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

Good morning, everyone, and welcome to Alsea's first quarter 2024 earnings media conference. My name is Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, and today, our Chief Executive Officer, Armando Torrado; and our Chief Financial Officer, Federico Rodriguez, will be presenting the results. Before we continue, a friendly reminder that some of our comments today will contain forward-looking statements based on our current view of our business and that future results may differ materially from these statements. Today's call should be considered in conjunction with disclaimers contained in our earnings release and in our most recent [ Bosamericana Valores ] report. The company does not have the obligation to update or revise any such forward-looking statements. It is important to note that earnings numbers referred to are based on pre-IFRS 16 standards unless specified otherwise. I would now like to hand it over to Armando for his initial remarks. Please go ahead, Armando.

Thank you, Gerardo, and good morning, everyone, and thank you for joining our first quarter 2024 earnings video conference. I'm pleased to share with you our financial results, regional highlights and brand accomplishments for the quarter. Additionally, I will talk about the progress we have made on our digital strategy and ESG initiatives. I will first like to take an opportunity to thank our team members and other stakeholders for their continuity, dedication for Alsea. Before joining to the numbers, let me share with you our top priorities for this year. Regarding organic growth, we remain very [ commitment ] to grow organically, both by generating more traffic, sales per store and open new stores where we see attractive returns on capital. As we highlighted in our recent Alsea Day, we saw plenty of white space ahead to continue to grow our main brands in our key markets. At the same time, we are constantly innovating to make our existing stores still more productive. And so you can see from our results today, it had been very successful. Regarding operational efficiency, while sales growth gets most of our attention, our management team spends a lot of time finding new ways to be more efficient and improving our operational margins, without affecting the customer experience. This is a product of rigorous attention to detail, deep knowledge of the company and its process and openness to share the best practice across the organization. Digitalization of our company. Alsea started the digital channel journey a long way back. We were convinced about 3 things: our customers will want to order their food digitally; second, data generated by the company could help improve frequency and sales; and three, the internal process could be simply simplified and requires less manual work. I am immensely proud of how we can and how we achieve this progress. Some 30.3% of our sales from this quarter are digital, broadly defined, but we will still see huge opportunity ahead to improve this number. Regarding our highlights 2024 results, as you will have seen, the year has started off well. In the first quarter, we posted a 2.7% year-over-year increase in total sales, reaching MXN 18 billion or a 12.2% increase when excluding ForEx exchange effects. Same-store sales grew by a robust 10.1% year-over-year. EBITDA grew by 12.4%, reaching MXN 2.6 billion for the quarter with a 14.3% margin for the quarter. These results demonstrate robust demands for our brand, even as the strength of the Mexican peso continues to affect our currency translations. We served over [ 28.1 ] digital orders in the quarter coming to MXN 5.5 billion, which accounts for 30.3% of our total sales. Let me go deeply into a quick overview of our brands. Regarding Starbucks, we reported a strong year-over-year same-store sales growth of 10.6% -- sorry, of 8.6%. The Starbucks same-store sales for Mexico were up 10.6%, driven by promotions like [ FrappeBirde ]. For Europe, they declined 5.7%, mainly affected by the boycott to American brands in France and Benelux. And in South America, the increase was 19.5%, driven by inflationary pressures in Argentina, but with a better performance in terms of traffic than the rest of the staples market. Regarding Domino's Pizza, we posted a robust 12.5% same-store sales growth in Mexico, largely driven by initiatives such as [ Domiz Mania ], some other carryout initiatives that we've been doing and another successful promotions in the whole country. The success of the campaigns strength our positions against other competitors. And also in Spain, same-store sales grew by 1.5%, supported by campaigns like [ Gracia Silvia ]. Regarding Burger Kings, the quarterly results were mixed with same-store sales increase in our biggest markets, Mexico and Argentina and a modest contraction in other markets. In Mexico, the successful rollout of digital kiosk continue to lead to double-digit growth in the average ticket. Regarding the Full Service Restaurant segment, we had a trended positive same-store sales up 8% and orders ticket frequency -- sorry, frequency or traffic grew by 3.6%. The strong results were driven by successful innovations with the launch of 9 new burgers in Foster Hollywood, Sandwich platform in Vips Mexico and a breakfast -- and a new breakfast menu in Spain. Additionally, we opened a new Cheesecake Factory restaurant in the city of Queretaro, Mexico with a great success. Regarding our expansion strategy, during the first quarter, we targeted the most profitable opportunities available to us. We opened 27 corporate units and 9 franchisee. So we did a total of 36 openings in the quarter. Most of these new locations were Starbucks and Domino's outlets strategically positioned in high-traffic areas and regions, particularly in Mexico and Spain. While we often see a slower start to expansion in the first quarter due to seasonal variation, we expect to increase the pace of openings through the year, alignment with our strategic growth goals and guidance. Another important pillar of our strategy is the remodeling of our units. And once we do work traffic and then we do the work, the traffic increase by 6% on average with paybacks aligned to the minimum returns set to the openings of the stores. During the first quarter, we have remodeled 13 units globally. Regarding our loyalty programs, we're supported by our digital transformation strategy. And at the end of the quarter, our loyalty sales grew 21.7%, reaching MXN 3.7 billion and representing 20.3 million orders and 20.6% of our total sales. By the end of the first quarter, we had more than 7.8 million active users in the different loyal programs. Programs such as Starbucks Rewards and Club By play a crucial role in driving sales and growth. At the end of the first quarter, just a few months following its launch in Spain, Club By already had 1.5 million users. Regarding ESG, in the first quarter, Alsea advancing its ESG initiatives. Some of the highlights include all the new opens of Starbucks in Iberia and Mexico will consider as green stores in 2024. Also, we have certified 44 Starbucks stores as greener stores, reaching 129 in Latin America. In Mexico and in Europe, we use 70% and 50%, respectively, of clean energy to cover our electricity needs. Fundacion Alsea has donated over MXN 25 million to one institutions committed to food, education and employability in Mexico. These contributions had benefits more than 8,000 people, thereby demonstrating a significant commitment to the wellbeing and development of our communities. Also, Fundacion Alsea together with World Vision Mexico launched the third vision of the Alsea award in March with the aim of promoting the dissemination and creation and initiative reach research projects in the field of food and nutrition. It contributes to the development of public policies. I will now pass you to Federico so he can give you a more detailed overview of our financial information. Please, Federico.

