Alsea, S.A.B. de C.V. (ALSEA) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Alsea's Third Quarter 2021 Earnings Release. Presenting today, we will have our Chairman of the Board of Directors, Alberto Torrado; our Deputy CEO, Fernando Gonzalez; the Head of Starbucks Mexico, José Luis Portela; and our CFO, Rafael Contreras. I will now hand over to Alberto for his initial comments. Thank you.

Thank you very much, Salvador, and good morning to everyone, and welcome to Alsea's Third Quarter 2021 Earnings Webcast. We will discuss, as always, the most significant events from the third quarter of this year and our strategy going forward. And after that, we will open for questions from the team. I am pleased to report solid results for the third quarter as many of our key geographies continue recovering from the economic effects of the pandemic and the lifting of most of the mobility restrictions after more than a year of full or partial lockdowns. We also continue to see the positive impact of the implementation of successful commercial strategies for our in-restaurant experience and home delivery channels. As a result of all this, we posted a strong sales growth for 9 consecutive months, achieving 41.1% increase in total sales year-over-year, and a positive consolidated EBITDA growth of 49.2% with a margin of 22.5%. Also, it is worth mentioning that we ended the quarter with MXN 3.6 billion in cash, even after having invested EUR 55.4 million for acquiring an additional 10.5% stake in our European operation. As you know, we are a company with 17 brands, more than 60,000 collaborators and presence in 11 countries. We closed the third quarter with more than 4,200 restaurants, out of which 77% of them are corporate store. At the end of September, we have been able to open this year 42 new units, 70 of those during the third quarter of this year. Globally, the vast majority of our stores are now open and only a few have been kept in hibernation, mainly units located in specific sites such as corporate offices and universities. This ongoing incidents of restriction has driven our strong results in terms of sales. On a year-over-year basis, sales in the third quarter of 2021 were up 40.7% versus the same quarter of 2020 and only down 3.5% compared to the third quarter of 2019. We continue observing our business benefited not just from the full reopening of our outlets, but also from an improved consumer confidence, some government incentives and a return to school and corporate offices. Our EBITDA generation, it's almost reaching 2019 levels, only 3.2% below the third quarter of 2019. Also, in the third quarter of the year, we achieved a 30 basis point cost reduction versus the third quarter of 2020 and 70 basis points versus the third quarter of 2019. This was mainly due to the accretion and shrinking and improved productivity of the supply chains we have achieved as well as our positive effect from the business mix caused by an increase in the share of casual food and family dining brands. With respect to geographies, Mexico saw sales increase by 46.7% year-over-year, and sales were already slightly positive than the ones reported in the third quarter of 2019. While Mexico EBITDA of MXN 1.5 billion was 57% higher compared to the third quarter of 2020, sales in Europe increased by 19% and EBITDA was MXN 1.2 billion in Europe, up 29% versus the third quarter of 2020. Finally, sales in South America increased by 91.5% compared to the same quarter of 2020 and EBITDA was MXN 407 million as the region reopened up after highly restrictions long terms, as you know. We continue to report savings from government support, mainly in Argentina related to labor costs as well as benefits in terms of efficiencies, synergies and best practices linked to the consolidation and integration of our operations in the region. In terms of brands, Domino's, Starbucks and Burger King continued to lead the way and perform well with the higher increase in sales coming from South America with a growth of 108% in Starbucks Chile, 100% in Starbucks Colombia, 53% in Burger King Chile compared to the third quarter of 2020. And compared to the same quarter of 2019, Domino's Colombia reported a 46% growth as well as Domino's Pizza and Starbucks in Mexico, both brands growing a little bit above 21%. The positive results our testament of our more digital and customer responsive business model, which enable us to take full advantage of the economic recovery across the regions and where our competition has been struggling. Regarding our delivery strategy, during the first 9 months of the year, we achieved more than MXN 8.5 billion in sales only through this channel, leading to an increase of 39% year-over-year, and by servicing more than 31 million orders. In general, despite the gradual reopening of our restaurant, our delivery business has remained very strong. Regarding our environmental and social initiatives, during the quarter, we have focused in different efforts to promote a positive impact at the local and regional level. A clear example is our commitment with a zero hunger goal where we are currently working in our annual fundraising campaign of the Va por mi Cuenta movement in Mexico, with which we seek to raise more than MXN 28 million that will be used to provide nutritious food for the most vulnerable population in Mexico. Concerning our environment program, it is important to highlight that we are working on different initiatives that have favorable impact on our commitment to sustainability. For example, in Mexico, 63% of the units now use clean energy. Likewise, through the cooking oil recycling program in our stores, during 2021, we have collected more than 600,000 liters of cooking oil in Mexico, Argentina and Chile for its recycling and transformation into biodiesel and other products. Also in [indiscernible] Argentina, the packaging for the sales have been replaced completely by polypropylene paper which is expected to reduce 7,000 kilos of plastic every year. And with this, I will now hand over to Fernando, our Deputy CEO, who recently has completed his first month of induction in the company. Thank you. Please, Fernando.

