Arca Continental SAB de CV
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Arca Continental SAB de CV
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Good day, everyone, and welcome to today's Arca Continental conference call. [Operator Instructions] It is now my pleasure to turn the conference over to Melanie Carpenter of Ideal Advisors.
Thank you, operator. Good morning, everyone. Thanks for joining the senior management team of Arca Continental this morning to review the results for the fourth quarter and the full year of 2022. The earnings release went out this morning is 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; and 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. 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.
Thank you, Melanie, and many thanks to everyone for being with us this morning. Let me start by saying that we are pleased with our fourth quarter and full year results. Once again, we closed the year on a high note, delivering a solid top line and volume recovery, operating margin expansion and remarkable free cash flow generation. Despite continued volatility in nearly every region, we delivered an exceptional full year performance in 2022. Total consolidated volume grew 0.1% in the quarter and 4% for the full year to reach 2.4 billion unit cases. This is the second year in a row that we achieved all-time high volume marks. Total consolidated revenues in the quarter rose 7.1% to MXN 52.6 billion. For the full year, total consolidated revenues grew 13.3% to MXN 207.8 billion, cycling 8.3% growth in 2021.
2022 was a year for the record books. I am proud to report that we surpassed the MXN 200 billion revenue mark for the first time in our company's history. We continue effectively managing key levers of pricing and optimizing our promotional spend as we leverage segmentation, analytics, customer and consumer insights. Consolidated EBITDA for the fourth quarter grew 9.4%, reaching MXN 9.9 billion. For the full year, EBITDA reached MXN 39.6 billion, up 11.9%, representing a margin of 19.1%. While the year proved to be challenging, our timely pricing actions, coupled with tight control of expenses, helped us to offset cost pressures in key inputs, maintain profitability and enhance our market leadership. As we announced last quarter, we are moving forward with a new collaboration agreement with the Coca-Cola Company.
We are excited about the potential to expand our consumer-centric portfolio and capitalize on the great opportunities that our digital alliance provides. Let me now give you an overview of the performance and highlights of our 5 markets. Total volume in Mexico for the fourth quarter declined 1.4%, cycling a strong 4.5% growth from the same quarter in 2021. However, total volume for the full year grew 3% to 1.3 billion unit cases once again breaking our all-time high annual volume record. Volume performance was led by growth across all categories, with sparkling up 1.8%, water 12.5% and still beverages 2.8%. The steel beverages category contributed to 40% of growth in our nonalcoholic ready-to-drink portfolio in 2022. We fully capitalized on the success of the FIFA World Cup marketing campaign and hosted the Trophy Tour in Monterrey and Guadalajara as part of its multi-country journey.
Brand Coca-Cola delivered a remarkable performance in 2022, growing 2.3% and posting its fifth consecutive year of volume growth at a compound annual rate of 1.4%. Net sales in Mexico rose 9.8% in the quarter to reach MXN 22.2 billion, marking the 26th consecutive quarter of net revenue growth. For the full year, revenues grew 13.6%, reaching MXN 89.3 billion. Average price per case in Mexico, not including jug water, rose 10% in the quarter, reaching MXN 78.04. EBITDA in the fourth quarter increased 3.1% to MXN 4.7 billion, representing a margin of 21.1%. For the full year, EBITDA closed at MXN 20.6 billion, up 7%. Single-serve mix grew 1.1 percentage points for the full year, confirming the sequential improvement trend. Growth in immediate consumption packages was driven by the steady recovery of the on-premise convenience store and leisure channels.
The universal bottle initiative continue to fuel growth as we expanded to more territories. These packages represent over 11% of volume mix within our multi-serve returnable portfolio. We continue accelerating expansion of face digital. At the end of 2022, approximately 38% of our volume in traditional trade in Mexico was captured through this platform. We also advanced with the rollout of our flavored alcoholic ready-to-drink portfolio with the launch of Lemon-Do and new reformulated flavors of Topo Chico Hard Seltzer. In South America, total volume grew 2.1% in the fourth quarter, reaching 168 million unit cases. For the year, volume was up 8.9% to 602 million unit cases and cycling strong double-digit volume growth in 2021. The traditional trade once again proved its resilience and confirmed the sustained recovery throughout the year.
Total revenues was up 1.3% in the quarter, reaching MXN 10.4 billion, while the increase for the full year was up 14.5% to MXN 40.5 billion. EBITDA declined 6.2% in the quarter to MXN 2.1 billion, representing a margin of 20.6%, while for the full year, EBITDA rose 14.6% to MXN 7.9 billion, a 19.5% margin in line with 2021. Revenue management and product reformulation initiatives, together with our focus on cost discipline and optimization were key to maintain healthy profitability amid a decelerating consumer environment. In Peru, volume was up 0.8% in the quarter, cycling double-digit volume growth from the same quarter in 2021. For the full year, volume in Peru grew 7.9%, driven by sparkling, stills and water categories, up 7.8%, 8.4% and 10.4%, respectively. We grew value share in the Sparkling category leveraged by changes in our mix. We saw a sequential positive trend in single-serve, up 3.1 percentage points in the quarter, supported primarily by the on-premise channel.