Thank you, Armando. Good morning, everyone. We are pleased with Alsea's first quarter performance as quarterly sales increased 2.7%, driven by positive consumption trends in most of the regions, brand preference and effective commercial strategies. Excluding foreign exchange effects, sales increased 12.2% for the quarter. In Mexico, sales were up 13.1% to MXN 10.1 billion for the quarter. Sales in Europe decreased by 2.4% to MXN 5.4 billion, but in euro terms, sales increased by 6%. Finally, in South America, we posted an 18.4% decrease in sales for the quarter to MXN 2.5 billion, mainly driven by the devaluation in Argentina and a lower consumer trend in the region. In Mexico, adjusted EBITDA increased 23.3% to MXN 2.4 billion for the quarter. This improvement was driven by positive consumption trends, better portfolio mix and lower raw material prices. Also, the 10.1% growth in same-store sales boosted operating leverage and the appreciation of the Mexican peso helped cut dollar-denominated costs. In Europe, adjusted EBITDA increased by 1.8% to MXN 739 million for the quarter and 10.9% in euros, driven by growth in same-store sales as well as a reduction in energy prices, food cost and other inputs. In South America, adjusted EBITDA decreased by 18% to MXN 413 million, driven by the devaluation of the Argentinean pesos in more than 400% year-over-year as well as by pressures on the operational leverage stemming from the decrease in regional consumption. In the net income, for the first quarter, we had a decrease of 22% to MXN 440 million year-over-year. This was mainly driven by the purchase of U.S. dollars in Argentina and the lower appreciation of the Mexican peso in comparison to the same period of the last year. For the first quarters, the earnings per share were MXN 3.08 post IFRS earnings per share, rose to MXN 3.36, an increase of 58% year-over-year. Regarding the CapEx, in terms of the investments, our first quarter CapEx amounted to MXN 940 million. We allocated 23% of this amount to maintenance activities, 62% to store openings and re-modelings and 15% to other strategic projects like digitalization or change of the digital platforms. We have made prudent and responsible investments throughout the year, focusing on profitability. For the debt, our pre-IFRS gross debt increased MXN 1.7 billion year-over-year, closing at MXN 28.1 billion at the end of the quarter. This increase resulted from a bank loan to finance the exercise of the option to buy out the minority shareholders in Europe. Finally, the financial ratios. Looking at the total debt-to-EBITDA ratio, we closed the quarter at 2.5x and the net debt-to-EBITDA ratio at 2.2x, sorry. The debt structure at the end of the quarter was 88% long term with 67% in Mexican pesos and 33% in euros. We expect to continue with the strong balance sheet going forward and meet all our debt covenants, thanks to the healthy ongoing cash generation. At the end of the quarter, we posted a cash position of MXN 5.4 billion. Before going to the Q&A, Gerardo will remind us of the '24 guidance. Please go ahead, Gerardo.

