Becle, S.A.B. de C.V. (CUERVO) Earnings Call Transcript & Summary

Good morning, and thank you for joining Becle's Fourth Quarter Unaudited Financial Results Call. During this call, you may hear certain forward-looking statements. These statements may relate to our future prospects, developments and business strategies and may be identified by use of terms and phrases such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, goals, target, strategy and similar terms and phrases and may include references to assumptions. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those in forward-looking statements. For all the foregoing reasons, you are cautioned against relying on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Before we begin, we would like to remind you that the figures discussed on this call were prepared in accordance with International Financial Reporting Standards, or IFRS, and published in the Mexican Stock Exchange. The information for the fourth quarter of 2024 is preliminary and is provided with the understanding that once financial statements are available, updated information will be shared in the appropriate electronic formats. [Operator Instructions]. Now I will pass the call on to Becle's CEO, Mr. Juan Domingo Beckmann.

Good morning, everyone, and thank you for joining us today as we discuss Beckle's fourth quarter and full year 2024 results. Before our regional directors and CFO take you through the details of our results, I'd like to offer some perspective on the year and our broader position as a company. It's been a year of navigating challenges across our key markets with widespread market contraction affecting the entire value chain. We've seen increased pressures from the -- from macroeconomic factors and evolving consumer trends, which have led to competitive pricing dynamics and inventory adjustments across regions. Despite these headwinds, we were able to deliver robust financial performance in 2024, backed by our decisive and strategic actions that have strengthened our position for the year ahead. In the U.S. and Canada, we maintained our position as price leader throughout 2024, while we leverage promotional programming selectively. We remain disciplined in protecting long-term brand equity and prioritize premiumization. In Mexico, we also made solid progress in executing our premiumization strategy, driving market share gains while benefiting from early signs of market recovery. Meanwhile, despite weak consumer confidence in EMEA and APAC, we sustained depletion growth supported by key markets and our premium portfolio. Our premiumization strategy remains a core driver of long-term growth and value creation. Tequila continues to be a standout performer versus other categories, and our strategic pricing initiatives have helped us maintain or expand market share by the end of the year across most regions. As we enter 2025, we remain committed to protecting and expanding these gains. We also saw strong operational performance with gross margin expanding by 280 basis points and EBITDA margin improving by 370 basis points in 2024, driven by favorable raw material trends, productivity improvements and foreign exchange benefits. Additionally, we delivered tangible cash flow conversion and ROIC improvements through optimized supply chain management. While Cuervo remains the dominant force in most major tequila segments around the globe, we remain confident on our brand portfolio and our capability to capture untapped opportunities. In an evolving market, innovation and strategic marketing will be key to capturing additional and profitable market share and strengthening our long-term position. Moving forward, continuous improvement remains a key priority, especially as we navigate through volatile industry and macroeconomic conditions with a clear strategic vision, strong focus on execution and a deep commitment to growth. We are confident in our ability to deliver sustainable value in 2025 and the years ahead. Thank you. And with that, I'll turn it over to Luis Felix to discuss our U.S. and Canada results.

Thank you, Juan, and good morning, everyone. Please note that the figures shared in today's remarks are presented on a constant currency basis. The U.S. and Canada region faced a dynamic environment in the fourth quarter as we took deliberate actions to rebalance trade and distributor inventories. Net sales value declined by 21.3%, primarily driven by lower shipments versus a minus 8% decline in depletions. However, when excluding RTDs and Margarita Mix, depletions declined by 6.2%, highlighting the disproportionate impact of RTD declines, which accounted for 1.8% of our total depletion losses. While year-end inventories remain slightly above historical norms, our disciplined approach to managing shipments and working closely with distributors have positioned us well for 2025, even as some destocking effects may persist in the first half. Our fourth quarter performance reflected a combination of industry-wide headwinds and proactive commercial decisions. To support distributor destocking efforts, we adopted a measured approach to shipments, ensuring better alignment with full year depletions. Importantly, we remain a pricing leader throughout 2024, maintaining a disciplined approach while competitors took more aggressive measures. We leveraged promotions selectively, ensuring long-term brand equity remains intact. From a competitive standpoint, our portfolio is outperforming key industry benchmarks. According to 13-week Nielsen data for the period ending January 4, Proximo grew dollar sales by 1.8% in full strength spirits category, while the overall spirits industry, excluding prepared cocktails, declined by 0.3%. We're also gaining share in the on-premise channel where SipSource data shows we outpaced industry trends by 2% in Q4. Proximo continues to benefit from improving tequila trends, leading to slight share gains when executing -- when excluding prepared cocktails from total spirits. Meanwhile, the RTD category continues to present challenges. With category growth concentrating in small formats, we are currently under indexed. To address this, we plan to increase innovation efforts with RTDs in 2025 to stabilize declines. Looking ahead, we are taking proactive steps to manage the complexities of 2025. Our focus remains on strengthening our market position, optimizing portfolio mix and executing our long-term commercial strategy. Additionally, we're closely monitoring potential tariff developments. And while our CFO will provide further details, we are prepared to navigate any challenges effectively. I will now turn the call over to Olga Limon to discuss the Mexico and Latin American results.