Nonetheless, we still see potential in this channel, which was severely impacted by the mobility restrictions in the last 2 years. Our beverage operation in Argentina delivered 1.3% volume growth in the fourth quarter and 13.5% for the full year. Volume growth in the quarter cycled strong 17.2% volume growth from the same quarter in 2021 and marks the 10th consecutive quarter of volume growth, confirming the sequential improvement. Notably, growth in still beverages accelerated 9.2% in the fourth quarter, driven primarily by powering. Promotional activities as part of FIFA World Cup global campaign played a key role in achieving these outstanding results. We capitalized on all the excitement and emotion from celebrations of Argentinian football fans across the country. As for Ecuador, our beverage business posted a solid 5.8% volume growth in the quarter and 6.6% for the full year, driven by strong performances of Fanta, PST and Powerade brands.
We continue driving immediate consumption occasions to capitalize on the sustained recovery of the on-premise channel, up 5% in the quarter and 14.1% for the full year. Single-serve mix also benefited from this recovery, increasing 2.8 percentage points in the fourth quarter to reach 34.4% of total volume. We invested in market-focused initiatives, refining our price-pack channel strategy and promoting affordability by expanding the portfolio of returnable presentations. Tonicorp, our value-added dairy business posted double-digit sales growth in the quarter, driven by strong growth in yogurt, flavored milk and oat milk categories. We maintain our strong market share in core categories driven by solid execution at the point of sale and product innovation. Our ice cream category sustained its growth momentum as we expanded product coverage and strengthen a closer connection with consumers, thanks to a portfolio of high-quality products and ongoing innovation in the premium segment.
I will now turn to our beverage operation in the United States. Coca-Cola Southwest Beverages closed out the year delivering a strong operating performance and posting solid top line and bottom line results. Volume for the quarter grew 1.3% to 112.2 million unit cases, driven by sparkling flavors category, up 1.2% and water 14.6%. We saw a positive volume performance across large and small stores, up 2.2% and 0.7%, respectively. Our volume boosting initiatives continue to shift volume into more profitable packages and delivered growth in multi-serve packages up 1.5%. Volume for the year was up 0.7%, reaching 447.9 million unit cases. Revenues for the quarter rose 15.5% to $962 million, marking the seventh consecutive quarter of double-digit revenue growth. For the full year, revenue increased 14.2%, reaching $3.6 billion. Average price per case in the quarter grew 14%, fueled by growth in total transactions up 1.7% as we continue to focus on 20-ounce packages and promotional spend optimization.
EBITDA for the quarter grew an outstanding 38.5% to $158 million, representing a margin of 16.4%. For the year, EBITDA closed at $550 million, an 18.1% increase with a margin of 15.1% and marking the fifth consecutive year of EBITDA growth in our U.S. beverage business and increasing EBITDA at a compound annual growth rate of 13%. Importantly, the FSOP channel continued its path to recovery, closing the year with a strong 3.1% growth compared to 2021. We are optimistic that in 2023, this positive trend will continue as outlets we open and consumers increasingly return to restaurants, retail outlets, sporting venues and vacation destinations. Furthermore, we kept making solid progress in our digital agenda as we expanded our B2B platform, myCoke.com, to reach 83.7% penetration in the FSOP channel. And to conclude with a review of our operations, our Food and Snack businesses posted double-digit sales increase in the quarter and full year.
Profitability significantly increased across all our snack divisions as we accelerated our productivity and cost efficiency programs. Wise snacks in the U.S. delivered triple-digit EBITDA increases in the quarter and full year, driven by our segmented pricing initiatives and enhanced management of discounts and promotions, along with key initiatives to optimize logistics, reduce freight costs in product waste. Bokados in Mexico delivered single-digit sales growth in the quarter and posted its 21st consecutive quarter of revenue growth, mainly driven by the sustained recovery of the traditional trade. In Ecuador, our snack business posted double-digit sales increases, both in the quarter and full year, supported by growth in the traditional and modern trade. Incremental sales growth was also driven by the launch of our new popcorn and cold cereal product lines.
And I'd like to close now with an overview of our ESG initiatives. For the fourth consecutive year, our company was included in the Dow Jones Sustainability Indices for the Latin American integrated market. In addition, for the first time, we were selected to be part of the Sustainability Yearbook, a standard in force publication that recognizes those companies that demonstrate leadership in corporate sustainability. In the environmental arena, we entered the Climate Change A List published by the Carbon Disclosure Project, which recognized as companies that are leading the way in reducing emissions, mitigating climate-related risks and contributing to the low carbon economy.
