Budweiser Brewing Company APAC Limited Aktie

Welcome to the 2026 First Quarter Results Announcement Conference Call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. YJ Cheng, Chief Executive Officer and Co-Chair of the Board; and Mr. Bernardo Novick, Chief Financial Officer.

The results for the 3 months ended 31st of March 2026, can be found in the press release published earlier today and available on the Hong Kong Stock Exchanges and Budweiser APAC websites. Before proceeding, let me remind you that some of the information provided during this result call, including our answers to your questions on this call, may contain statements of future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. It is possible that Budweiser APAC actual results and financial condition may differ possibly materially from the anticipated results and the financial condition indicated in these forward-looking statements. Budweiser APAC is under no obligation to and expressly disclaims any such obligation to update the forward-looking statements as a result of new information, future events or otherwise.

For a discussion of some of the risks and important factors that could affect Budweiser APAC's future results, the risk factors in the company's prospectus dated 18th September 2019, the 2025 annual report published and any other documents that Budweiser APAC has made public.

I would also like to remind everyone that the financial figures discussed today are provided in U.S. dollars, unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated, percentage changes refer to comparisons with the 2025 full year. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities. As normalized figures are non-GAAP measures, the company disclosed the consolidated profit EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2026 first quarter results can also be found in the press release.

It is now my pleasure to pass the time to YJ. Sir, you may begin.

Thank you, Ari, and good morning, everyone. Thank you for joining today's call. We entered 2026 with a clear focus on recovering volume through disciplined execution across our market. For Bud APAC total volume returned to a positive growth, supported by continued strong momentum in India. In China, our increased investment shows a sign of progress. With the quarter-over-quarter volume decline tightening further as we remain committed to our strategy of enhancing our in-home route to market enriching our portfolio and innovating behind our mega brand to rebuild momentum. In South Korea, we gained market share in both on-premise and in-home channels.

Before we go over our financial results, I wanted to take a moment to introduce Bernardo Novick, our new Chief Financial Officer, effective from April 1 this year. Novick joined ABI Group in 2009 through the global MB program and has worked across various functions in multiple markets. He brings deep finance and global resource allocation expertise, having led projects, delivering savings and meaningful value creation. I'm pleased to welcome him to the Bud APAC team.

Let me now hand over to Novick for a brief introduction.

Good morning, everyone. I am delighted to join the Bud APAC team. I would like to thank you, YJ for your trust and invitation to join the team. I joined AB InBev 16 years ago and spent 5 years in finance roles, 5 years in commercial roles and 5 years in innovation roles where I led the corporate venture capital arm in New York. Most recently, I was responsible for our global capital allocation division reporting to the global CFO. I hope I can bring this experience to grow Bud APAC's business in a profitable way. I have already had the pleasure of meeting some of you joining the call today, and I look forward to meeting many more in the next weeks and months ahead.

Let me share our financial results for the first quarter of 2026 in more detail. In the first quarter, APAC volume returned to growth, even if it's just 0.1% after many quarters, driven by strong growth in India, and a sequential improvement in the industry and our volumes in China, with volume decline narrowing quarter-over-quarter. This progress was driven by both enhanced execution as well as increased investments across channels and our portfolio, which added temporary pressure to our bottom line. We also maintained strong brand momentum in South Korea, despite a soft industry and a challenging comparable last year. In India, we continue to advance premiumization, delivering strong double-digit volume and revenue growth.

In summary, for Bud APAC, total volumes increased by 0.1%. Revenue and revenue per hectoliter decreased by 0.7% and 0.8%, respectively. Normalized EBITDA decreased by 8.1%, while our normalized EBITDA margin contracted by 246 basis points.

Now let me cover some of the highlights from each of our major markets. In China, volumes decreased by 1.5%, improving sequentially with a quarter-over-quarter decline continuing to narrow since the second half of 2025. Revenue and revenue per hectoliter decreased by 4% and 2.5%, respectively, impacted by increased investment to support our wholesalers and activate our brands in the in-home and emerging channel. Normalized EBITDA decreased by 10.9%, impacted by our top line performance and increased investments. We continue to make progress in expanding our distribution in the in-home channel, while increasing the distribution of our premium brands. This premiumization is more clear in the online to off-line or O2O channel, which grew strong double digits in the quarter.