Thank you, Fede. I would like to briefly review the guidance we provided in March at the Alsea Day. We anticipate opening between 250 and 300 stores this year, primarily corporate, with the minority being franchisees. We expect CapEx at MXN 6 billion, with the majority directed towards store openings, maintenance, remodeling and digitalization. We project growth in same-store sales to be around 7% to 9% and in revenues above 10%. We forecast EBITDA pre-IFRS to increase by more than 11% with a margin of 14.2% or higher. This will lead to a gross debt-to-EBITDA ratio of about 2.5x and return on equity of 28% to 29%. This quarter's results have set the foundation for meeting our full year guidance. Operator, we're ready to take questions. Please go ahead.

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

Just 2 quick ones. So number one, very detailed on the presentation on some of the impacts in the different regions, but I wanted to follow up as to some of the strategies you've been working on to mitigate some of the negative impact from the boycott over in Europe against the brands. Have you done anything on the marketing side? Have you been trying to kind of overcome some of these headwinds? And how do you feel this is going to play out over the next 1 to 2 quarters, particularly with the Olympics coming up? That would be my first question and I have a quick follow-up on Mexico.

Thank you, Ben. Since we saw this decrease in sales starting the middle of October, more or less, of course, we -- this is not only us, it's also happening a little bit more [ root ] in the Middle East. So we sit down with EMEA, with Starbucks Corporation. We've been doing 2 or 3 studies to see how, why and when this can be over. Thanks, we've been seeing a less complicated environment now. Traffic is a lot better than we started in the first of the year and the end of the year now. After Ramadan finished just 2 weeks ago, things have started to ramp up again. And you are right. I think the distraction of the goodwill of the Olympics will also help. This is only in a particularly part of some regions of France and another in Holland. We don't have only other brands, just Starbucks is the one. But yes, we are creating with Starbucks Rewards some plans. We are seeing that the younger crowd, it's the one that is making that switching of a local stores or switching to other brands and not the occidental U.S. brands. So we are working with a plan, yes, consisting in plan with Starbucks Rewards. This also is created only in the mornings, not in the evenings. So at the end, we have it very well clear where is it and we are creating some commercial programs for a region per store in order to mitigate that. I think we have to see in the next 2 weeks, this align and we expect to be in May really same-store sales slightly positive, but it's not going to have any effect in the total Alsea of our numbers. And this continue at the same guidance and we are looking how we're going to mitigate all this impact and we already do with a conversation with Starbucks and with another vendors and all our teams.

