urban centers.

Now on top of that, consumers are still reluctant to fully return in the same pattern that they had before. OK? So the bars are there, the bars -- number of bars are working, but the occasion is something that is still not completely there. When we think about channel mix and this impact of occasion, we are halfway returning in the -- for what we have in the past. So having said that, so our global brands are doing very well, 40% growth.

Average with corona impact growing much ahead of that because they have a footprint that they can go off-trade. They can go in home. When we talk about premium, the big hit that I have in my portfolio are two brands, the Sukita and Brahma that is really one related with the occasion that is not there yet, so the occasion. And original big bottles, 600 ml, that they are really the two most important brands of this occasion.

There is socializing out-of-home in bars. So this one are really still not there. But global brands, Budweiser, Corona backs that we have longneck cans, and we can go off-trade and in-home, they are very [Inaudible].

Ricardo Alves -- Morgan Stanley -- Analyst

That's helpful, Jean. Thank you. Just a quick follow-up on premium. When you talk about double-digit growth for the whole category? Are -- is it fair to say that it was more or less in line with your consolidated Brazil beer volume? Hello?

Operator

Excuse me. The Q&A session is closed. I would like to turn the floor over to Mr. Jean Jereissati for your closing statement.

[Operator signoff]

Duration: 62 minutes

Call participants:

Jean Jereissati -- Chief Executive Officer

Lucas Lira -- Chief Financial Officer and Investor Relations Officer

Marcella Recchia -- Credit Suisse -- Analyst

Luca Cipiccia -- Goldman Sachs -- Analyst

Thiago Duarte -- BTG Pactual -- Analyst

Rob Ottenstein -- Evercore ISI -- Analyst

Lucas Ferreira -- J.P. Morgan -- Analyst

Ricardo Alves -- Morgan Stanley -- Analyst

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