This time period, I have been familiarized with the company's culture and of course, with operation and the business model, working in the continuous commercial model evolution in order to answer the expectation from our customers, focus on the gastronomy value proposition and, of course, in the company digital transformation plan in the company as they drive to the delivery model, the screens and of course, in the digital plan front and back. Now I will leave you with Jose Luis, our Head of Starbucks Mexico, who will do a general overview about the business. Thank you very much. Thank you very much Jose.

Thank you, Fernando, and thank you, everybody. For me, this is my 9th year with almost 7 years with Alsea. The first 4 being as company manager for Alsea in Chile. And the last 3 having the privilege and honor of leading the Starbucks brand here in Mexico. I'm glad to share with you the strong results that we achieved during the third quarter of this year. We achieved a level of MXN 2.3 billion in sales, which means almost 60% increase against the third quarter of year 2020, and 23.1% increase against the same quarter year 2019. In terms of comparable sales or same-store sales, we increased during this quarter 53% against third quarter of 2020 and fourth -- sorry, 24.1% against the third quarter of 2019. Let's remember that this year 2018 was not only a normal year, it was a very good year for Starbucks. So to increase 24% is really a remarkable result. This very good grow of sales, we managed to leverage it in good and positive EBITDA result. We achieved a level of 27.7% margin, which is more than 2 point percents better than the third quarter of year 2019. And this EBITDA in this quarter means 136% increase against the third quarter of previous year and 36% against the third quarter of year 2019. We are currently operating 741 stores in Mexico. The main reasons for these very good results, I would say, that are -- or part of the main reasons are our policy of staffing, we managed to have the number of partners or collaborators that we need in each one of our stores, the focus on training. We have been -- as you will see later, we have been introducing new sales channels in our stores, meaning delivery or pickup or car pickup and we have to adjust our operations and our people did that in a very good way. So the operational excellence is in a very good shape in the company. This is meaning that our customers are more and more satisfied with the experience that they are receiving in our stores and they are telling this to us every month. And finally, I would say that our people managed do a great job in adjusting and monitoring and adapting the operation of our stores to the reality that we have around us in each one of the geographies here in Mexico. As you see in this chart, while we are increasing our volume of sales, we are maintaining and improving our margin EBITDA. And which is very interesting is that the momentum that the brand is leaving is going upwards. I mean, as you see, quarter by quarter, the gap between the increase of sales against year 2019 is increasing. 0.5% first quarter, almost 13% second quarter and an impressive 23% in the third quarter. And we believe that this momentum that we are gaining is going to continue during this quarter and the coming year. As you see here, we already mentioned is not years total sales, not comparable sales, 24% increase against year -- against third quarter of year 2019. And let's notice that we are currently operating a lower -- slightly lower number of stores than we were doing in the year 2019. Here, I just wanted to show you the -- I mean, the demand of our customers have spread in a different way this year. And one of the formats that is a clear winner is the format of and Fernando already mentioned, is drive-throughs. We have 160 drive-throughs operating here in Mexico of total number of 742 stores. So 20% of our stores are drive-throughs, but they are providing us 34% of our sales. This format has been and is being one of the winners and -- during this great recovery. And as you see, this 34% compares with the 25% that we had in the year 2019. We have been doing several improvements in our operation in drive-throughs. And there are even more improvement that we are introducing during this quarter and coming years. So we believe that this format of drive-through is going to give us very good news in the coming future. In terms of orders, in third quarter, we are still slightly below the number of orders we were making in third quarter in the year 2019. During this year, we managed to increase sales mostly in terms of average ticket and not that much in terms of orders. But this trend is changing, and our expectation is that for this fourth quarter of this year, we will be able to increase and to have positive orders growth against year 2019. As I mentioned, in terms of stores operating, we wanted to show here that out of our 341 stores, we have 723 today that are fully operating. We still have 18 stores, we call them hibernated or temporarily closed. Those 18 stores are mainly stores located in office buildings or in educational centers. And we have the plan to reopen those stores. And during the period, we closed just [indiscernible]. In terms of labor, the recovery very good. Let's remember that our strategy during year 2020 was to introduce what we call the labor flexibility. So we decided -- I mean, to keep all our labor force, we have to adjust, of course, the schedule and the compensation of our people, especially during the second quarter of last year, but everybody was with us, and that helped us a lot given the recovery that we had last year and is helping us a lot during this year because we have, as I mentioned at the beginning, full staffing and people with experience. Of course, we have to do the specific trending for the newcomers to the company. As you say, we are already operating with more people than we have in year 2019. But having the right people and having the good training and having the great spirit that our people have here in Mexico is helping us a lot. We have -- we can compare the turnover and see that still we are below the level that we had in the year 2019 and is -- I mean, compared with the industry, it's a very good level of turnover although we will continue working on that and trying to reduce. And finally, in terms of digital, one of our main drivers for sales and loyalty of our -- for our customers is our Starbucks Rewards program. And we already have always -- almost the same number of active members. We have more than 0.5 million active members and similar than we had before in year 2019. And we recently during this year, introduced the pickup option, meaning that our customers can now order and pay for their coffee and food and just go to our stores to pick it up. And this means already 4% of our sales. Total Starbucks Rewards program means almost 24% of our total sales, and we recently introduced the option of, that we call, car pick-up, which is like the standard pickup, but in this case, the customer will get his order in the car. They will not have even to enter inside our -- the lobby of our stores. We see a huge growth for us in terms of digital experience, of digital sales for our brand, and we will leverage the analytics power and more functionalities and more options that are going to come during next year. And I think that is all from my side. I give the word to Rafael, who will continue sharing with you the financial information. Go ahead, Rafael.