Okay. And then just following up on Mexico. Obviously, you had a very strong performance in the quarter with double-digit same-store sales growth, which probably was on the higher end. And I guess a lot of that was driven by somewhat of the shift of the Easter week from April into March. And now just thinking about this, we're at the end of April. Last year, this whole thing was in April. Have you any preliminary data as to the performance on a year-over-year basis for April so just that we can kind of potentially quantify what the shift impact was from 2Q into 1Q and would obviously would then be negative in 2Q?

Well, I'm not going to give any kind of figures for the April month, but I can tell you that the calendar effect that we had in March from Easter was around 1 percentage point in the same-store sales mix. But obviously, as Armando just said, we maintain the guidance because we have that into our projections for this year.

Our next question is from Mr. Hector Maya from Scotiabank.

We have been seeing the favorable results that you're getting from portfolio innovation, menu architecture and mix in Mexico. So just wondering if you believe that there are still learnings from Mexico that could be applied to either Europe or South America? And also, if you could please share an update with more details on input costs in Europe, like if there are specific items in Europe that could revert a bit from the positive trend in costs that we have been seeing so far?

I will head the best practice and Federico will get the thing of the cost. I mean, we are doing best practice all the time. And to be honest with you, in this quarter that we felt in week 2, a little bit weakness on the traffic on the stores. We got all together, we are aligned the whole 13 countries of Starbucks, how can we do some best practice to share and in commercial details. And it's not only how can we bring ideas from Mexico exported to the Europe or South America. We did it other way right now exactly in the Burger King, some ideas that we did in Argentina that really work very fine. And I think right now with the digital platform that we have, we are very -- we are capable and we are making some strategies only in those 32% of our customers that order by digital. We tender with a very personalized promotion strategy, like I said, to drive more traffic, to drive more frequency. When we see the P mix of our units, we are selling more items in every order that we sell. So I think that is the key of the game. We're also doing in all our concepts the second buy that we call, we go to the consumer that is in our store saying if he wants another coffee or another item once they order their first order. So that is a little how we are capturing better the consumers that we -- and the customers that we already have in our stores. So, yes.

Okay. I will take the second question, Hector. Thank you very much. Regarding the input costs, we are starting to see a decrease in all the raw materials where we suffer in '22 and '23. And even when this is slightly -- well, this is around 1 percentage point of decrease. We expect this trend to continue during the year. And additionally, talking about Europe, not only about food cost, we have started to see the same historical prices from energy that we had pre-COVID. So good news, not only in Europe, but for the whole portfolio of Alsea. Thank you very much.

Our next question is from Rodrigo Alcantara from UBS.

Two questions here, if I may. And the first one would be for Armando. I mean, just to make sure on the competitive dynamics in Spain, you mentioned that part of the deceleration that we saw there was this switch, right, from QSR to casual dining. Just wanted to make sure that that was actually indeed the case, right, and perhaps not some increasing competition, let's say, from Telepizza or -- I don't know -- McDonald's, right, that could contribute to the deceleration in QSR in Spain. And the other one would be very quickly on -- I mean, very technical, but some questions that we received from clients yesterday on the mismatch that we saw between the pre-IFRS 16 and post-IFRS 16 EBITDA margin when we saw expansion -- on the pre-IFRS 16, we saw expansion came in line with our forecast, but on the post, we see a contraction. Just curious if you can comment about that? It's very technical, but would help us to understand much better here what happened.

I think we had a -- we don't have a very, very impressive sales momentum in Spain. I mean, when you saw that when we see the numbers, all our casual dining [indiscernible] you remember 2 years ago, we're struggling a little bit with Foster's Hollywood. We did an impressive 10.2% in traffic. Vips is performing also great with another 6.5%, Ginos 21%. So I'm always counting just traffic. So I mean, all our units, exception of our Burger King, because some differences become price and delivery, but all our units are doing great in Iberia. I will say it's just Iberia. But Iberia, including Portugal, the results were great in the whole atmosphere. I mean, yes, we grew a little bit less in the Starbucks segment. But all of the rest, I think very confident. The thing is when we close by and put together the Benelux business -- that is a little bit affecting of Europe. But if we exclude just the Benelux business of Starbucks, the rest of Europe really performed very well, very well. I think -- and I'm very pleased with that. And like Federico said, the context there in costs, it's another story, that in energy, it's another story than 2 years ago. So I'm very pleased with the numbers. [ Unfortunately ], the exchange rate does not help us. We had a 19-point-something budget. It's coming at EUR 18.4 per peso. So that is an [ affection ]. But I think in local currency, Europe is doing a good job there.