Thank you, Luis, and good morning, everyone. The Mexican market remains challenging with macroeconomic pressures driving a contraction across the spirits industry. However, the second half of 2024 improved over the first half as the industry volume contraction slowed from high single digit in the first half to low single digit in the second per [ NIScam ] data. This provides cautious optimism as we move into 2025. We had an encouraging fourth quarter with a stronger performance marked by a smaller decline in shipments of just 1.4% and a 2.8 percentage increase in net sales value and improved depletion trends. As we currently command a significant share of the spirits market by volume and value, our efforts not only bolstered our results, but also contributed to broader industry stability during the second half. Within the industry, the tequila category outperformed the overall spirits industry, favoring Cuervo. In this category, we strengthened our competitive position and expanded our market share throughout the year. Premium brands were a key driver of this success, leading to a 4% increase in price per case for the quarter and a 3% rise for the full year. During the first 3 quarters of 2024, depletions consistently outpaced shipments as retailers adjusted inventories in response to softer demand. By Q4, our shipments and depletions were more closely aligned with the market contraction, and we ended the year with healthier inventory levels. In the second half of 2024, we also observed a gradual return to typical seasonality patterns, aligning with consumer demand. This period has historically carried significant weight in terms of volume and sales. We expect 2025 to reflect a similar seasonality structure, supporting more normalized performance over the year. In Latin America, inflation and political uncertainty continued to weigh on the region. While shipments improved in the fourth quarter, depletions registered a slight contraction. We anticipate challenges to persist in 2025, but we believe our strong brand equity positions us to navigate these dynamics effectively. As we enter 2025, we remain cautiously optimistic for both Mexico and LatAm regions. Despite volatile market dynamics, the signs of recovery and our strategic initiatives position us favorably to maintain our market leadership. We remain focused on leveraging our premium portfolio and meeting evolving consumer demands to sustain momentum through 2025. I will now turn the call over to Shane Hoyne, Managing Director of EMEA and APAC region. Thank you.

Thank you, Olga, and good morning, everyone. In 2024, shipments in the EMEA and APAC region declined by 5% compared to 2023, while depletions rose by 2%. Net sales remained stable, reflecting the continued premiumization of our portfolio. While the region faced persistent trading challenges, strong momentum in priority markets helped offset pressures in others. Tequila continues to be a key growth driver with premium offerings gaining traction across the region, reinforcing the long-term opportunity in this category. Additionally, consumers in developed markets continue to gravitate toward well-known and accessible premium brands supporting our broader portfolio strategy. Throughout 2024, consumer confidence remained fragile with Q4 purchases reflecting continued caution. Intense price discounting was particularly evident from our competition in selected markets during November and December. Additionally, our distributor working capital constraints and destocking efforts further weighed on shipments. Ongoing conflicts in Eastern Europe and the Middle East continued to disrupt business operations through the end of the year. With these challenges, the EMEA and APAC region showed resilience, supported by stable macroeconomic conditions in key markets and ongoing category momentum. Looking ahead to 2025, we remain optimistic with Tequila continuing to show significant volume and value growth potential across multiple markets. Our portfolio strength and established route-to-market strategy position us well to capitalize on these opportunities as we anticipate sustained growth across the region and further expansion opportunities. I will now pass over to Rodrigo, who will take you through the financial results.

