Arca Continental SAB de CV (AC) Q1 2023 Earnings Call Transcript

Arca Continental SAB de CV  (NYSE:AC)Q1 2023 Earnings Call  dated Apr. 27, 2023

Corporate Participants:

Melanie Carpenter — Investor Relations

Arturo Gutierrez Hernandez — Chief Executive Officer

Emilio Marcos Charur — Chief Financial Officer

Jose Borda Noriega — Chief Commercial and Digital Officer

Analysts:

Ben Theurer — Barclays — Analyst

Fernando Olvera — Bank of America — Analyst

Thiago Bortoluci — Goldman Sachs — Analyst

Alvaro Garcia — BTG Pactual — Analyst

Luis Willard — GBM — Analyst

Lucas Muse — Morgan Stanley — Analyst

Presentation:

Operator

Good day everyone and welcome to today’s Arca Continental Conference Call. A [Operator Instructions]

I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Melanie Carpenter of Ideal Advisors. Please go ahead.

Melanie Carpenter — Investor Relations

Thank you, operator. Good day, everyone, and thanks for joining the senior management team of Arca Continental this morning to review the results for the first quarter of 2023. The earnings release went out this morning. It’s available on the company website at arcacontal.com in the Investor Relations section. It’s now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutierrez; the CFO, Mr. Emilio Marcos; the Chief Commercial and Digital Officer, Mr. Jose ‘Pepe’ Borda; as well as the Investor Relations team. They’re going to be making some forward- looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release. Arturo Gutierrez; the CFO, Mr. Emilio Marcos, the Chief Commercial and Digital Officer, Mr. Jose Pepe Borda; as well as the Investor Relations team. They’re going to be making some forward-looking statements and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release for guidance. And with that, I’m going to go ahead and turn the call over to the CEO, Mr. Arturo Gutierrez, who is going to begin the presentation.

So, please go ahead, Arturo.

Arturo Gutierrez Hernandez — Chief Executive Officer

Thank you, Melanie, and good morning, everyone. Thanks for joining us this morning to discuss the results for the first quarter. Let me begin by saying that I’m pleased to report that we had a positive start to the year. We delivered promising first quarter results, achieving solid topline performance and volume acceleration, while continuing to exercise cost discipline. Total consolidated volume grew 4.2% to reach 64 million unit cases. Net revenues grew 10%, reaching MXN5.7 billion. On a currency-neutral basis, net revenues rose 17.9%. Consolidated EBITDA for the quarter grew 12% to MXN9.6 billion, representing a margin of 18.8%. On a currency-neutral basis, EBITDA increased 19.6%.Moving over to the result from our various markets, let me begin with Mexico, where we sustained strong volume performance. Our unit case volume, not including jug water, grew 5%, reaching 245 million unit cases and cycling 3.5% from the same quarter of the previous year. This is the highest volume increase registered in the first quarter period since 2017. Volume growth was broad-based across our portfolio, driven by solid performances in sparkling beverages with 4.2% and water at 12.2%. It’s worth noting that the sparkling category represented over 75% of total volume growth as Brand Coca-Cola maintains its growth momentum, up a healthy 4.9%. Growth was mainly driven by new affordable package options and ongoing flavor innovations. Furthermore, all channels grew during the quarter, led by modern trade with double-digit growth due to the expansion of SSD dual packs in supermarkets. The on-premise channel also continued with its positive trend, growing by 11.2%.

Nonetheless, we are confident that there is upside potential in the leisure and at-work segments, which haven’t fully recovered to pre-pandemic levels. Total net sales in Mexico rose 18.4% in the quarter reaching MXN21.7 billion, marking the 27th consecutive quarter of net revenue growth. The average price per case in Mexico in the quarter, excluding jug water, rose 10.9%, reaching MXN80.83. EBITDA increased 18.9% to MXN4.7 billion in the quarter, representing a margin of 21.8%. This marks the 17th consecutive quarter of EBITDA growth and continues to demonstrate the strength of our beverage business in our flagship market. We’re also making significant progress with our AC digital B2B commercial platform, which has reached over 78% of our traditional trade customers. At the end of this quarter, over 40% of our volume was captured through this platform. Additionally, this quarter, we launched Jack Daniels and Coke as part of the plan to capture a share of the alcoholic ready-to-drink market. These premixed cocktail brings together two iconic brands and joins our small but growing portfolio of flavored alcohol beverages, including Topo Chico Hard Seltzer and Lemon Dou. Let’s shift our focus to South America, where our beverage business continued its upward momentum, resulting from a strong performance across all our markets. Total volume was up 6.4% in the first quarter, reaching 165 million unit cases and cycling strong double-digit volume growth in 2022. Total revenue was up 2.8%, reaching MXN10.6 billion, while EBITDA for the quarter decreased 3.8% to MXN2.2 billion, representing a margin of 20.3%.