Furthermore, as an evidence of our commitment to our communities, we deployed more than 120 shared value initiatives and allocated $6.5 million to amplify our impact across 200 social purpose organizations. Moreover, I would like to highlight our water access initiative. Throughout the year, our company provided more than 2 billion liters of water to communities to help mitigate water scarcity challenges. And with that, I will turn it over to Emilio. Please, Emilio.
Thank you, Arturo. Good morning, everyone, and thank you for joining our call. This last quarter and year-end results reflect the resilience of our business in a complex macroeconomic environment. We delivered a solid financial performance in the fourth quarter with high single-digit consolidated top line growth and an EBITDA margin expansion of 40 basis points. Although we still face some pressure from raw material pricing volatility, this was offset by affecting price pack architecture, operating discipline and hedging strategies. It is important to highlight that this year, our consolidated volume continued with a solid performance, already surpassing prepandemic levels in all the countries where we operate. We are pleased to report that in 2022, our U.S. beverage operation reached an EBITDA margin of 15.1%, an expansion of 50 basis points from the previous year.
This represent an important milestone for the organization as we have achieved the EBITDA margin level that we set as our target after the acquisition of these territories. And now moving on to the results. Consolidated revenues grew 7.1% in the fourth quarter, mainly driven by the solid performance in our operations in Mexico, U.S. and Peru. For the full year 2022, consolidated revenues increased by 13.3% to reach MXN 207.8 billion, reflecting our effective pricing strategy and the solid volume performance throughout our operations. Cost of goods sold increased 8.1% during the fourth quarter and 14.5% for the 12 months of 2022, mainly driven by increases in key inputs. In the fourth quarter, SG&A grew 5.5%, reaching MXN 16.7 billion. While for the full year, it increased 11%, reaching MXN 63.9 billion. Despite inflationary pressure and challenging labor environment, our operational discipline and continued search for efficiencies led to a 70 basis point reduction in our SG&A to sales ratio.
In the fourth quarter, consolidated EBITDA reached MXN 9.9 billion, an increase of 9.4% and a margin expansion of 40 basis points compared to the same period of 2021. While for the full year, it rose 11.9% to reach MXN 39.6 billion. Net income for the quarter was 24.2% higher, reaching MXN 4 billion with a margin of 7.5%, an expansion of 100 basis points from the same quarter of 2021. For the full year, net income was MXN 15.5 billion, representing an increase of 26.2% from 2021, mainly driven by a strong top line and efficiencies in SG&A. Now let's turn to the balance sheet. Last November 28, an extraordinary dividend of MXN 3 per share was distributed, reaching a total dividend of MXN 6.18 per share for the year, which led to a payout ratio close to 90% of retained earnings and a dividend yield close to 3.8%. As of December, cash and equivalents were MXN 27.8 billion with a total debt of MXN 46.9 billion and a net debt-to-EBITDA ratio of 0.5x.
For the full year of 2022, our operating cash flow was MXN 3.7 billion. The CapEx investment reached MXN 9.7 billion, which allow us to reinforce our production and commercial capabilities to keep pace with the current volume growth trend. Our financial performance for 2022 demonstrates our abilities to drive and adapt during challenging times. We're confident that in 2023, our disciplined OpEx and CapEx execution, consistent hedging strategies and the ability to capture market opportunities to our digital and commercial initiatives will enable us to protect profitability and continue driving value creation to our shareholders, even in the face of recession fears and a still uncertain global economic outlook. That concludes my review. Back to you, Arturo. Please Arturo.
Thanks, Emilio. Our performance in 2022 is a direct result of successfully executing our strategy and demonstrating that we're operating from a position of strength, proving once again that our business remains resilient in the face of macroeconomic uncertainties. As we look ahead to this year, we anticipate that inflationary headwinds across commodities, labor and utilities will persist and continue to weigh on both our consumers and our business. In this environment, we must maintain our disciplined approach to pricing. We will adjust prices to at least offset the inflation rate in each of our operations while maintaining affordability and value in our portfolio. We expect our consolidated revenues to increase high single digit. We anticipate a further recovery of volume and mix and continue managing our key levers of RGM promotional spend and scaling innovation across our businesses.
Additional recovery of the food service and on-premise channels as well as a resilient consumption at home should also drive volume and a better mix in 2023. We plan to invest 6% to 7% of total sales towards CapEx, continuing with our disciplined approach of investing in market execution capabilities and accelerating our digital agenda. It is important to emphasize that the digital and technology investments that we've made over the past few years have been strong contributors to our top line growth. In summary, although 2023 will be challenging, we are confident that the resilience of our business and the strength of the relationships we have with our customers will be key to sustain our market leadership. We are making a difference in our industry and believe we have the right foundation to drive sustainable growth and deliver increased shareholder value in 2023 and beyond. That concludes our remarks. Operator, we are ready to open the floor for questions, please. Thanks.