Thank you, Shane, and good morning, everyone. I will now walk you through the financial results for the fourth quarter and full year 2024. In the fourth quarter, the company reported consolidated net sales of MXN 12.9 billion, reflecting a 2% decline year-over-year. This result was unfavorably impacted by the year-end inventory rebalancing effort in the U.S., partially offset by a strong rest of the world and Mexico regional performance, plus an FX advantage. Excluding the ready-to-drink category, net sales declined by only 0.3% in Q4. EBITDA for the fourth quarter increased by 11% year-over-year to MXN 2.7 billion, with the EBITDA margin expanding 250 basis points to 21%. This result was driven by: one, a 54% gross margin, which expanded 150 basis points compared to the same quarter last year despite unfavorable geographic mix. The highest margin region, the U.S., saw a steeper volume decline than other regions, reducing its relative contribution to net sales value from 56.5% in Q4 of '23 to 49.6% in Q4 of this last year's '24. However, this was more than offset by benefits from lower agave-related input costs, productivity improvements across our supply chain and favorable FX. And second, operating expenses efficiencies across the middle of the P&L, including distribution and nonworking A&P, which contributed another 100 basis points to margin expansion despite increased investments on IT and organizational capabilities. Net income for the quarter was MXN 1.5 billion, benefiting from a retroactive full year effective tax rate reduction to 24%, which was booked in Q4. This was offset by a MXN 707 million year-over-year swing in foreign exchange within our financing results from the depreciation of the Mexican peso, which negatively impacted our net U.S. cash exposure. Excluding this effect, net income for the quarter would have resulted in a 19.1% increase. Cash flow generation for the quarter remained robust at MXN 3.5 billion with a strong cash conversion rate of 96%, reflecting our continued focus on optimizing working capital investment. As of December 31, 2024, cash and cash equivalents reached MXN 10.7 billion, an increase of MXN 4.3 billion compared to the previous year, while total debt amounted to MXN 26.5 billion. In 2024, the company generated MXN 11 billion in net cash from operating activities, a MXN 10.1 billion improvement compared to the MXN 921 million generated in the same period of the previous year. These results were driven by inventory optimization efforts and sustainable extensions of supplier payment terms, all of which significantly improved the company's free cash flow. Over the past year, we've also made significant progress in reducing our lease adjusted net debt ratio from 2.8x to 2.1x, bringing us slightly below industry standards. This enhanced financial condition and flexibility will allow us to reduce further debt and increase funding capability for strategic investments going forward. Overall, and despite industry challenges, our full year financial results were top tier within the industry. While NSV declined by 0.9% in the year, we achieved a 280 basis points expansion in gross margin to 53.5%. We delivered 21.7% EBITDA growth for the year and improved our EBITDA margin by 370 basis points to 20.2% from 16.5%, triggering a notable 90 basis points improvement in ROIC versus last year, plus we delivered an improved cash conversion rate that enhanced our liquidity and debt-to-EBITDA ratios. Before providing our guidance for 2025, I want to briefly address the possible impact of upcoming tariffs, which have been put on pause until -- at least until March 4 and remain uncertain. Assuming tariffs are implemented in March, we would be on a favorable position as we have proactively increased inventories in the U.S. through anticipated intercompany shipments from Mexico and Canada. All else equal, we estimate the impact of these tariffs to be approximately $80 million in 2025, assuming no mitigating actions through pricing, operational efficiencies or currency effects. Now moving on to 2025 guidance and subject to FX fluctuations, we expect to deliver full year net sales value growth of mid-single digit versus 2024 and A&P as a percentage of net sales value to be in the range of 20% to 22%. On the CapEx front, we expect 2025 CapEx to be in the range of $110 million and $130 million for the year. And it is important to note that this guidance does not factor in any potential tariff impacts. While we expect gross margin to be enhanced in 2025, we will maintain a cautious approach as we navigate through uncertainties. By adhering to this comprehensive framework, we remain committed to effectively navigating market challenges, while driving sustained growth and value creation for our stakeholders. We are confident in our ability to deliver both short-term results while staying focused on our long-term strategic priorities and sustainable improvements. I will now turn the call back to the operator for questions-and-answers session. Thank you.

[Operator Instructions]. Our first question comes from the line of Lucas Mussi.