As for Peru, large portions of the country continue to experience heavy rainfall, gushing floods and land lights leading to casualties and damage. Additionally, major protests and social unrest have hindered regular business activities as demonstrators have intermittently blocked roads and airports in the southern region. Despite these challenges, our team effectively navigated these complexities and achieved 6.6% sequential volume growth, while cycling 12.5% growth in the first quarter of 2022. The water category grew a remarkable 22.9%, as we continue with our dual commercial strategy featuring the San Luis and [Indecipherable] brands. We saw strong growth across all channels. The on-premise channel was one of the best performance in the quarter, up 12.7% supported by our ongoing investments in market-focused initiatives expanding cooler coverage. This quarter, we installed more than 3,000 cold drink units and work to optimize cooler placement, driving incremental volume. Moreover, at the end of the quarter, over 240,000 customers in the traditional trade actively placed their orders using our AC digital mobile app. This represents 54% of the targeted customer base improvement. Our beverage business in Ecuador posted a solid 7.5% volume growth in the quarter, driven by remarkable performances in still beverages, water and sparkling categories, up 17.9%, 13.4% and 4.9%, respectively.

Fanta and Inca Kola brands led the outstanding double-digit growth in the flavor segment for the quarter. Furthermore, Coca-Cola Trademark posted outstanding results of 3.1%, mainly due to the launch of the 1-liter returnable glass presentation. Single-serve mix in Ecuador increased 2.8 percentage points, in line with the steady sequential recovery of the on-premise and QSR channels growing double digits and reaching pre-pandemic levels. Moreover, we reached a significant milestone this quarter with 37% of our volume in the traditional trade placed through our AC digital B2B platform. Tonicorp, our value-added dairy business posted low single-digit sales growth and double-digit EBITDA growth in the quarter. Growth was driven by flavored milk, oatmeal and ice cream categories. Topsy our ice cream brand sustained its growth momentum supported by initiatives to expand freezer coverage and product innovation in the premium segment. In Argentina, volume in the quarter grew 5% and marks the 11th consecutive quarter of volume growth, cycling close to 28% volume growth from the same quarter in 2022. Growth was driven by solid performances with water at 41.2% and still beverages up 9.1%. These outstanding results confirm the sustained momentum in the face of the severe currency devaluation and high inflation backdrop. We continue refining our revenue management capabilities and executing our selective pricing strategy to promote affordability to consumers.

From a channel perspective, supermarkets on-premise and convenience stores delivered strong growth. Let’s turn now to our beverage operation in the United States. Coca-Cola Southwest Beverages delivered a strong top line performance through transaction growth and healthy pricing, coupled with best-in-class execution. Volume for the quarter declined 0.9% to 100.4 million unit cases. Although the start of the year was low, we saw a positive trend month-over-month with March volume growing as we executed initiatives focused on multi-serve and 12 packs. Volume performance was led by growth in the high revenue per case packages with immediate consumption up 9%; Monster 8.5% and Smartwater 14.7%.The notably, the Fairlife Core Power brand grew double digits, showing a consistent increase in demand across all channels due to successful promotional activity. Revenue for the quarter rose 16.8% to $926 million as we continued improving execution in the right packages and optimizing our promotion spend. This quarter marks the eighth consecutive quarter of double-digit revenue growth. The average price per case in the quarter grew 17.8%. True rate increased 15.1%, mainly due to the off-cycle price increases in 2022 and better management of promotions to our trade promotion optimization tool. We strengthened our market leadership position as we gained value share in the nonalcoholic ready-to-drink beverages this quarter, up 0.5 percentage points driven by the sparkling category. Small store and FSOP channels posted growth in the quarter, up 5% and 7.5%, respectively.