[Operator Instructions] Our first question will come from Benjamin Theurer with Barclays.
Arturo, maybe the one question I wanted to ask just in light of some of the outlook you've just given on growth in terms of top line, et cetera. Can you also help us put that in context with what you're seeing on the cost side, raw material pressure, ingredients pressure. How do you think about the balance between high single-digit top line growth, but then obviously still cost pressure that's likely going to persist. So just to get a little bit of sense of profitability across the regions.
Well, as you saw in '22, we did have a high raw material cost environment, and that certainly impacted our margins. Our pricing strategy last year was very effective to mitigate that impact as was our OpEx discipline throughout the year. 23 still looks challenging in several raw materials, but we're expecting some commodities to start cooling off during the year. Probably the most relevant impact for the year would be fructose in terms of pressure or sweeteners in general what we are expecting a better environment in the comparison with PET cost and with aluminum, although it will remain high. But in comparison, it will be, in some cases, better, especially aluminum in the U.S. and some of the PET comparisons in South America. We also have some hedges for some of those inputs. So I'll ask Emilio to elaborate more on that.
In fact, we've seen a slowdown on the second half of the year regarding raw material prices. So we expect that to continue for this year. But the only issue, as Arturo mentioned, is sweeteners, basically in Ecuador. We still see a higher prices this year in sugar for Ecuador raw materials, we expect to continue the slowdown that we started to see the second half of the year. Regarding hedges, for 2023, we have hedged 75% of aluminum and 80% of fructose in Mexico and U.S. and 80% of sugar in Peru. And all these hedges are below 2022 prices or in line with inflation. So we are really well covered there. And as you know, in Mexico and Argentina, we have integrated with our own sugar meals. And regarding FX, we have hedged 50% of our U.S. dollar needs in Mexico and 80% of U.S. dollar needs in Peru at a lower current levels. So we feel comfort with those hedges. But we still -- well, since we still have some fears of recession fears and volatility. We're still looking for any opportunities that we can improve or increase our hedges.
But all in all, that would mean that we have a positive perspective on our margins for the year.
Our next question will come from Alan Alanis with Santander.
A couple of questions here. The first one regarding alcohol products in Mexico. Could you talk a little bit about the strategic relevance that they're having? I know that they're very small. You mentioned that 40% of your growth was coming from still beverages. That means that 60% is still coming from farming it. I wonder how much -- what's the potential and what's the outlook of the strategic outlook for alcoholic beverages in Mexico. The second question is you mentioned that water was the main driver of volume in Texas. That's 15% of the U.S. operations. What's driving such a strong growth in terms of bottled water in Texas and how containable that will be? I guess those are the sort of the critical operating questions. And any update that you can give us on capital deployment and M&A last week, that would be highly appreciated.
I'll turn it over to Pepe. Just to mention briefly about our strategy in terms of alcoholic beverages and how -- that has several dimensions. It's not only about incorporating products to the portfolio, and it's actually increasing relevance to customers with certainly a broader portfolio and improving our frequency at the point of sale and having the right partners in the right categories that would fit our execution and our distribution operation and also to complement our strategy to build a digital ecosystem in the traditional trade in Latin America. So it has several dimensions as we do that. And we know that the most adjacent categories for that would be certainly beer and some alcoholic beverages. As you know, we've been selling beer in Argentina for many, many years, and it's become quite relevant in our portfolio. So we know that, that is a very complementary part of the portfolio. But now it goes beyond that as we expand our scope and as technology is incorporated in our go-to-market model. So I'll ask Pepe to elaborate a bit on that and also on the performance of water in the U.S. market.
As Arturo was saying, our multi-category strategy is twofold. We're selecting partners and categories that generate more synergies with our portfolio with joint execution and distribution and beer and series also fall within these categories. The beer pilot with Heineken in Ecuador has shown important synergies with distribution and volume growth, along with also important mix of premium beer that is important in that category, we have increased our customer base. And most importantly, the penetration of our brands in the customers that we share in both categories have increased. In Peru and Mexico, we expect to have pilots running with one of the main beer producers by the end of this quarter.
And as Arturo said, our experience in Argentina have shown and have proven that this category is very synergistic with our base business. Also in Spirit, we already launched a pilot in Guadalajara, partnering with Diageo. We are increasing the Agios brands coverage in the traditional trade and also cross-selling with also NARTD mixers. But still, it's too early to have the results. On your other question about water in the U.S., it's mainly growing is Topo Chico that is rolling smart water that is also growing importantly, and those are profitable water products, and we are participating in the plain water with the same brands. So that's mainly being in our volume up in the U.S.