And to complement Armando's answer, Rodrigo, even with the competitors who are gaining market share, not only in the casual dining segment where we are the leaders with the different brands that we compete, but in the pizza segment, we are gaining market share in the last year in comparison with the 2 players that we had in there. And additionally, regarding the second question, a technical question like you said, both relevant, the difference between the EBITDA margin pre-IFRS and post-IFRS is driven mainly by the devaluation of the Argentinean pesos affecting the leases. That is around 60% to 70% of the deviation of the margin. And additionally, it's the appreciation of the Mexican pesos in comparison with the rest of the currencies. And it's 100% lease effect. The mix of the variable and fixed leases is pretty much the same. So it's only an FX impact.

Also -- I think very important highlight there. So you said you gained market share in QSR in Spain. Is that correct? It's just pizza or just...

In pizza and in casual dining.

Our next question is from Ms. Renata Cabral from Citi.

I have 2 here. The first one is about Starbucks. If you can comment a little bit about the profitability, especially if you can give a comparison between Mexico and in Europe as right now, at least in the first quarter, the brand is facing some boycotts there. How has this impacted and how we can think about that? And the second question is about the loyalty program. You made some commentary and also in the release and I understand this is, at least right now must focus on the Starbucks. Just to understand if this has been rolling out also for Domino's. And also if you can comment something about the Domino's Mania that we know that had a good performance in the first quarter of the year and what is the strategy for the rest of the year? It is a [ punctual ] program or it should be rolled out throughout the 2024?

Thank you, Renata. Regarding the difference between the profitability in Mexico and Europe, well, a usual way of business. The profitability is pretty much the same. The paybacks that we require to the brands and the EBITDA margins that we require on a normal way are pretty much the same. Obviously, when you are facing a decrease so relevant, like the one we are suffering in France, obviously, I cannot give you figures, but we are losing significant percent of points in the EBITDA for [indiscernible]. Having said that, we are not [ quieting ] the pace to open new stores because the profitability of the stores and the white space in France is huge. So we are having a slump in the way. Hopefully, for the second quarter, by the end of the second quarter, we are going to have better figures, better trends in terms of traffic for France. Additionally, we are not only taking actions in the top line for France and for Netherlands. We are doing the job in the productivity in the stores to preserve all the expenses to have an easier way.

Let me tell what we're doing in the whole digital platform regarding. As you know and we mentioned here in March when we saw you guys, we are in the implementation [ SDS Steel ]. And this is going to be all the way longer to the whole year and to the year-end. We are starting with LatAm, Chile, Argentina, Uruguay, Paraguay, already have that. Of course, in France and Benelux and Iberia and Benelux, we already have the ISDS, the POS installed and we are advanced regarding Starbucks Rewards, it's tax for everyone and we are right now utilizing CRM for really personalize the consumer. Regarding Latin America, we don't have the Starbucks program, for example, in Colombia that we have 70-plus stores. That's a little bit -- that's a achievement that is going to be starting in March, in third quarter. So I think that's going to give us another robust. And all the -- I think by the end of the third quarter, starting the fourth quarter, we will have to have the rollout completely for the SDS platform already. So we can -- I mean, [indiscernible] says that we are working right now with Starbucks Reward in Mexico. It's working. We are personalizing customers, but the platform is not as robust as it can be. We are working right now with MOP, Mobile Order & Pay in 2 countries. We started a long, long way to go with that channel that can give us a lot of sales. But also delivery, we're -- 9-point-something percent of our sales in Starbucks are delivery. So that's a great channel that we didn't have 3 years ago. It's increasing for us. The category is not increasing. I will tell you that category is not increasing in all the regions. But we are -- when we see the numbers with our aggregators, we are facing a good increase. So that's for Starbucks. And regarding Domino's, our friends from Domino's were here 2 weeks ago. I'm also pleased to say that we have -- we were named Franchisee of the Year in Starbucks International, Domino's Mexico and Domino's Spain. So that's a good news. And also we are regarding the loyalty program they have in the U.S., that is a loyalty program that is not based in points. It's not a [indiscernible] -- just a rewards program. For every 10 orders that you buy, they give you product free, but you don't have an accountability of the points and you don't redeem and you don't [Foreign Language], you don't accumulate and you don't redeem. We don't have accountability here. I think by the third -- at the end of third quarter, let's see, September, we can plan to launch that in Mexico. I think Domino's Pizza is going to report in the next weeks or something. But I think that that game of loyalty program in Domino's is working very well and we are very bullish to just to jump in that program that is going to give us headwinds regarding fidelity for our customers that nobody else have in this category that kind of rewards program.