Thank you, Jose Luis. Good morning, and thank you for joining. To begin, I want to clarify that as in previous quarter, and in order to present a comparable analysis versus the financials of the previous year, all the explanations and notes reported in our earnings release, including the effects from the statement related to hyperinflation in Argentina as well as IFRS 16. These 2 factors are also included in the financial statements issued to the corresponding authorities. The most important thing I would like to highlight in this chart is that even though we can clearly observe the recovery curve in total sales, our delivery share of sales remained stable around 20%, reaching an amount in the quarter of MXN 2.7 billion. Looking at our pre-IFRS EBITDA figures, we have also seen a positive trend following higher levels of consumption in all of our geographies, presenting growth versus the third quarter of 2020 or close to 300%. In Mexico, 280%, in South America from negative figures to positive figures, and in Europe operation, 211% prior IFRS 16. During the quarter, consolidated EBITDA reached 90.6% compared to the EBITDA reported in the third quarter of 2019. Apart from the already mentioned efficiencies related to cost, we have continued as well with the implementation of initiatives in order to reduce nonessential operational and corporate expenses compared to the third quarter of 2019. This was mainly supported by agreements reached on rents and high-level productivity among all brands. In terms of liquidity, at the end of the third quarter, we had in MXN 3.6 billion in cash, well above the agreed of MXN 3 billion minimum liquidity level plus the additional MXN 1.6 billion from the responsible credit lines in Europe that we still have according to the current waiver terms. The debt structure at the end of the quarter was 76% long term with 58% in Mexican peso, 41% in euros and less than 1% in Chilean peso. As Alberto mentioned, we are confident that with the trend on our ongoing cash generation, we will deleverage going forward and meet our debt ratios in a couple of years in the range from Alsea [indiscernible]. Our net debt-to-EBITDA ratio is included in IFRS 16 reached 6x at the end of the third quarter. Excluding the IFRS, the same ratio is at 5x. We are in the process to refinance most of our existing debt subject to market conditions. We are confident that following the recent investment transaction of the time, 10.5% of Alsea Europe and the improvement in our operation profitability that there will be spendable demand of our bonds. In order to improve our current debt profile, we will be issuing a 5-year high-yield bond in the U.S. before year-end. With this, we are planning to use the proceeds to extend amortizations that we have in 2022 and 2023. As you already know during the quarter, we only acquired an additional 21% stake in Alsea Europe. Together with Bain Capital Credit, Alsea now owns 76.8% of the European business; Bain Capital owns 10.5%; Alia Capital 5%, and another minority, the remaining 7.7%. We are happy to have Bain Capital Credit, 1 of the leading private equity group in the world, as a partner in our European business. I believe this is a strong endorsement of our post-pandemic business opportunities in Europe. We think it is outstanding that we have been able to acquire this additional 10.5%, having already achieved the synergies proposed since the acquisition of Grupo Vips in Spain, and we are confident that we still have a strong growth potential in all these countries that we are currently operating in Europe. Also worth noting is the trust and confidence that all of our banks have in us by recognizing Alsea's successful business model to such an extent that we were able to use the excess cash generated during the year to carry out this acquisition. As we have mentioned before, we maintain our conservative approach to CapEx without sacrificing needed investments especially in maintenance. Total CapEx in the first 9 months of the year amounted MXN 1.3 billion, out of which 56% was in market for maintenance CapEx since we have been focusing on having the store in optimal conditions now that consumers are starting to come back and on-premise traffic is improving. Thank you. And we would like now to open to Q&A.