And just addressing a fine point, Alan, we're keeping the same strategy with respect to capital allocation in terms of what we've said before for dividends and share buybacks. And you also know about M&A, what has been our approach. We're going to be -- continue to be patient and prudent about the possibilities of growing inorganically, mostly in the beverage space in the regions where we operate. So there's nothing in particular to add to that at this point.
I mean just really quickly in terms of capital deposits in alcoholic beverages. And Bina announced that they are opening -- they're building a brewery basically in Brazil. Is that something that you would consider in some of your territories? I mean, it sounds like the potential for alcohol is pretty big. So if commits, you would also build your own production capacity for alcohol.
Well, if it makes sense, certainly, we would analyze that it's not something that we are exploring at this particular time.
Our next question will come from Thiago Bortoluci with Goldman Sachs.
Maybe I have a question for Arturo. Arturo have been commenting for a while later around the potential from this new corporation agreement with Coke. Obviously, there are multiple touch points to address here, and I guess, multiple areas of opportunity for you to capture. I'd just like to help to comment and elaborate a little bit more and help us make this more tangible in terms of what are the specific areas for further growth that we envision maybe for the next 12 and 24 months arising from this dated agreement with Coca-Cola.
Thank you for your question. For us, this has been a very, very important transformational agreement that we've reached with the Coca-Cola Company because it certainly goes beyond our traditional relationship with our partner in our core business. So this has several objectives as we align our strategy with them. I think the key word, again, as we've said before, is alignment. We want to operate as a unified system, although we certainly are separate companies, and each of us has particular roles, but we want to be much better coordinated and aligned on what we do. And that starts with our core business. I think we are in a much better position now to align on our plans to have a joint planning process to set goals and more than goals to identify what are the enablers and investments and the capabilities that are required to reach those goals. We, first of all, the first premise is that we still believe that our core business in the core categories have a significant potential for growth in all the markets where we offer.
And so the first idea of the agreement is how can we align to capture that growth in the different channels in the new categories or the new subcategories that we've been launching in our operation. So that's kind of step 1. Step 2 is what Pepe was describing as a technology has been incorporated to our operations, we've identified that it's a better way to manage the complexity of the portfolio in the market. So that's what presents the opportunity of expanding into alcoholic beverages and other products that are certainly adjacent, as Pepe was explaining to our current portfolio, meaning they have a very similar go-to-market model.
They might go in the red truck. They have a similar approach to customers. And then other products maybe that are not as compatible with our go-to-market model, but certainly there are some of the links in that model that would apply to other products, and that's where the multi-category opportunities arise. And this is a big, big change in a paradigm of years ago where we thought that we had to be focused on our core categories and that it was very hard to expand without hurting sales or the focus on those categories.
Now with technology, with all the new capabilities, we know that can be done in the pilots shown that. And the third dimension of this agreement would be the digital ecosystem. And that's a completely different bulking. This is creating more relevance with that customer. That probably would ratifying a number of other opportunities in the digital space, which, as you know, we have been exploring on our own. And if you look at what we have been doing with Yomp in the last few years, we have 19,000 active customers with Yomp premium.
That means a platform that has this connection with the customer in the digital space and it brings new opportunities, including the collection of data. So now as we bring Coca-Cola into that partnership, again, it strengthens our presence in the store and the collaboration will also drive us into scaling this further, although we think that we've achieved now the scale that has validated the model. So I think in summary, those 3 aspects would be the most relevant for our perspective of our long-term relationship model with the company.
Our next question will come from Fernando Olvera with Bank of America.
Very quickly, regarding your sales guidance for the year, I mean can you comment what is the performance that you expect by division? And the other question is, given the improvement in single-serve in 2022, mainly in Mexico and South America, can you give us some color of what are you expecting regarding mix to behave this year? And how are you seeing it by division?
Sure. I'll turn on the second part to Pepe. Thank you, Fernando. Let me just talk a little bit about volumes and sales going forward in this year. We've -- the guidance we've provided is based on several factors, some positive aspects of -- for volume growth this year -- and I mentioned probably the most relevant. One is the expansion of our AC digital platform, which we know that not only provides a new connection with the customer, but actually increases sales and that still has an opportunity to continue to grow as we've seen in the last few months. We continue leveraging our analytics to boot sales as well, segmentation, defining optimal portfolio or suggest or order and something that's also very tangible, which is the recovery of the on-premise channel, which is something that has not fully occurred except maybe for Argentina, but for most of our markets, we're still not at prepandemic levels.