EBITDA for the quarter grew an outstanding 22.6% to reach a total of $141 million on marking the 17th consecutive quarter of EBITDA growth. EBITDA margin in the quarter stood at 15.2%. The cost discipline and hedging strategy continue to pay off, resulting in a gross profit margin expansion and an opex to sales ratio improvement of 50 basis points. It is worth mentioning that this is the most profitable first quarter since taking over the operation in the US. We continue to accelerate the use of our B2B e-commerce platform, MyCoke.com, which posted sales increase of 22% in the quarter as more than 17,000 eligible customers now use their platform. And to conclude with the review of our operations, our Snacks operation in Mexico, Ecuador and the US started the year with steady momentum, delivering strong operating performance and posting solid top line and bottom line results, driven by solid pricing initiatives and enhanced management of discounts and promotions. Bokados delivered a double-digit sales increase and posted it’s 22nd consecutive quarter of revenue growth. The traditional trade was once again the best performer as we capitalized on our solid execution at the point-of-sale. Wise Snacks delivered another quarter of solid EBITDA growth, driven by pricing and ongoing productivity and cost efficiency programs. Inalecsa is making great progress to spark consumer-centric innovation with a new line of confectionery products and generating incremental sales, increasing relevance in the traditional trade. I will now provide an update on our most relevant sustainability activities in the first quarter.

To uphold our commitment to the efficient use of water and preservation of sources, we launched a 2030 water strategy in collaboration with the Coca-Cola system. The strategy focuses on three areas of action. First, enhancing water circularity within our facilities; second, improving the health of water sheds that are critical to our operations; and third, returning water to nature and communities. As you may recall, in Mexico last year, we collaborated with the Coca-Cola Company, local governments and the community to address the water scarcity crisis that impacted a significant portion of our communities in Nuevo Leon. Our efforts span from coordinating actions, investing in infrastructure and donating water to the affected areas, demonstrating our commitment to creating share value. In line with our commitment to sustainability, we participated in the 2023 Water Conference organized by the United Nations, where we signed the business leaders open call to accelerate action on water. Our goal is to promote collective action for water stewardship. We’re also working with the Coca-Cola Company towards creating a world without waste. We are increasing our collection rates and investing in consumer recycling culture. For instance, in Argentina, we launched the, my waste-free festival initiative to reduce waste generation, promote proper material separation and promote recycling and public events. Our unwavering commitment to creating shared value is reflected in our sustainable business model, which we embed in all aspects of our operations. We firmly believe that this approach will lead to long-term success and benefit all our stakeholders.

I will now turn the call to Emilio to go over our financial results.

Emilio Marcos Charur — Chief Financial Officer

Good morning, everyone. It’s a pleasure to be with you today to review our first quarter performance. During the first quarter of 2023, we sustained our positive momentum, achieving double-digit growth in both revenue and EBITDA. This is notable considering the prevailing macroeconomic environment. Our volume performance, effective pricing strategy and commitment to operational and financial discipline, coupled with the dedication and hard work of our associates have been the key drivers of the solid results. Let me offer further insights in our financial results. In the first quarter, consolidated revenues increased 10% and 17.9% on a currency-neutral basis. We faced FX headwinds in due to the strong performance of the Mexican peso. These positive results were driven by the effective implementation of our selective pricing initiatives and solid volume performance across the operations. Our price pack architecture enable us to maximize revenues while protecting product affordability. During the quarter, the cost of goods sold increased 8.5%, while some of our key inputs experienced volatility in relation to 2022, the more stable raw material environment contributed to a 20 basis point expansion in contribution margin. SG&A expenses increased 9.7%, reaching MXN15.9 billion.

Despite facing inflationary pressures and challenging labor environment, our commitment to operational discipline and constant pursuit of efficiencies resulting in a 10 basis point reduction in the SG&A to sales ratio. Consolidated EBITDA reached MXN9.5 billion in the quarter, increasing 12% and 19.6% on a currency neutral basis. Furthermore, EBITDA margin expanded 30 basis points when compared to the same period of 2022. Net income rose 20.6% reaching MXN3.7 billion with a margin of 7.4%, an expansion of 70 basis points. The main drivers behind this expansion were solid top line, more stable key input prices and SG&A efficiency. Now, moving on to the balance sheet. A dividend of MXN3.5 per share was distributed on April 17, 2023, which represents a payout ratio of close to 39% of retained earnings and a dividend yield of 2.2%.As of March, cash and equivalents totaled MXN59.5 billion, while total debt was MXN45.5 billion resulting in a net debt-to-EBITDA ratio of 0.4 times. At the same time, the operating cash flow reached MXN5.7 billion. Our financial discipline provides a strong foundation to face a challenging economic landscape. We remain confident that despite the ongoing uncertainty of the global economic climate, our disciplined opex and capex execution, diverse geographic footprint and strong relationship with our customers will continue to enable us in sustaining overall profitability and generating value for our shareholders.