[Operator Instructions] The first question is from Benj Theurer from Barclays.

Well, first of all, congrats on the very strong results and thank you very much for sharing all the insights. Two questions, if I may. And the first one I wanted to focus on your commentary around Starbucks and what you -- and the initiatives you've been doing in regards to improve customer experience, lowering the turnover rates and staff training, et cetera. I mean, obviously, it has been a very successful story on a year-to-date basis, and you showed this nicely through the acceleration. Now given that we're getting to a higher base comparison, how do you feel about Starbucks looking maybe beyond 2021 and into 2022, hopefully, assuming life is going to be more normal? Where do you see opportunities to even further grow that business, which has been growing already so tremendously? That would be my first question.

Thank you, Ben, for your question. As we show in the numbers, what we feel and what I believe that we are gaining momentum, there is still room for growth, yes. What we are seeing now is while our customers are coming back to our stores and I must say that our customers here is Mexico they have seen during this recovery and this increasing, they have found a very nice place to go in Starbucks, yes. We are famous for receiving and servicing our customers in the best way. And this is what we call the great reconnection of our customers is happening here. But besides that, for example, let me give you a couple of examples. We saw during the pandemia, the impressive growth of delivery, yes? And now that we are, as you saw, with much better than in year 2019, we are seeing that the delivery is not going down, not in percentage, not in volume. So we believe that this is a new channel that our customers, the current ones and the new ones, they accustomed themselves to this channel, and they will continue growing. Just an example, yesterday, and this is because our customers ask us to do it, we introduced for our delivery customers the possibility to order their -- to make their delivery orders through our Starbucks Rewards, yes. It was happening that our customers on delivery, they were saying, okay, I am the member of Starbucks Rewards, I'm ordering on delivery so I'm not getting my stuff with the loyalty program. Now this is possible. We started the day before yesterday, and it's been a very good -- we are having very good results. Besides that, for example, we mentioned the phenomena that we are living with drive-throughs, yes. Is it the same story. Drive-throughs have been growing all along the time. The recovery is happening, more customers are coming back to offices and to malls, et cetera. But drive-throughs are increasing as well, yes, still growing. And we have some ideas that we are implementing, as we speak, like, for example, to introduce tablets to speed up the service in our drive-throughs or example to introduce, we call it the injection of the order in drive-through to our printer systems. We have a system of printers to provide -- I mean, when you are ordering through delivery or you are ordering for pick-up, your order [Technical Difficulty] have been your cup, we will have our sticker added to your cup, yes. This is going to happen very soon as well to our drive-thoughs. But I'm trying to tell you that we have plans and ideas to continue this growth in this kind of stores. Something similar is happening in our high-traffic stores in hospitals, in airports. And at the same time, those stores that are still in negative numbers like stores in office buildings or for example, educational centers, we are seeing that step by step, week by week, they are coming back to us. Finally, we believe that this effort that we are making in staffing properly our stores, training properly our people. And again, I have to emphasize, the quality and the attitude -- great attitude that we have among our people here in Mexico. We believe that the growth is coming for next year and the next, and the next, we are very positive about the growth. Thank you, Ben.

Perfect.

In my option, in terms of Starbucks because we have a lot of opportunities in terms of sites. And as Jose Luis mentioned, we already have a pipeline for the next year. We think we can open 50 stores just in Mexico for the next year. And we already have more than 20 in drive-throughs site pipeline for the next year. So we have a -- we see a lot of opportunities also in terms of openings and pretty good sites.

Perfect. And then one on the delivery piece, and maybe that's for Alberto. I know we've talked about this in the past. So clearly, delivery has picked up as a result of the pandemic and maintained a relatively healthy share. And I know you've been investing in your own apps and in your own solutions, but at the same time, you do work together with the aggregators. Now that roughly 20% of sales within delivery, can you give us a breakdown how much is actually through your own channels versus how much is through aggregators and how that has been evolving maybe over the last 3 quarters or so?

Thank you, Ben. Yes, First of all, the majority of the volume goes through aggregators. And let me focus in Mexico, if I may. Obviously, out of the numbers that we gave you, a big part of that is Domino's, about half of what we said is Domino's because Domino's still half of our delivery business in Mexico and is done through our drivers. I mean, we use our delivery people for Domino's mainly, even though we have some aggregators that inject orders to our system, which is not a amount in Domino's. I believe it's about 8%, more or less. A little bit less than 10% when it's the highest. Second, we do believe that we need to keep our delivery in home to be ready for whatever happens, but also to give our consumers the option to go through our Wow program and just get what they want. If I give you numbers, I would say, and correct me here, it depends on brands, but about 90% of the deliveries out of Domino's are still done by aggregators. Different aggregators are playing in different brands. But for example, in Starbucks, which, as Jose Luis said, we have been seeing a very steady participation of delivery even without the restriction of delivery have maintained at levels that we have never seen before, and Mexico is probably the highest market of Alsea delivering Starbucks over 10% is done -- 95% through aggregators. And again, remember, Ben, we are not trying to compete with anybody. We're trying to give our customers options so they can choose, not competing in delivery, but competing in the products, of course.