So there are several reasons to believe that we still have room for growth, even though we -- as Emilio said before, we are facing a macroeconomic headwind in the year. And I think these would apply mostly to every one of our markets, the factors that we mentioned. There are some additional things in some of the markets. We expect every market to grow. And in the case of Mexico, there's some additional things that we should mention, which is how we're capitalizing the near-shoring of investment in a territory.
So that's also a very significant factor that impacts possibly a business. If you see the recent investment in Mexico, maybe more than 70% of that is coming to Arca Continental territory. So that's going to be an important or positive impact in the dynamics, economic dynamics of our territories. Same thing for the expansion of returnable packages in all our regions. That's also going to be an important initiative that will bring us additional volume.
And one thing that we have to mention, and this is mostly an opportunity, something where we were not operating at our ideal standards last year, is that we had a number of supply chain disruptions in most of our markets. So we've also identified those as an opportunity as an upside for 2023. So I mostly want to mention those factors that are part of our -- the building blocks of our plan. And that would get us very conservatively to grow in every one of our markets. And looking from what has -- we've been seeing in the first few weeks of the year, I think we're on the right track. I mean, we have a good momentum in almost every market. So we're optimistic about, again, about the year and also positive about the guidance we've provided. With respect to the mix, the mix has also been very important as we have improved average prices of 2022. And we -- as the on-premise market recovers, that's also, again, an opportunity to improve mix, but I'll let Pepe expand a bit on that.
So just adding to what Arturo is saying, as you know, the pricing and packaging architecture and our installed RGM capabilities are key in our pricing strategy. So as you said, volume mix will also be a key component of our strategy as we continue promoting and executing more profitable packages. For example, in the case of Mexico, the tailwinds in that sense will be the immediate consumption channel recovery that Arturo said, and the launch -- the expansion of the -- for example, the 250 PET bottle centric packages in all the categories. In the U.S., for example, we have also the positive mix effect driven by single-serve bottles, especially the 20-ounce bottle.
So we expect mix to be also an important part of our pricing for next year. And that will be complemented by the carryovers that we have for next year because of the price increases that we did in 2022, just to give you some numbers. In Mexico, the carryover for the next year is 6.4%. In the U.S., we are entering 2023 with a carryover of 6.2%, 4.8% in Peru, 4.4% in Ecuador and 30% in Argentina. So that also helps us to drive our pricing for the next year.
Our next question will come from Álvaro García with BTG Pactual.
A couple of questions in mind. One, just a quick follow-up on the sales guidance for 2023 and you mentioned high single digits. I'm just curious if that's FX neutral or not. -- pesos obviously been very strong. We calculate a couple of points of headwind there. I'm not sure if that considers the stronger peso or if it's on an FX-neutral basis -- and I'll wait to answer -- ask my second question.
We are not considering a stronger peso is really to predict. So we're basically considering a flat exchange rate. So that will impact that number talking about strategies.
And then my second question is going back to multi-category. Just wondering how you're balancing pilots on the coke truck versus increased traction at Yomp!. And again, a lot has been made of sort of the magnitude of the potential opportunity. So any sort of comments on sort of when you might sort of scale these pilots would be very helpful.
So as I said before, -- this is -- our multi-category strategy is twofold. In one side, we're partnering with partners and caters looking for synergies, and that's where beer and spirits, for example, fall. There's another set of categories in which what we aim is to generate platform stickiness and increase our share of wallet with our customers. In those categories, we might use only parts of our go-to-market capabilities and mainly emphasize the use of digital assets. We already happen with the category platform operating in Ecuador, representing more than 40% of our customer share of wallet with ensereverage dairy as tenapanother 15 other categories. And beer is also going to complement this commercial ecosystem. So in Mexico, we have been learning for the past 3 years with Yomp Express -- and being just a wholesaler, it's not a new business per say.
Our aim is not to become a wholesaler, but to generate stickiness with our ecosystem. With the LTRN gas signed, we are starting joint commercialization and distribution pilots with the coal portfolio in Monterrey and Guadalajara. But our aim is to evaluate the right portfolio and go-to-market strategy. This will include using our complete distribution system, including Coca-Cola trucks for some products or only our digital platforms for other products. And we are in pilot phase in that arena. And having said that, Arturo mentioned, that Yomp Premium continues healthy growth. We've reached close to 20,000 customers and positive EBITDA. And we're generating an insightful data that helps us to boost our core business.
And then also we increase the loyalty of those customers. So you have to think about this as connected. The business of selling other categories might be more attractive than beer initially. The other categories may not be a great business at some point, but it does reinforce the strength of the platform. The cost of switching might be lower for the customer, but not if that is interconnected to the rest of our digital ecosystem, and that's what we are trying to do and identify what the points of connection are with the current go-to-market model. And so the trade-offs are there are probably, if you use more of the red truck, it's added complexity but increased profitability. So we are figuring out what would be the best , especially for those other categories that are not as adjacent as would be beer and spirits.