That concludes my review, and now I’ll turn it back to Arturo. Please, Arturo.

Arturo Gutierrez Hernandez — Chief Executive Officer

Thank you, Emilio. So while we expect the consumer dynamics to be challenging throughout this year, we are encouraged by our performance across our markets. Our sustainable business model prioritizes profitable growth, operational excellence environmental protection and community development, all within a framework of ethics, transparency and responsibility. We are confident that we have a clear road map for growth, innovation productivity and investment, which are driving efficiencies and improving execution. We are also encouraged by the prospects of the near-shoring trend in our territories. As you are aware, Mexico has become a particularly attractive destination for near shoring due to its proximity to the United States and Canada as well as its competitive labor costs, skilled workforce and modern infrastructure. Such developments are very promising for our business. As of today, more than 80% of these expected investments will be located in states where Arca Continental has presence.

We aim to capitalize on this momentum by strengthening our end-to-end supply chain to meet the heightened demand in our markets. In parallel, we will remain focused on the effective management of pricing and promotional spend, leveraging segmentation, analytics, customer and consumer insights and taking timely hedging actions. Looking towards the remainder of the year, there is a lot of activity ahead. We will continue strengthening the relationship we have with our customers who continue to share in our success while doubling down on our digital transformation agenda and our sustainability initiatives. We also remain committed to our strategy of exploring new revenue streams by becoming a more relevant partner to our customers while aiming to increase our share of wallet with a broader portfolio. Notably, this quarter, we launched a new beer distribution pilot in Peru. With that said, we are off to a solid start in 2023 and I’m confident we are on track to deliver against our full year targets and with the guidance we laid out at the beginning of the year.

Thank you for your support and confidence. Operator, please open the call for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And we’ll take our first question from Ben Theurer with Barclays.

Ben Theurer — Barclays — Analyst

Good morning, Arturo Emilio big congrats on the very strong results. So let me try to get this into one question. Given your commentary around the challenging conditions from a macroeconomic point of view, but at the same time, you just delivered, even on a reported basis, double-digit sales growth, even higher EBITDA growth, your increasing your investments, your leverage is low. So help us understand what is it where you see potential downside risks given the strong start you have for the year? And where do you think things can go wrong just given the multiple callouts of the macroeconomic conditions you just made during the call? Thank you.

Arturo Gutierrez Hernandez — Chief Executive Officer

Thank you, Ben, for your question. Good morning. And certainly, we are very pleased with the results. And despite the the challenging conditions for different circumstances, we had some weather adversity in the U.S. first month of the year and then in South America as well. And then as you know, we had volatility in mostly our Peru and Ecuador market, most of the first quarter. So I think what that demonstrates and that continues to be a risk going forward. And we know that we may continue to face some disruptions and some external factors that also could also affect and impact our business as you know, inflation has been our biggest concern. But I think what this would demonstrate is that our business is very resilient and we can cope with those difficult circumstances. Maybe growth would not be as spectacular when we have this diversity but certainly, we can deal with it, not only the first quarter of this year, if you look back the last three years, I think we’ve faced a much more external diversity that we’ve seen in normal times if we can call normal time to any particular year.

But I think on the other hand, when we have some tailwinds to we can capture that and have extraordinary growth, and that’s been demonstrated even in markets where we have high per capita consumption like Mexico, it’s not that we have not had adversity in Mexico. But if you look at some of the positives talking about external factors in Mexico and the development in the North Mexico near shoring of investments and then you have quite significant growth. So that’s, I believe, the assessment of how we perform — no, we can continue to do better. And what happens is many times when you face adversity, you are more focused on those opportunities and those internal indicators what we call the fundamentals and things that would not depend on the weather or political volatility, but certainly things that we can control. So we expect the industry to continue growing and we continue to see high potential volume growth, particularly in emerging categories. So there are going to be risks all the time, and we identify those and we match and mitigate those seven challenges, but we continue to be very optimistic for the rest of the year.

Ben Theurer — Barclays — Analyst

Thank you.

Operator

Thank you. And we’ll take our next question from Fernando Olvera with Bank of America.