Our next question is from Vanessa Quiroga from Crédit Suiss.

Good to see you. My questions are mainly on Mexico, first on Mexico. I saw that the OpEx increased about 14% quarter-on-quarter, while sales didn't grow as much quarter-on-quarter, about 4%. So what are the building blocks for that OpEx increase? And what should we expect going forward? Also, I was wondering if you have a target margin at store level for the Mexico operations? That's the first part. And the second is if you can provide us an update about your digitalization project in terms of the experience for the customer, what has been the progress?

[Foreign Language]

Okay. First of all, if you compare with the quarter 2020, in 2020, we have a lot of reduce in terms of rents in all of our geographies. And now in this third quarter sales are almost the same as 2019. We don't have the same reduce in terms of rents. So we are almost in the amount that we have pay for the landlords. The other is that in 2020, we have this flexibility in terms of also productivity into a store in the salaries. And right now, 100% of our people gain 100% of the salary. If you remember, last year, if you achieve between 50% to 60% in terms of sales, they worked 3 days, and we paid them 4, and then they worked 5 and we paid them 6 if they achieved 80% of sales. So now also, right now, we have in terms of salaries, all of the people gaining 100% of these salaries. So I will say that this third quarter, it's more normalized in terms of expenses, in terms of salaries, in terms of rents. And another thing that in Mexico, we are putting in terms of expenses is that we have to pay for all of our employees in all of our brands, just in this quarter was around MXN 60 million in expense that we didn't have last year.

Vanessa, what I heard that you mentioned -- you were asking about CapEx also, no? Vanessa, am I right?

No, no. I said OpEx. Operating expenses, yes. But if you can -- if you want to comment about CapEx, that's very helpful as well, I guess.

Okay, I will before Fernando answered the next question. The only thing I would like to tell you about CapEx, which I think is important is we have been investing, as I said in the last call, heavily in maintenance to our restaurants. As we said, we want to make sure that we have the best terraces and the best in-dine experience because we were not investing in maintaining CapEx for our restaurants, and some of them were left behind. So we are making sure that we do the catch-up. So you will see CapEx being invested mainly as Rafael presented on the pie graph in maintaining CapEx, remodeling stores and making sure that store looks the best they can for the customer experience that we expect to have, and we are having the recovery in most of the branch including this opportunity that there are assets that we want to lead the market in that sense as well as technology.

Thank you very much, Vanessa. I'm going to try to answer your question, your approach about digital. Just in order to make a fast introduction, in terms of OpEx, including in the third quarter, we have better percentage of OpEx -- store OpEx, distribution costs in another language for the stores versus 2019, including percentage of our sales. Why? Because the base of the company is the profitable growth. And of course, it's spreading. So we try to be much more efficient. When we are talking about digital, of course, is in this moment, we are preparing the strategic example of 2022 until 2026. And the digital transformation, the technology is the base to keep the efficiency and of course, to improve the value proposition, the offer that we are doing our consumers. The main part of our investment now is not fixed, it's not excluding, it's not presented to our Board. It is the base of the -- all the plans that we are going to have in the next 3, 4, 5 years in order to try to answer the expectation from our customers that every day are much more demanding about everything that we are doing. And the base has to be the technology. We can call digital, we can call about apps, about digital transformation back in the stores in order to be in the restaurants in order to be every day as more efficient than before. And the base has to be the technology, we can call digital, we can call as we want. But basically, it's the technology. And of course, is -- today is, of course, one of our main legs of leverage for the growing in terms of a strategic plan. But of course, it's the same before, but that we are doing is to try to be much more faster, much more dynamic in order to take advantage of the momentum in terms of digital as explained by Jose Luis and for all the brands that we have worldwide and including through geographies and through brands. I don't know if I answered your question. If not, don't worry, I can explain much more in detail.

No, I think that helps a lot. I guess if you could talk about specific strategies or projects that you have for the main brands maybe that would allow us to visualize it better? And also going back to the Mexico question about margins, if you have a target level, that would be great?