Next question will come from Sergio Matsumoto with Citigroup.
I want to go back to the cooperation agreement question. And this has been in place for 5 months, and I appreciate the color you gave on the profitabilities. Are there any changes that you would like to highlight that took place in the last 5 months that wouldn't have occurred under the old agreement, perhaps in the way you invest capital or launch products or go to market within the core business of nonalcoholic?
I don't think there are any tangible changes in that aspect. Most of what has changed has been in our interactions with the Coca-Cola Company and mostly that foundation of the culture of the relationship. And that's what we've been working. We've actually had meetings with the top leadership of both companies where we define those principles, and we've been working on the planning process as well, on the setting of goals and those sort of conversations are the ones that we've had, I would say, in a very positive way, not that we didn't have good conversations, but I think that we've become closer in those interactions. One good example is, particularly the digital space, and the initiatives that were -- the pilots and the initiatives that we're undertaking, those are coordinated and we have the input of people from the company, and they're part of the meetings and the committees and the decisions now.
So it's mostly in that level that we've made progress in the last few months. I think that, again, that would be the foundation of how the growth is going to come in the future. And another example to what Pepe was explaining a minute ago is that the Coca-Cola Company is not participating in Yom!p, not only in decisions, but also contributing to the expenses and the cost of operating Yomp and that also reflects the commitment they have to go beyond the core business.
And if I could add another question. You mentioned the distribution order management technology in the United States. Could you give some color on that? And which part of the distribution logistics, this technology would enhance.
Yes. mainly the focus is on more dynamic routing and getting efficiencies in the way we distribute our products. We are working -- and we're expanding that not only in the U.S., but also in Latin America. We are also creating a fully automated logistics network with expanding digital platforms such as network design, transportation management systems, telemetry, et cetera. And we're in the midst of implementing a company-wide a whole integrated business planning platform to optimize our supply chain in partnership with Yomp.
So that impacts mostly primary distribution.
Our next question will come from Lucas Ferreira with JPMorgan.
My first one is a follow-up on your comments on, I guess, it was a third comment on the near shoring. So I just wanted to understand a bit better the opportunity you see there with the larger investments in like that region of Mexico growing faster. Given the already high consumption per capita, do you see this as more of a volume opportunity or more of a mix opportunity in pricing? And how do you see that playing out? So when you compare the standards of consumption of North of Mexico, let's say, DAS. So what are the guests you see that could close and benefit to -- and the second question on the multi-category. I know the U.S., it's a very, very different market from Latin America. So it's a much more mature market in terms of logistics, supply chain, et cetera. So my question on multi-category that is there something you see that could be done in the U.S. as well, maybe to compete with some food service or distribution company. Is that any category that sounds more obvious for you to jump in as well? Or it's just more Latin America opportunity?
Let me talk about near-shoring first. And as I said, this is a very positive impact -- in our business, it's certainly an indirect impact as the economy is -- continues to be activated here in the north and certain parts of Mexico. And that is now becoming very, very visible as the way just how the world has been evolving provides a very, very important tailwind for this part of the world. And I've been actually working in a group like the Mexican private sector to identify the supply chains that would be logical to be relocated to the region, to the Mexico U.S. region or North America region based on USMCA and obviously logistics convenience. And we've identified 11 supply chains that make a lot of sense to be relocated. And that is already occurring.
They're not connected to our beverage business, though. This is something, again, that it's indirect, but we will see the impact of that and how that would be reflected. Well, as you said, it will be certainly growth in volume. The per capita may be high, but this is, again, the same story that we heard over the decades per capitals have been high and the volume and the market continues to grow. And we still think there are many opportunities there to develop categories that are not as developed. And now we have the comparison with the U.S. where you see those categories and subcategories being developed, and you don't see that as much in Latin America. It has sometimes something to do with purchasing power. As you said, the mix is going to improve also and that connects to the possibility of consumers to buy some other of the relevant value-added categories, which has happened in the U.S.
So if you look at -- if you compare those markets, it's still -- the U.S. is lower margin, but on an absolute basis, EBITDA per case is higher because of that because, I mean, we have a much more variety of those value-added high higher price per case products. So that's going to happen naturally as the economy develops. And that's been happening mostly in the states of Nuevo Leon and Paila, Chihuahua, San Luis, which are states where we operate. And again, as I -- the data we have is that more than 70% of the new investment is coming into the Arca territories in Mexico. So I think that's going to be important not only in '23, but in many years to come as those supply chains continue to be relocated.