Fernando Olvera — Bank of America — Analyst

Hi, good morning, everyone. And thanks for taking my questions. Mine is related to the US. Can you — what explains the increase in single serve presentations, which improved year-over-year and quarter-over-quarter? And how do you expect this type of presentations to perform going ahead? Thank you.

Arturo Gutierrez Hernandez — Chief Executive Officer

Thank you, Fernando. I will let Pepe elaborate a bit more on that. But certainly, this has been part of the strategy in our U.S. market to move our mix towards more profitable packages. And as we take advantage of the post-pandemic dynamics, that’s been an opportunity — and also as we manage our pricing and discounts in the market. So I think it’s proven to be a successful strategy. And Pepe can provide some detail on that.

Jose Borda Noriega — Chief Commercial and Digital Officer

Thanks, Arturo and thank you, Fernando. As Arturo was saying, this is part, an integral part of our strategy to grow top line — and we think this is working — we’re growing value share and that is driven by a very well balanced price and package strategy supported by multiple commercial activities and innovation by line within the categories. Single — in this quarter, single- serve packages grew 6.6% and that was offset by a decline in multi-serve packages, and that’s the equation that we balance month after month. But as Arturo was saying, this is part of a strategy to move from volume to transactions and focusing on growth of those more profitable packages. An example of that might be on our on-premise channel and how we promote. And this is activity at the point of sale, not only our pricing and promotion strategy and how we promote the consumption of certain categories and bottle can presentations that probably were not as relevant in that particular channel those stores before. And this is — this really benefits the customer and the consumer ultimately with having more choices and also helps to have a more balanced portfolio in our case towards the single-serve and increase of transactions.

Fernando Olvera — Bank of America — Analyst

Great. Thank you so much.

Emilio Marcos Charur — Chief Financial Officer

Thanks, Fernando.

Operator

And we’ll take our next question from Thiago Bortoluci with Goldman Sachs.

Thiago Bortoluci — Goldman Sachs — Analyst

Yes. Hi, good morning, Arturo and Emilio. Congrats on the very strong results, and thanks for taking my questions. So I would just like to follow up on the initial conversation on the Q&A on what could go wrong or right on a local place, try to analyze very quickly here what we delivered in the first quarter. In Mexico volumes have been pretty resilient. Margin is at inertly, your raw material inflation will probably improve going forward, right? So fully acknowledge and recognize demand macro are points that are out of our control. But if you look to whatever you have contracted in terms of hedges and raw material costs going forward, what is the band on profitability that you might have to support demand in case there is increase in market volatility going forward. And this is a good question. Thank you.

Arturo Gutierrez Hernandez — Chief Executive Officer

Yes. Well, if you look at our profitability going forward, and I’ll ask Emilio to provide more detail on hedging. I think we’re also in a very, very favorable position because up to now, we have significant cost increases that we have been able to mitigate, at least partially to pricing, to supply chain efficiencies through savings in opex, and that has helped us maintain or even improve margins — the margins that were high to begin with from last year. And we also have been benefiting from mix improvement, as Pepe was explaining in most of our markets. So 2023 will still be challenging in some of the raw materials, particularly sweetener, sugar and Fritos, but we expect some commodities to start fueling off during the rest of the year. So particularly in — for PT and aluminum, we’re going to start seeing a better environment. We already saw a very better comparison for aluminum in the first quarter of the year. We expect PT to be in a good trend as we compare that with 2022. So again, that’s together with our continued focus on pricing and being competitive on prices will help us maintain our profitability. Talking about hedges, Emilio will provide some further details.

Emilio Marcos Charur — Chief Financial Officer

Yes. Thank you, Arturo. Thank you for the question. And as Arturo mentioned, we believe that in 2022 prices reach their peak. And as we’ve seen in this quarter, we have a positive trend in most of our raw materials. We expect to behave online with inflation. And as Arturo mentioned, the only raw material that we expect with different trend is sugar [Phonetic]. Prices are having pressure and we think that we’ll continue to be pressured for the following quarters given that I think the harvest below — the harvest is below expectation in some of the world’s largest producers. As you know, we have a vertical integration in Mexico and Argentina. So really the highest impact that we expect on that raw material is in Ecuador. And regarding hedges, well, we wish to have some hedges in Ecuador, but we haven’t been able to do that.