Lucas from Morgan Stanley. I have 2 quick questions. The first one is on gross margins and costs, if you will. So I just wanted to see if you could provide us with more color on the drivers behind the gross margin performance in the fourth quarter. I recall that on -- I think it was on the second quarter, on the third quarter conference call, you stated that about 100-plus of gross margin improvement came from weaker FX and you also had 100-plus coming from lower agave, which was an evolving tailwind for Cuervo. Since you delivered a 54% gross margin in the fourth quarter, which was about 100 bps better than the third quarter, how do you see -- how do you define the drivers, especially on a quarter-over-quarter basis or on a year-over-year basis, that helps as well in the context of better agave tailwinds, FX tailwinds, but at the same time that you had a more unfavorable geographical mix, especially in the context of declining volumes in the U.S. So that's my first question. Sorry for the long explanation. And the second one is in the U.S. I just wanted to hear more about competition. I understand that you guys resorted to a little bit of more discount activity in the last couple of months, both on the Jose Cuervo Especial line and also on 1800 products. So just wanted to get your sense if you now feel comfortable with the level of pricing that you have implemented, how sales, how customers have been responding to your new pricing activity and how competition has responded as well. So I just wanted to see if you could share more color on competition.

Yes. Thank you, Lucas. This is Rodrigo. Regarding your first question, I think you captured the components quite well. We're clearly still benefiting from lower agave costs overall. And we have to -- we do have the benefits of FX within that. But as you well mentioned, there's also the component of unfavorable mix, mostly related to the lower contribution the U.S. had this quarter for us as well as some product mix as well, which includes a little bit of the price adjustments that you referred to. So overall, I mean, the margin expansion was pretty solid. Potentially, it could have been better if you go back to, let's say, the normalized regional mix we have. And so those are the key components, and we feel pretty good about the result in terms of gross margin improvements so far.

Thank you, Lucas. And in the case of your second question in terms of more about competition and what we're doing in Cuervo Especial and 1800. We believe that the actions -- we took some tactical actions in both brands in specific markets. And what we're seeing is that it is having a positive impact, and that is basically from what we saw in Nielsen -- in the last Nielsen data. We grew dollar sales by 1.8%, while the total category in the industry was basically flat. We are seeing also more aggressive environment in terms of pricing. In a 52-week basis, Nielsen ended, the total industry is declining 1.9% in prices and eroding further in the 13 weeks to 2.2%. So we believe that the pressure in pricing will continue, but we also believe that both brands are reacting positive to the tactical adjustments that we implemented.

Our next question comes from the line of Ben Theurer.

This is [ Rami ] on for Ben from Barclays. So we kind of -- our first question would be about remarks that you made for the U.S. You said destocking could persist in the first half. What gives you confidence that this will not continue into 3Q and on? And also maybe if you have any tidbits of color on how 4Q went in terms of destocking in the U.S., maybe some examples and how 1Q is coming through?

Thank you, [ Rami ]. Yes, in the case of the U.S., let me try to explain what happened in Q4. So we started the year and we were optimistic after the first half of the year. Our depletions for tequila were up 2.3% and our shipments were up 11%. That's on the first half. And then starting in June, we started to see -- experience significant headwinds driven by a combination of macroeconomic headwinds, inflationary pressures and also the normalization of the post-pandemic world that continued. So we started to see in Q3 some deceleration in depletions. In Q3, depletions in tequila decelerated by 5.2%, and our shipments grew 4%. So what we face in Q4 is we have higher inventories in our distributors and depletions continue to underperform. So we took a deliberate action to try to normalize the depletions through our shipments. And in the month of December, we adjusted, we shipped 900,000 cases, and we depleted 1.4 million. So we adjusted almost 500,000 cases to get through a level of inventory with distributors, which is more -- now on a more normal ways. The depletions in the fourth quarter, we experienced some headwinds in 2 of our biggest brands in terms of depletions decelerating double digit. But when you look at the other 5 brands that we have in tequila, in aggregate, those 5 brands grew 13% in depletions compared to the previous year. So we -- yes, we're seeing some negative effect, but we -- basically, we took more an approach to try to not mortgage the 2025 year and adjust it in the fourth quarter.

And [ Rami ], this is [ Bryan ]. If I may very quickly, remember that shipments and depletions are normally misaligned throughout the year, and we try to align them on a full year period. So if you see historically since 2019, the quarters normally have mismatch. So we don't see a straight line between shipments and depletions and then try to balance that out in a full year period. And also remember that shipments are forward-looking. So we work with distributors to try to understand what demand will be. And that basically ends up being what we ship to distributors. If that's not the case, we try to adjust throughout the year to get to a more normalized number of inventory at a distributor level. So that's what we're expecting into 2025.

Our next question comes from the line of Tiago Harduim.