Firstly, of course, we are multi-brand company, so different targets. Initially, our strategic plan -- the base of our strategic plan is to earn in term of profitability over sales where -- as percentage of sales in terms of EBITDA every year sustainable, okay? In terms of digital plans, we have today a battery of different plans. I'm going to try to explain very fast what is strong for me, what is back for me. When we are talking about back, one of the challenges for any company, not just Alsea, is the manage of data. Today, we are very intensive in terms of data in order to be much more efficient in the marketing plan. I mean, the proposition that we are doing to every customer, we are doing today. And some is not new and of course, in order to be a reality for the next year. At the same time, we are working internally in order to be much more efficient in the administration processes, and other invoices and replenishment, ordering from our restaurants to their warehouses, to the platform and now we have it in the connection with the different kind of suppliers that was as much more automatic in order to be much more productive in terms of efficiency, in terms of people and in terms of the added value that we can give to the project. At the same time, we are working in the front strain, either what to repeat what we are doing and the plans that we are doing in Starbucks, but we are doing similar plans brand by brand. What this means? Burger King, of course. To ease that transformation for the customer in Burger King, loyalty program that allowed us to manage their data, and of course, to improve the perception and the value proposition that we are giving to any customers to do -- the target is very simple, that we want this different relationship systems of communication with the customers, that the customers can order for any kind of systems and any kind of movements at home, do at home, drive-through, eat in restaurants and the service and the quality and the product that we are giving to them, of course, has to be exactly the same in any kind of channel in order to try to understand. We have a big battery today developing. Of course, it's going to be presented to all of you. I mean, probably we try to have better visibility about all the consistency of the plans, back and front, okay? But that needs everything at the same time is true all the companies worldwide. We are trying to be much more dynamic and much more innovative and disruptive in order to take advantage of this moment.

Our next question is from Paulina Moreira from Compass Group.

Congrats on the results. And I just have a quick question about the number of units in Mexico because I noticed decreasing tendency since I remember in 2018. And in the last quarter, there were 10 units less and also related to the same quarter of last year, you are like 60 units below. So I want to know like what's the reason for this? And why do you want to -- well, you mentioned that you are going to increase 50 units in the next few months. So that's my question.

[Foreign Language]

Yes. Last year, as you know, we closed around 180 restaurants last year because all the restaurants that were not profitable, and we decided to close them last year in all the geographies and in all of our brands. So the main reason was that they were not profitable at that time before the pandemia and we see that in the pure, they were losing on. So that's why we decided to close around 180 restaurants last year. And this year, some of those restaurants that didn't perform as well as we thought, we decided to close some of them also. We think that right now we closed all the restaurants that we decided to close. And that's why we see many opportunities in terms of previous sites for the next year that we are going to pull back in the number of restaurants. Just 50 restaurants that I mentioned is just for the Starbucks Mexico, total will be next year around 120, 150. And we expect that in the future, we are going to be back with the 200 restaurants that we used to open before the pandemic.

Paulina, if I may. Remember what we did last year was making sure that we, as I said, we clean the house and everything that we needed to close, we should close it. But also we took the opportunity with some of the landlords because we have some different agreements that were not letting us get out of those agreements. So we took the opportunity also because of the emergency to close them down. And so that's why we also expect -- it's quite interesting to see how the company has recovered in total sales, even with 180 restaurants less. And that's also interesting to see, and you can see in the numbers, how we are getting more profitability at the margins, obviously, because we have in restaurants a healthier portfolio in all of the brands, and not only in Mexico, in most of the regions. I'm actually right now in Spain, and we were reviewing numbers. And the good news is that we have very few restaurants today that we think that they will not get back to the track in terms of generation of EBITDA in the Q2, which I mentioned already the international ones. So I don't see a lot of closings from here to the end of the year anymore.

Yes. And to give you an amount, for the full year 2021, if you compared with 2019, the amount of sales that we lose -- the 180 stores that we closed is around MXN 2.5 billion. So if you see just the quarter, the 3.5% that we decreased in terms of sales versus 2019 will be around 0.7%, if you took out these stores that we closed. And as Alberto mentioned, we have the opportunity to close the stores without penalties with the loss.

Okay. And I just had another question on deliveries. I know that your delivery service is almost 20% of the total sales. And this -- you mentioned that it will continue, even the restaurants are open. But do you believe that this trend will continue once everything is back to normal, and you are planning like to make huge investments in this segment to grow your sales from deliveries?