I would say, Renata, just to complement what Armando was saying, in Domino's Pizza, we have implemented Domino's Cloud in Mexico and Colombia. And we're planning to do the rollout in Mexico for EPS. So we are, again, kind of moving in the right direction and we will have a much more robust app in Domino's in our markets.

Our next question is from Mr. Felipe Cassimiro from Bradesco.

I have just a couple of questions. So first, I wanted to follow up on the negative impact of the FX losses. Federico mentioned there was a purchase of USD in Argentina. I imagine there's something related to that. I'm just wondering going forward the next quarters, are there any more major movements in this sense of the purchase of U.S. dollars? And the second one, if I may, Gerardo reinforced the guidance in the presentation, Armando as well. But I just wanted to double-check with you because the situation in Argentina is ongoing and it's impacting numbers. So I just wanted to assess what could be the risks in the Argentina operations that would make you change your guidance in 2024.

I can take both of the questions. The FX loss, to be pretty clear, I'm going to explain it. The FX losses we suffer from Argentina became from the conversion in the cash position from the official rate, which was around ARS 850 per dollar to the [ Contado per Liquidacion ] rate, which is more than 50%, 56% of difference in the rate and this supposed MXN 170 million in the consolidated figures you received yesterday. So having said this, this is a one-off impact. Obviously, we will have a cash position during the next quarters, but it is not going to be relevant. You have to think that this cash position became from the last 2 years. So it is not going to be relevant. Additionally, the risk from Argentina, I would say, we haven't considered in the budget and obviously in the guidance that we delivered to you in the Alsea Day. So we maintain the guidance, and we do not expect to have any more risk from Argentina. Do you want to complement?

So I think -- Felipe, I think in Argentina -- and you are closer than me from that country -- things are looking -- when I did the budget in November, we did a very dramatic budget that is included in the forecast. But as soon as we are seeing the numbers right now, things are looking a lot better in the exchange rate, look a lot better in traffic. The inflation you know there is a positive run, 3.2% report yesterday. So I'm a little almost more positive about Argentina future than I was 3 months ago.

Our next question is from Mr. Fernando Herrera from Compass Group. Our next question is from Thiago Bortoluci from Goldman Sachs.

Congrats on the results. I would just like to explore a little bit more the SG&A dynamics, particularly in Mexico, right? When I try to infer here the SG&A ratio that you printed in the region, I see a slight improvement year-over-year, like 10 basis points improvement. And this is in a context when we're seeing a significant increase in the minimum wage, right? So my question is, with all the efficiencies, operating leverage that you expect going forward, couldn't we see even room for slightly better profitability and lower expenses going forward once you digest this new payroll structure?