I would like to touch point here on a couple of things. So the first one on the guidance. If you could give us some additional information on the assumptions, that would be very interesting for us. So first, I understand that naturally the FX is very important for you guys. So I would like to understand if you can open to us what level of FX you're assuming to 2025? And also on the sales comment, just wondering whatever additional information you can give us on like geographies and performance of sales versus pricing, what you're thinking ahead for 2025? And the other thing, you guys made a very interesting comment on the -- if I'm not mistaken, ready-to-drink in the U.S. and how the consumers are shifting more towards smaller formats, right, and that you might need some innovation to try and work with that. So just wondering if you can give us any additional information on like changes in mix, pricing, margins, investments, just to try and understand -- just for us to try and understand the impact this can have on financials for 2025. That's it from my side.

Yes. Thank you, Tiago. So regarding guidance, we're not comfortable at this point in time, given all the fluctuation that there is and could be going forward, in particular with the FX to disclose that. But we -- what I can tell you is we plan conservatively from an FX perspective. In other words, there's not much -- too much of FX benefits embedded into the guidance. But again, we remain cautious. And given the level of uncertainty we have in the market right now, uncertainties, not only from the market perspective, but from tariff perspective, and we'll know shortly how that moves. And so we'll be ready to provide more clear, let's say, guidance going forward as soon as some of these uncertainties are eliminated. And so regarding your second question in terms of geographic improvements, well, we continue to obviously pursue growth as a company. And -- so regarding guidance, again, just for -- to reinforce what I mentioned previously, guidance for the year at this point in time and given the uncertainties that I've already mentioned, we remain committed to mid-single-digit NSV growth. And so that's the basis for -- at this point in time that we can share. In terms of geographic opportunities, we have -- we see sort of a balanced approach. But of course, some growth markets within the EMEA and APAC region are providing also some good tailwinds in terms of growth opportunities relative to the U.S. and Mexico regions, okay? So, regarding RTD.

Yes. In the case of -- Tiago, in the case of RTDs, basically, we're doing a couple of things. In the ready-to-serve business that we have, which is the largest part of our RTD business, in ready-to-serve, we're working on innovation and new flavors. We're also working in increasing A&P spending because we know that tasting and liquid to lips, it helps a lot. So we're increasing the spending to improve there. And on the ready-to-drink in the small formats, we do have sparkling margaritas and some products in cans. So we're basically addressing pricing in that SKU. We're also including more activities in national accounts and implementing additional like a new 4-pack for sparkling. So yes, we're taking -- we basically want to stop the declines that we have in the ready-to-serve and being more active in ready-to-drink.

Our next question comes from the line of Antonio Hernandez.

This is Antonio Hernandez from Actinver. Overall, what are the trends that you're seeing in 2025 so far, especially in the U.S. and Mexico? I mean you already mentioned some of those, but if you could provide a little bit more color as well on the solid sales growth of nonalcoholic, if that's a trend that you're seeing and maybe you're reacting in terms of innovation as well. Any color that you can provide on that would be very helpful.

Thank you, Antonio. We believe that 2025 will continue to be a challenging year. Just the projections that we got from SipSource, which is a very credible source of information, the projections that they have is a negative performance for the industry. However, when you look at tequila, they're projecting to grow tequila industry by 1.7. So I think with the size of our tequila business and the weight that tequila has on our portfolio, we're confident that we have some opportunities to improve. However, we continue to -- I think the headwinds will continue to be. And of course, if tariffs are implemented, then a lot of things will change. But it's going to be an interesting challenging 2025.

As for Mexico, as we've said before, tequila is outperforming the industry. So we continue to think this will happen. And we will focus our efforts on maintaining our market position with a conservative growth outlook. And we are seeing a less confident and more cautious consumer. So we will be assessing the market on a brand per brand basis and our portfolio as well.

Okay. And does this include maybe some opportunities in nonalcoholic, for example, I mean, given the solid sales growth, is there anything else that you could provide on that?

Not really. It's too soon to tell. I think there's a lot of volatility in the market. And I think that our core business is performing better than the industry. So we'll continue to focus on that.

Antonio, this is [ Bryan ]. Just very quickly. Nonalcoholic isn't the main priority within the company. I mean it moves volumes a lot, but it's not really too large in terms of net sales. So we're focused on net sales here within the company. So our priorities continue to remain within premium tequila, premiumization within the company. So I wouldn't focus too much on nonalcoholic.