Yes, Paulina, we don't only believe that's going to stay. I think that what the convenience that the customer has asked in this pandemic, not only delivery, but carry-ons, the digitalization of the orders, the digital menus, everything that we have faced, I do believe and we do believe, not only we, as I say, but also our franchise stores, it's here to stay. So I think we have a unique position because of the brands we represent because the customer wants these brands, but because also the creators need these brands and the critical mass that Alsea has in geographic coverage in Mexico and in the other geographies, I think it put us in a privileged position to take this business. We are working very hard to have the better packaging, to have best time to the consumer, to be the best JV -- I mean, the best partners for the aggregators and to be one solution for the customer when they want our products. So I do believe that's going to stay. We have a challenge, but we are asking all our brands to make sure that we give the same importance to delivery, that we give us an important dine-in restaurants for the case of casual or for any other of the brands. So I think that's an opportunity. As I was saying, Starbucks is doing over 10% in Mexico in sales of delivery, but we have other brands over 20%. So I think it's our job to make sure that the consumer has the best experience wherever they want to have our products, and we're working on that.

Our next question is from Bruna Warnick from UBS.

I'm Bruna here on behalf of Rodrigo. So congratulations on the results. I would like to know better if you have any inflows on or any color on potential impact from the supply chain disruptions and from the energy reform?

I'm glad you asked, and I'm going to pass this to Fernando because you guys saw that we are -- been able to maintain our costs, and it's due also to the mix, but we've been working hardly in the supply chain. Fernando, why don't you help us with that, Fernando?

Yes. Thank you very much, Bruna, for your question. I think that the supply chain, as you know, is crucial in our business. We have a plan internally in the company, including structuring the company dedicated just to the supply chain in order to be every day as much more efficient. So the cost for the delivery to the restaurant has to be lower, and at the same time, to improve our working, to be every day much more efficient in terms of cash. How we are doing this? Optimizing the stocks and at the same time, not having stock-outs in any restaurants, of course, okay? So it's not incompatible, okay? So we are working and when I arrived to the company, we have a structure dedicated to this quite professional in order to be every day as much more professional with CapEx that is much more, probably a bit much more disruptive in terms of frequency, in terms of time delivery, in time of stock-outs, in terms of boxes per pallet, much more technical in order to guarantee that the plate that you found in our restaurant is always one, okay? Today, the evolution of the distribution cost, logistics cost is every year it's much more efficient including we are improving in this logistics cost. We are continuous and the target is to be every day in terms of percentage of total sales every day is much more efficient of this, okay. In terms of supply chain, I consider that is crucial for our business. Why? Because it's a part of the value proposition. And the plan and including the investment in the company for the next years in terms of automatically -- replenishment automatically ordering from the stocks is oriented to do this. Currently, our platforms, at least in Mexico, that we have seen, of course, and it's the same everywhere, is much more advanced in terms of radio frequency, in terms of preparation, boy-speaking, we have different tools in order to prepay them the commodities, the material for their restaurant and including trying to be every day at least a bit more industrial, not just to prepare everything in the restaurant, including in our supply chain model, okay, that is quite important requirement in the company. We are measuring this, the supply chain, the cost of the supply chain despite who are delivering the products because, in my opinion, the company has to be prepared for the inflation that we can have, of course, in the commodities in the mid of the next year, and in order not to be much more efficient for the customers, not to transmit this cost to the customers, and in order to give the best value proposition to our clients understanding, okay? So I don't know -- till now, I have some data, but it's not relevant, that I propose to do in the next meeting that we can have with all of you. At the same time that we are talking about the KPIs for the global business overview for Starbucks. We can repeat or do in order to explain as we are working in our logistics, our plan to optimize this and our KPIs sometimes are quite similar for any kind of retail [indiscernible].

[Operator Instructions] Our next question is from [Valentine] [indiscernible].

And congratulations on the results. The first one has to do with the growth strategy for Starbucks in Europe. It seems that openings have already started to pick up at least mainly in France. So my question here is with Fernando's incorporation, [indiscernible], is there any game changer in your growth thesis in that region? Let's say, how can you give us a sense of the expected growth in -- for Starbucks in Europe, balancing both corporate units and franchises. I'm sorry. And the second question is regarding South America. The impressive comeback that you just delivered in the third quarter. Just to get a sense on the current trends that you're seeing down in South America, specifically in Chile, amid both the extraordinary seasonal positive boost from the intern there and also from the government support, how is -- how are you seeing your sales behaving right now there in South America?