And second, with respect to multi-category, the opportunity to go beyond the traditional categories for now with the Latin America. In the U.S., as you know, there's some regulatory restrictions in alcoholic beverages. And go-to-market is certainly a more sophisticated and complex. We do have, as you know, the snacks business in the U.S., which operates independently. But currently, we're exploring the expansion of innovation in categories in the U.S. only in the beverage space.
Our next question will come from Rodrigo Alcantara with UBS.
Just a quick one. I was curious on the breakdown by channel in Mexico, right? You mentioned 12% volume in supermarkets, 4% in on-premise channels, right? So thanks me like kind of what the issue this quarter was like a mom-and-pop and perhaps a proximity channels in the monitoring as well. So I was just curious if you can comment the growth on those channels. What happened there? And how you have seen borrowing growth in those channels or a -- that would be my first question. And the second one, very quickly on the U.S., I mean you continue to surprise us there on what you can achieve in terms of profitability. So just curious if you can give us any -- or you any idea without being any form of guidance, but any deal, where do you foresee the EBITDA margins in the U.S. and the long-term head mid to long-term best.
For the first, I'll turn it over to Pepe just mentioned briefly that when you look at channel performance in any particular quarter or even in the year '22, it has to be connected to how those channels have performed throughout the pandemic because there's been significant recovery in some of the channels that have not been performing as great in the last couple of years. But I'll let Pepe expand on that.
Exactly Arturo. And Rodrigo to give you perspective on this, when you compare to 2019, the traditional channel is growing 7.4% and the modern trade is growing 8.8%, while the on-premise channel is still below minus 9%, but that is mainly driven by the entertainment channel, which was the most impacted and has not recovered. However, the heating and drinking channel has already recovered or is in a recovery in the end of 2022. So what we're seeing in the short term is just a rebalancing of the channels to the pandemic effect.
I believe with respect to the second part, the profitability in the U.S., first of all, we're certainly satisfied with the performance in the U.S., not only in terms of the margins, this is one of the operations where we increased margins in '22 despite the challenging conditions for raw materials, especially aluminum and PET pricing. But even more importantly, the EBITDA on absolute basis continues to grow. Fourth quarter '22 was the 17th consecutive quarter of EBITDA growth in our U.S. business, which is also something that we're very satisfied with. As we look forward and taking into account what Emilio explained about input pricing, we're very confident that we are going to be continuing to grow overall EBITDA and maintain the margins that we've attained so far.
Our next question will come from Carlos Laboy with HSBC.
Just to stay with that previous question a little bit longer, which of the dynamics that drove margin improvement in Q4 do you think might most contribute to further margin gains in the U.S.
That's a very relevant point that you -- this has actually been the focus of how we manage the business in the U.S. because this is an operation where we always present this chart with 2 axes. One is the change in mix. And the second is the gross margin of that particular category. So we can identify that effect very clearly and very graphically. And the big opportunity certainly should come from a growth in single-serve growth in transaction packages, growth in the on-premise market and recovery of the on-premise market, in particular, which still is way below the pre-pandemic levels of 20% below prepandemic levels.
So if you look at both the channels and packages and look at the chart, there's still some opportunity to continue to grow any of those packages that are above the $3, $3.3 gross margin per unit case mark. And that's where we continue to focus our commercial strategy. So I think that's been a change in a very effective approach of our team in the U.S. to connect the strategy in the market with the profitability of certain packages. So that's how we sustain margins even in this environment with raw materials were very, very challenging in terms of pricing.
And if I may, just on refillables. Refillables last year seems to be going in the wrong direction going down. Do you see any changes in the pipeline for growing refillables better and faster?
Yes. refillables is one of our priorities in Latin America. -- universal bottle has proven successful. This is one of the initiatives that's very important. And also, as we -- we're going to be seeing a challenging also macro conditions in some of the markets. This will continue to be a very important strategy and an important investment for each one of our Latin American markets. So we expect that to maintain probably at the current level, maybe growing some -- in some particular markets is mostly to balance our price park architecture. I think refillables will be maybe more important in Ecuador. I don't know if you agree with that, Pepe, probably where we have more challenges in terms of competitive environment. It's very important in Argentina as well, which is the highest mix of returnables in any of our markets. But also Peru, Mexico, would be very focused in some of the multi-serve packages for returnables.
And Carlos, just to add to what Arturo was saying, it's important to take into account that during 2022, as we said, mix has gradually shifted from the turn to returnable due to the recovery of the modern trade and the on-premise channels. So -- and also, it's important that we have limitations in production due to short of some returnable glass presentations. So that probably -- that is not going to happen in 2023.
This concludes today's Q&A. I would now like to turn the call back over to management for closing remarks.
Thank you. And as always, we thank everyone for your time and interest in Arca Continental. Please reach out to our Investor Relations team for any questions you might have. Have a great day.
Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.