So regarding hedges, as we have mentioned, we hedged 75% of our aluminum needs in US and Mexico at a lower price than 2022 and 80% of fructose in Mexico and sugar, 80% also in Peru at a lower price than the current spot prices in those markets. Also, we have hedged 50% of our needs of — our US dollar needs in Mexico at a lower rate than last year, lower than 20 pesos. So it’s a better comp for that in Mexico. And due to the Mexican appreciation — Mexican peso appreciation, we have started to hedge some of the needs for 2024 since the exchange rate, we feel really comfortable with levels below 19 pesos. And also in Peru, we have hedged all of our needs for FX around the current spot prices. And we also have started to hedge some of our needs for 2024 at the same levels that the current exchange rate levels in Peru. So that’s basically what we have on hedges and the trend for raw materials.

Thiago Bortoluci — Goldman Sachs — Analyst

Amazing. Thank you very much.

Arturo Gutierrez Hernandez — Chief Executive Officer

Thank you, Thiago.

Operator

And we’ll take our next question from Alvaro Garcia with BTG Pactual.

Alvaro Garcia — BTG Pactual — Analyst

Hi. Good morning. Good [Phonetic] Emilio for updates. Congrats of results. One very quick follow-up on sweeteners. If you could just remind us your mix of fructose and sugar in Mexico and the U.S., that would be very helpful? And then my second question for Pepe, on volumes in Mexico. I was just wondering if you could drill that a little deeper into — what’s going on in terms of maybe different cohorts? I mean, the growth has been tremendous, whether it’s just general GDP activity or its specific cooler coverage on your end that’s really driving that? Thank you very much.

Arturo Gutierrez Hernandez — Chief Executive Officer

Thank you, Alvaro. With respect to sweeteners mix, as you know, in the U.S., we use fructose. And in Mexico, we have a mix that is approximately 50-50, that sometimes changes or come in general, we would say it’s a 50-50 mix. In South America, in our market — in our operations, we use 100% cane sugar. So with respect to Mexico, certainly, we had a very good quarter and consider that we were cycling a good quarter from 2022. So this is the best result we had in the past five years in terms of comparison in the first quarter. So I’ll ask Pepe to elaborate it. But what I can anticipate is it’s not only the consumer environment, also there are some initiatives that have really been very successful and very important for a job the rolling out of our AC Digital platform, the rolling out of Universal Bottle, our own analytics projects, segmentation and suggested order. But I will ask Pepe to elaborate more.

Jose Borda Noriega — Chief Commercial and Digital Officer

Yes. Thanks, Alvaro, for your questions. So Arturo, I think growth in Mexico has been very consistent and in all categories, partly growing 4.2%. Water had an important contribution, growing 12% through better promotional activities and better position and branding. The traditional channel has continued strong even after the pandemic. And also the on-premise channel is continuous recovering, still below 2019 when we see the whole on-premise channel, but the eating and drinking channel that is the most important, is already getting to 2019 volumes, but the entertainment channel is the one that is not — it is not there yet. So this is not the result of one-time activities. As Arturo was saying, we’ve been investing in improving our execution capabilities in the last year. And we see the impact of better suggested order algorithm, better use of AC Digital in which we have proven that customers using is AC Digital have — you have a wider array of products and more frequency, so with the composition of many small things that we’ve been working, and still, there’s a lot more we can do in the future. There’s also an important investment in affordability and repeatable presentations even as we come from last year — last year, we had some issues with supply of glass and refillable. So that’s also a very important avenue for growth this year as supply of glass also recovers. So it’s a little bit of what we do every day, the strong execution in both in traditional and modern trade and the great space that we have for still beverages to grow. Still beverages and water categories.

Alvaro Garcia — BTG Pactual — Analyst

Wonderful. Thank you very much.

Jose Borda Noriega — Chief Commercial and Digital Officer

Thanks Alvaro.

Operator

And we’ll take our next question from Luis Willard with GBM.

Luis Willard — GBM — Analyst

Hi guys. Good morning. Thanks for taking my question. Congrats to get on a good quarter. So I was wondering if I could pick your brain. I know it’s still early, but talking about the alcoholic RTDs within your portfolio, I mean, it seems to me like you’re quite excited with the rollout and what you’re seeing. So if you could walk us through a bit more on what you’re seeing in sites in the ground and the potential that you see of this category going forward, please? Thank you.