Thank you, Valentin. As far I'm here in Spain now, Just finalizing a meeting with the people from Starbucks International to review our growth plans for, obviously, Alsea but also particularly Europe. I can tell you that the brand is doing well, not only in Mexico. The brand is doing well across the region. The only places where the brand is not doing well, I'm talking about Starbucks because that's the question, is where we have the lockdowns. But as soon as the lockdowns get out immediately, the bounce back of sales is impressive. The customers are going back to the stores as Jose Luis said, expecting this recognition and to leaving the full experience. So we are going to continue with our growth plan in Europe, particularly in Spain and France. As you know, we didn't have enough time to prove the model completely in France because the COVID got us 1 year after we did the acquisition. But we have a good pipeline for growth for 2021, which has been developed already, and you will start seeing openings in France soon. We plan to duplicate the business of corporate stores in France in the couple of 2 years. And also the plan that we have is to open more than 100 stores of Starbucks starting next year across the regions. So you'll see -- we do believe that the strategy that we decided in 2018 to have a bigger market holding capacity in Europe for our business is still there. And I would say, probably more now than ever because competition has been hurt in a big way, and we are here and we were able to clean the house to be more efficient. So France is going to be one of our main objectives of growth for Starbucks. Regarding Latin America, most of the good news in Latin America are coming for less restrictions. Obviously, our team is doing a good job. We are we have a very clean P&L store per store. The supply chain has been very efficient. The labor has been very well taken care in terms of efficiencies per hour, et cetera. But mainly the volumes are coming because the customer is going now, the customer is looking back to the brands they know and they love, and we are there for them. So we do continue -- we expect that to continue. And as I mentioned in my initial remarks, the Argentina result, yes, they are there because of the government support in labor. But as also Rafael said earlier, most of our businesses now are full in terms of the number of people that we have in the restaurants. We are paying full salaries. And I don't see any more government support in Q4. So you guys will see -- I'll say in Q4 -- I will say, a normal Alsea, if I may, without government support, without anything additional, but just the business as it was, which I think is great news for everybody because we're back where we were, and I really believe this is the beginning of the end, aside traveling around the stores here in Madrid or we have done in Mexico.

Just 1 follow-up on the 100 stores that you mentioned you're planning to open up for Starbucks in the next year. How should we think about the proportion between corporate growth and so franchising?

The only thing I'm telling you around with those 100 stores is corporate. And remember that we only do licenses, not corporate in Spain right now and Benelux -- I mean, in France and Benelux, sorry, which is where we can do that. But we are talking with our -- with Starbucks to see if we can replicate that model to grow faster in some geographies where we need to do that, but mainly 100 stores would be corporate stores divided by Latin America, Mexico and Europe.

[Operator Instructions]

Sorry, to this followup. Just before to end the call, I would apologize because there was a question, I think from Vanessa about the energy that I didn't answer, okay? In order to try to answer very fast, and I apologize to Vanessa. In term of the company, we're working in different plans. The first plan is the price of the kilobyte, okay? When we're talking about the plan of the kilobytes, we have a joint venture, and we are working with different companies that are providing partially to us, kilobyte with very competitive and here in Mexico that allowed us to be much more efficient in terms of cost. And at the same time, we have in the company currently plan in order to reduce the consumption of kilobytes with technical people focused on the consumption per restaurant about our kilobytes, as we can do -- we can be much more efficient. It's not just the unit cost, it's including the consumption of kilobytes. This is the plan in the company. We are working very deeply, why? Because consumption of the energy is 1 of the main cause for any kind of retailer worldwide. And in our case, it's a relevant goal, and we have to work actively in 2 things: one, in order to try in terms of sustainability to be every day as better consumer and to produce a better consumption or work for all us and at the same time, to be every day much more efficient. And to be every day, a less consumer of kilobytes. We are talking about energy. We are talking about CO2, we are talking about different consumption that we are doing. But in terms of energy, we are working deeply on this. This is a strategy, of course, in terms of internal team, our target is to dedicate professional technical team to be as much more efficient in terms of our productivity in the stores in terms of goals.

Anabel López from GBM.

Congratulations on the good results. I have a question, if I may. In the press release, you mentioned that in South America, you continue to report savings from government support related to labor costs as well as some benefits in terms of efficiencies and synergies. And my question would be for how much longer can we expect these savings to be maintained?

As far as we know, Anabel, every month, the government is taking those decisions. So we are really getting the news from the officer working with the government. So the government is the one that is taking those decisions. So they can end up -- we don't have any control on that.

Okay. And correct the results...

Thank you, Anabel. What I could say also, Anabel, is that obviously, the government is the one taking decision. We are working with the government, but we don't expect that to continue because things are getting to normal, and obviously, the government has been spending a lot of money with these programs.

[Operator Instructions] That was the last question. I will now hand over to Mr. Torrado and Mr. Contreras for final comments.

Thank you. Well, like always, I always thank you for your time. Thank you for your interest in Alsea. I am very happy to tell you that the company is performing well. I think all our team has done an incredible job, and you can see it in the results. But what I'm more happy about is that we are seeing very good results throughout our geographies, throughout our brands. And I think all the work that we have done in terms of become more efficient, are paying results, and you can see them in our numbers of the third quarter. We are already finishing October, and we are seeing continuous good numbers in sales. So we do expect to have also a close of the year quite good. So hopefully, we continue like that, and see you soon. Thank you, everybody.

Thank you very much to everyone.