As we said in the outset, obviously, it's not a good news to have increases in the minimum wage, but we think we have some kind of levers to increase the productivity into the store. I want only to remark because some of the notes that see after Alsea Day, that is not a good news. We have around 60% of our employees linked to the minimum wage. And obviously, we are trying -- we are accomplishing with [indiscernible]. That's the first part. And the second part, we are trying to improve the productivity into our stores. We think we have room to do it, but this would have in case we have this perpetuity rate, this would impact the final customer. It is not happening right now. We are preserving the same kind of service and we have excellent reviews from the customers, but we are not seeing an impact on the P&L as we said on the Alsea Day.

I would say, Thiago, to complement on that one. We mentioned in the previous quarter that we were making some, let's say, rollout in Burger King in Mexico of flexible hour week for employees. That worked well. That is now amplified to other regions. So let's say, the experiment that we're doing is a little bit bigger today. And we're also looking for doing this at the Domino's Pizza as well and the same for Starbucks. So we're adding a little bit more of analysis behind it so we're prepared for that. And as you know, we already have some labor markets or intensive labor markets that we operate today, such as Spain or Chile. So we're used to it and we should adapt relatively easy in Mexico, hopefully.

No, that's clear. And if I may, a quick follow-up also in Mexico. The elections are just kicking in. And obviously, we are seeing more incentives being deployed in the economy, right? To this point, are you seeing sequentially better demand and even same-store sales moving? I know the comps, but should we expect sequentially better momentum for traffic demand and consumption into the second quarter?

They were yesterday [Foreign Language] 2 weeks -- a week ago. They put a little bit upscale, above 1.4 to 2.6 about a growing Mexico. We didn't see anything, any movements yet. Right now we are comparing with Semana Santa a year before. So of course, this is not a very well comparison. But now we are going to go there. There's now next 15 days, for us, the week of [ Trainta Abrili ] is very strong, Dia el Nino here and then comes Mother's Day, Father's Day. So a lot of things are coming. And I think the economy -- yes, we see some resources and better resources in next 50 days for the elections and any 6 years here, there's more resources and money in the pockets of the consumers. But we needed -- to be honest with you, that we are seeing some other changes or minimal and other changes, we are not.

Yes, it's favorable for the country and we think it's favorable for Alsea.

Our next question is from Luis Willard from GBM.

Congratulations on another strong quarter. I wanted to go back to Renata's question about loyalty and pick your brains about -- I mean, you're already doing around 1/3 of sales on e-commerce or digital sales, let's call it digital sales. And also a significant portion of it, especially in Starbucks, is related or is attached to the loyalty program. So the question in particular is, as you roll out loyalty in Domino's and you continue to evolve loyalty in Starbucks, where do you see it moving forward in terms, not only in penetration, but in terms of monetization, in terms of all the added value that you can extract from having successful loyalty programs? Basically, the question is, where do you see it now and where do you see it going 5 years forward?

I mean you are very right. This is the key of the game, how we monetize that consumer in all the ecosystem of Alsea in Club By, that is very -- Club By with Fosterianos, Club Vips and Ginos has a big, big platform in Europe, better than the one that we have in Mexico. What are we doing in the Domino's and what do we do? I mean Domino's has more than 30% of digital sales. I mean, remember that we do their aggregators. Also, we do the -- now our app, that is very strong. So I mean, Starbucks, as is Domino's, are strong as digital sales and our Burger King with a digital kiosks are also going to be part. So yes, you are right, 1/3 of our sales are there and I think by the end of the year, probably can be 50% of our sales can go by digital. And like I said, that is also the cost of labor. Like we said, that gave us a lot free [ expenditure ] for that. Right now what we need to do is -- and we -- I would like to show you the next quarter is how we are processing the heavy, light and medium users and how can we get the light users to change to medium, how the medium user can go to high user, what is the frequency in each level, what is expenditure in each level and how we can pass one level to the second level to the third level in order to have more frequency with those consumers. All the stumps that we've been doing in the glasses or in the new initiative of merge with Starbucks, we've been very successful. Now every time we do a stump, we do a new promotion with all those Stanley cups or other cups, it's just an amazing success that we have. So we are a partner also with Starbucks and other third parties to understand better how can we monetize those consumers in order to purchase with more frequency, better ticket. And also, they have to have more incentives. If you are a gold member in Starbucks, you can have those Stanley cups before other ones. And that makes you be part of our loyalty program. So we are doing a big segmentation in order to gain more momentum for them and a better -- and being more loyalty to our brands.