Arturo Gutierrez Hernandez — Chief Executive Officer

Yeah. Thank you, Luis. Well, in general, what I can say is that, we continue to see this as an opportunity to leverage our capabilities in some categories that are truly adjacent to the categories that we’ve been managing over the years. And this is what we’re piloting and identifying, what else do we need or what are the relevant factors to make these categories grow in our markets. So we’ve run these pilots with brands from third-parties. But at the same time, we’re innovating in categories with the Coca-Cola Company, which I think it’s a good way to capture the opportunity. And it’s not only the growth that it brings to our portfolio, but also how that continues to reinforce our presence in the traditional trade in Latin America. I think as we increase our presence and our leadership that will also be benefiting us in other ways — in — as it relates to our digital platforms as well. I will ask Pepe, also to provide some further detail on the different initiatives for alcoholic beverage.

Jose Borda Noriega — Chief Commercial and Digital Officer

Thanks, Arturo, and thank you, Luis. As you said, we are very enthusiastic, but we are aware that this is a long-term game. As Arturo was saying, what we are building here is a complete commercial ecosystem — and — but we remains number one, to grow our core business; number two to increase loyalty in the traditional trade becoming a more relevant partner and then the possibility of generating new revenue streams and optimization efficiencies. So in this context, we’ve talked about our twofold strategy. On one hand, products that are synergistic to — completely synergistic for distribution, this is where spirits and beer come from. And we’re starting with Espinoza and then extend the in Ecuador, we’re already extending our beer partnership is going to cover. In this quarter, we’re going to be covering 30% of the country. We’re just starting in Peru. During this quarter, we are going to start a project in Mexico and with the learnings and the incentives that we get, we will further rollout and the pilot is we experience in Guadalajara, while still small that is starting to show a good results. And we’re starting to expand. We are starting to crack the code of what works, what doesn’t work, streamlining the portfolio. But most importantly, for example, the numbers in Guadalajara show that we are obtaining positive results in the non-alcoholic ready-to-drink portfolio through cross promotion with our mixes and FAB brands. And this is as we build commercial capabilities to win in the alcoholic beverage arena. For example, we’ve been in Guadalajara, we’ve been rolling more with our FABs, still very small categories but we command a 27% share already being a strong number one or two player. So at the end, this multi-category strategy is part of the whole commercial ecosystem that we are trying to build.

Luis Willard — GBM — Analyst

All right. Thank you, guys. Very interesting.

Jose Borda Noriega — Chief Commercial and Digital Officer

Thank you, Luis.

Operator

[Operator Instructions] We’ll take our next question from Lucas Muse [Phonetic] with Morgan Stanley.

Lucas Muse — Morgan Stanley — Analyst

Hi, good morning. Thanks for taking my question. I wanted to explore a little bit more the top line dynamics that you guys are seeing in the US. You said that March was a very positive month. So I just wanted to understand if you’re seeing demand improving, at least on the margin, or if there was something specific in March? And also, what are your expectations for the rest of the year given your current commercial strategy? Also, I just wanted to know how to think about pricing, if they are still to do — allow one price increase in the second half of the year? Or if there is a chance that we could see no additional pricing this year as you guys already have a lot of price carry-through and mix is improving? Thank you.

Arturo Gutierrez Hernandez — Chief Executive Officer

Yeah. Thank you, Lucas. In the US, as you saw volume decline in the quarter, we were cycling growth in the first quarter of last year. But as I said, in March has a positive trend, growing close to 1%. And January and February were certainly impacted by weather conditions. So as Pepe explained, most importantly, our volume mix was improved favorably with more single-serve presentations and more profitable packages. Also, we have — we had growth in micro sales and more customers using the platform, which also is very important for growth and profitability. So if we look at the business going forward and the rest of the year, we’re optimistic in terms of margins. The outlook is to maintain or improve 2022 margins through pricing, as you said, we have important carryover. We’re going to be more conservative with pricing for the rest of the year. But we have other opportunities as we have better raw material environment, and we have some opex efficiencies also, some projects that are going to be important for our margin, sustaining or improving margins for the rest of the year. In terms of raw materials, as I explained, PT was expected to increase, I’d say, pretty much in line with inflation, but aluminum has a better trend for us decreasing both Midwest premium and LME during the year. So again, our pricing strategy will be more conservative for the rest of the year.

Operator

Thank you. This concludes today’s Q&A. I would now like to turn the call back over to management for closing remarks.

Arturo Gutierrez Hernandez — Chief Executive Officer

Well, thank you for your continued interest in our company. Please contact our Investor Relations team for any further questions. Have a great day.

Operator

[Operator Closing Remarks]