Now let me share with you some of the investments we are making on our brands through our marketing campaigns as well as liquid and package innovations to better connect with our consumers across more occasions and increased sales momentum particularly in the in-home channel. On Budweiser, we accelerated the national expansion of Budweiser Magnum, building on its strong consumer traction and sustained sales growth. In March, Budweiser Magnum, launched an integrated nationwide campaign, anchored by a strategic partnership with global football icon Erling Haaland, and the FIFA World Cup mega platform to drive geographic and channel expansion.

Regarding our Harbin family, we introduced Harbin 1900, celebrating its brewing heritage as the birthplace of Chinese beer. Position in the Core++ segment, which is the RMB 8 to RMB 10 price range. This new innovation is 100% pure malt classic lager, pairing distinctive vintage packaging with a rich authentic taste. The launch reinforces Harbin's role in driving innovation and placing new bets in this growing and important Core++ segment.

In South Korea, volumes decreased by low teens and revenue decreased by mid-single digits, mainly due to a challenging comparable in the first quarter of last year, driven by shipment phasing ahead of a price increase that if you recall, was in April 2025. Revenue per hectoliter on the other hand, increased by low single digits, also comparing with the first quarter last year before the price increase. This led to a normalized EBITDA decreasing by low teens. Having said that, we maintain a good commercial momentum in both in-home and on-premise channels, and we foresee a recovery in the second quarter.

Finally, India continues to grow and will play a bigger role in our footprint. Industry momentum continued in the first quarter, and we gained total market share. We delivered strong double-digit volume and revenue growth led by a strong growth in our premium and super premium portfolio. We also continue to see momentum in the moderation agenda with states like Maharashtra and Karnataka introducing changes that decreased the current relative tax advantage of hard liquor versus beer. We see this as a step in the right direction and a sign that some states understand the importance of evolving towards an alcohol tax policies that are consistent with global policy standards where high alcohol products are taxed higher than low alcohol products like beer.

And with that, YJ and I are here to answer any questions that you might have.

[Operator Instructions] Our first question is coming from Xiaopo Wei from Citi.

Can you hear me now?

Yes, we can hear you very well.

I'm sorry. That -- I have two questions on China. I'll ask one by one. The first one, in the past 2 years, we have seen a few senior management leadership changes in the company. So far is any achievement or breakthrough that the company would like to share with us with the new leadership? [Foreign Language]

I'm YJ. Let me take these questions. So let me start in English, then let me turn to Chinese, if needed. So the changes we have, mainly happened first half year last year. And the reason for the change is kind of retention between either global other between the region in China. So and also between Headquarter in China versus operation in the field in each sales region. And the reason for that is to share some best practice and to further strengthen their strengths in each area or each function and also learn each other best practice sharing. So that's kind of a normal retention changes. And to be able to share the more the answer to your question about the changes of the people.

As I mentioned earlier, we keep a consistency of our strategy which is focused on portfolio, brand portfolio, which is meaning Harbin and Budweiser and also focus on in-home and market. And third one is focus on execution. So those are the 3 strategies we set up early last year and we have no changes. And also, you see the progress we have been made as Novick just mentioned, quarter-over-quarter on decline narrow quarter-by-quarter and see very good trends.

And also, we see the execution in each area make a huge improvement, and we put a lot of effort to invest in our brand and also further focus on the in-home channel that the channel changes reached which and that's our further opportunity in our operation. So we see starting from second quarter last year and the fourth quarter last year, and first quarter this year, the things getting improved quarter-by-quarter. So I think that's I tried to answer your question.

Shall I start a second question?

Yes, go ahead.

Okay. The second question is about the channel inventory. As far as I can recall, the company in China start destocking the channel in 4Q '24. It has been a few quarters of destocking and I remember in the last quarterly earnings call, you mentioned that actually, our China inventory actually was young and lower versus historic level. But we know that China is a very dynamic market and the changing areas on a daily basis.

So were you foreseeing the future that the China channel inventory will be below historic level as a new norm? Or is any factor you expect to see before you become more exciting and try to restock the channel looking forward.

[Foreign Language]

Thank you for your question. You're right. We have been proactively taking steps to adjust our inventory given the current business environment. [Foreign Language]

Our next question is coming from Ye Liu from Goldman Sachs.

Thanks. Can you hear me?

Yes.