Our next question comes from the line of Fernando Olvera.

Fernando Olvera of Bank of America. I have 2 questions. The first one is on the EBITDA. If you can comment more about the onetime contractual benefit related to the former brand ambassador agreement? And what would have been the growth of EBITDA if you exclude such onetime? And my second question is on taxes. If you can explain the 17% tax rate of this quarter and what tax rate should we expect this year, it would be great.

Fernando, this is Rodrigo. Regarding your EBITDA question, I don't have the exact number to share, but it was -- if you look at A&P, it provided some relief for the quarter. And that's -- within the year, that should not take effect. In other words, this is simply a reversal of some A&P that we were reserving for throughout the year. So it doesn't really move too much the needle from a full year perspective. And on a tax basis, it's simply the adjustments that we do, final calculations on a tax perspective on an effective tax rate as we close the year. So taking advantage of some of the inflationary adjustments that are done at the end of the year.

Okay. And for this year, Rodrigo, what tax rate should be -- in which tax rate should we think given that you have registered a 24% tax rate in the last couple of years versus the 27%, 28% before?

We should expect perhaps a little -- we should expect a tax rate closer to 26%. So that's sort of our planning base at this point in time.

Our next question comes from the line of Felipe Ucros. Our next question comes from the line of Lucas Mussi.

It's a quick one this time. Just wanted to hear more about what are you thinking in terms of how to potentially offset an eventual case that tariffs end up being implemented? I know that you guys disclosed how much you are calculating in terms of potential impact on a stand-alone basis, but just wanted to hear more on how are you planning to potentially mitigate if that ends up taking place in the next couple of days?

Thank you. Of course, Lucas. We've been working -- we continue working on our plans. And as I mentioned before, I mean, it won't be different than what I said before, which is there's mostly 3 components, and we'll have to see what competitors are also doing in this sense. And the good news is that we've gained a little bit of time as we've shipped some product -- incremental product into the U.S. So -- but it will be a combination of perhaps P&L efficiencies, some pricing that would perhaps have to be transferred into consumers. But the big question, again is what will happen to FX. And so -- which could potentially be an important component of that offset. So those are current thinking and potentially the ways in which we will manage to mitigate and try to offset most of that impact.

Our next question comes from the line of Felipe Ucros.

This is Filipe Ucros from Scotiabank. Two questions on my side. So the first one, I was wondering if you guys could talk in a little bit more detail about the lower pricing that you're seeing in the U.S. I know it's been relatively selective and only a small percentage thus far. But I'm wondering if you could kind of discuss what trends you're seeing in sort of the discipline of industry participants. And if discipline is breaking with the big players or if it is with the smaller players in the industry. Just wondering if you can kind of give us a little detail about how that discipline is breaking. And then my second question, I'm wondering if you view what's happening with the industry as a little bit of an opportunity. Obviously, your leverage is down quite a bit in the last few quarters. And I know we've discussed how most of the land that you have in Mexico is leased for the production of agave and your verticalization. Is this an opportunity that gives you a chance to reassess whether you might want to purchase land if there's distress in the agave sector? And also on M&A, right, when you guys did the IPO, in the beginning, the idea was to kind of take advantage of M&A, and we really haven't seen a lot in the last few years, price or valuations have been very high in the industry. I'm not sure if this is a moment where you're seeing those valuations starting to get more reasonable and perhaps a moment where you can pull the trigger.

As it relates to the pricing question, we are seeing this across the market in the U.S., whether it be small, medium or large-sized suppliers, we have seen consistent price reductions through not only FOBs, but also promotional pricing within the syndicated channels. We have taken a very measured approach in H2 to be a lot more selective in key markets and DMAs to ensure that we are within the pricing of the competitors that we deem across our competitive landscape. We think this is going to be a structural change as it relates to the way that large, medium and small suppliers look at pricing long term, but we also believe that we need to be a pricing leader. We have been taking less price reductions and promotions consistently across our entire price pack architecture, and those trends will continue in 2025.

Regarding agave, it's -- we don't plan to buy land. It's better to lease land, it's cheaper. So that's our -- the way of going forward, and that's the way we have been administrating our agave business. And regarding M&A, we always analyze brands. And if there's anything interested, we will see if we can buy it. But as of today, we haven't seen anything that makes sense.

We have not received any more questions at this point. You may now disconnect. Thank you.