Yes. That's very interesting, Armando. And looking forward for next quarter to see that.

Our next question is from Mr. Fernando Herrera from Compass Group.

Sorry, the last time I couldn't unlock my mic. Here, just a couple of questions. First one is a quick follow-up on energy prices in Europe. As you mentioned, you're seeing levels, pre-pandemic levels, in terms of energy prices. So just wondering if you have some plans to hedge at these prices. That will be the first one.

Okay. Usually, we have not hedged any kind of commodities, only the FX for the U.S. dollar raw materials. We are waiting for the best moment because we do not want to close our financial hedge. We want to have a fixed contract with some of the generators, but they are not willing to close 2-year contracts. They want something like 10 years. And I think it's too risky for the company. And honestly, with all the injection of renewable sources in Europe that it has been implementing since 3 years ago, we think the prices are going to improve in the next 6 to 12 months.

Okay. And the second one is related to the huge cash outflow we're seeing related to the minority, to the noncontrolling stake. I suppose that this is related to the Europe acquisition of the rest of the part of the business. So I mean, I have in my mind that this operation will take place by the end of this year and a small part in the first part of 2025, right? So -- yes.

Okay. The acquisition, as we mentioned in the previous video conference call, we bought the 3 minorities, Bain, ProA Capital, and the [ Arango ] family, well, [ Analia Capital ], partially with a bank loan and cash. We have closed the deal. In fact, Alsea, as of today, have the 100% of the European entity. The acquisition was, as we said, EUR 238 million and we have paid around EUR 150 million and we will pay the remaining part, the EUR 90 million, in the last quarter and in the first quarter of '25.

Okay. Super, super clear. And here, I'm just wondering, I mean, you have the optionality to pay with a stake of Alsea, right? So I mean, do you have plans to do that? Or will it be more driven with cash and more debt?

No, as I said, we are paying with cash and debt. We do not see pay with shares as an option. I think -- we think it is not a good option for the shareholders and we will do with the mix I just commented.

Our next question is from Mr. Jorge Izquierdo from BTG Pactual.

My first question is on mozzarella in Mexico. Could you please share an update on where you are in terms of mozzarella needs for the future? And my second question is related to your guidance. Could you please remind us your implied FX assumption for the Mexican peso? Congrats on the results.

I think in cheese, Federico, we have good news because the cheese -- I mean, right now with exchange rate of MXN 17, there's a great news. And then cheese prices are in the lowest ever. So we have a stock all the way to October, November. And actually, last month ago where vendor was here, we're going to see another opportunity to get there. So I think that is one of the most things that move the needle regarding our supply chain. So that is going in headwinds for us. That's -- we are not hedging, but we are controlling the future of the purchasing for the end of the year in order to have consistency in our platforms of value for Domino's. And then...

The second question, the guidance, when we prepare the budget and the guidance to you guys, we did it with different FX. Obviously, the appreciation of the peso at the end of the day is good for the company, but this is not having a crucial effect for the guidance we gave to you 1 month ago. So we will maintain the guidance. And honestly, the only way to change it is if the peso goes to MXN 13 per dollar. But we do not see that happening.

And I would say, Jorge, just to give you a little bit more details on the exchange rates, the ones that we were looking at the guidance were, let's say, roughly MXN 17.8 to U.S. dollars and in euros, roughly [ EUR 19.5 per dollar ] -- per peso, sorry.

That was the last question. I will now hand over to Mr. Armando Torrado for final comments.

Once again, I would like to thank you. Thank you very much for joining our quarterly video conference. As always, if you have any further questions, please contact us, our Investor Relations team. Wish you have a great day and thanks for connecting today. Thank you.

Alsea would like to thank you for participating in today's video conference. You may now disconnect.