This is Liu from Goldman Sachs. Thanks for the opportunity and welcome Novick for your first earnings call with Bud APAC. I have 2 questions. The first one is on China. So basically, our ground check shows that there has been some volume recovery in the super premium segment, including Corona, Blue Girl in the first quarter. So how to look at the sustainability of this trend? How to comment on the on-trade consumption recovery so far, including any color on 2Q to date on the on-trade performance in China? I will translate to Mandarin by myself. [Foreign Language]

Let me take this question. I will start the summary of the answer first, then I'm going to talk a little bit detail in sort of answer in Chinese. Indeed we grow Super Premium volume by double digit in the first quarter 2026 as we focus on premiumization in the in-home channel and O2O.

In terms of on-trade recovery nightlife channel contribution was stable, and we grew volume in the nightlife the first quarter 2026. However, Chinese restaurant channel remains under pressure. [Foreign Language]

The second question is to our new CFO, Novick. So I would like to know what's the 3 key focus for you this year, would you please share with the investors on the call. Thank you so much.

Thank you, Liu. Nice to hear from you, and thanks for the question. So let me share the 3 priorities that me and my team will focus this year. The #1 priority is growth. And the main objective here is to stabilize the volumes in China. The second priority is to improve execution. And the third priority is value creation. So on the #1, the #1 is consistent to the business strategy that YJ was describing. And the main objective of the business is to grow volumes here, right? And in order to do that, we really need to stabilize volumes in China. And the finance role to do that is increasing investments and making the investments more effective. I think it's important here, when we manage to stabilize volumes in China, given our footprint in India and in Southeast Asia, will be able to reignite growth for the whole Budweiser APAC.

Number two priority is execution. I think here, finance has an important role, collaborating with our commercial team in China to enable and upgrade our route-to-market model to help on this transition to more volume in the in-home channel. That's another important priority for us.

And the third one is value creation. Here, we are reviewing internal investment decisions, improving efficiencies, cost controls. One example here, for example, we are reviewing the unit economics of different packs to make decisions that can help us be more efficient with resource allocation. But ultimately, Liu we are here for growth, and that's our main priority for this year. Thank you very much for the question.

Our next question is coming from Elsie Sheng from CLSA.

Thank you management for taking my questions. Thank you, YJ, and also welcome Novick. I have 2 questions. My first question is on China in-home development. Do you have any update or progress to share on the development of off-trade channel in China. I will translate myself. [Foreign Language]

I will ask my second question later. [Foreign Language]

Thank you, Elsie. This is YJ. Let me take this question. As a channel shift to in-home channel, we are taking actions to expand in the in-home channel to adapt. As we have a relative low exposure in in-home channel, which means we have a massive growth potential. We are investing to catch up. [Foreign Language]

My second question is on China commercial investment. So previously, management mentioned that you will increase marketing this year. Is that plan still on track? And what's the marketing plan for the coming peak season and sport events like World Cup? [Foreign Language]

Yes. So as Novick mentioned, as I mentioned earlier, in 2026, our top priority in China is a stabilized volume. To achieve this, we have given room to the team, to the commercial team to increase commercial investment. So that's the direction we set up for the commercial team. [Foreign Language]

Our next question is coming from Mavis Hui from DBS.

My first question is on China. Could we have some more updates on the growth of your emerging channels such as O2O instant retail and e-commerce in China. More importantly, how do margins and pricing dynamics across these channels compared with traditional off-trade and how are we managing potential channel conflict with our distributors? But let me translate first. [Foreign Language]

Thank you for your question. I will take this question as well. O2O is one of faster emerging channel in China. We have started to make a fair significant effort to increase our presence with it. And we see this as a great opportunity for us in 2026 and beyond. We partnered with a major O2O platform to further expand our participation. [Foreign Language]

And my second question is on Korea. Excluding shipment phasing effects, are we still seeing underlying share gains in South Korea? What are the key challenges to sustaining outperformance in the market? [Foreign Language]

Thank you. Let me take this question again. Total industry in Korea have remained soft in the first quarter 2026. With a soft consumer environment continued to impact overall alcohol consumption. However, our underlying momentum in Korea continued and we outperformed the industry in both the on-premise and in-home channel. [Foreign Language]

Our next question is coming from Anne Ling from Jefferies.

I have 2 questions here. First is on the cost of goods sold in general. We saw some raw materials price volatility, and this has been coming up recently for example, like aluminum. So what will be our view on the raw material costs for year 2027? [Foreign Language]

In 2026 of first quarter our cost per hectoliter has decreased by 0.8%, mainly driven by efficiency improvement, partially offset by commodity headwind. [Foreign Language]

[Foreign Language]. So my second question is on the India side. So could you share with us now on the Indian market update? How do we see the market competition and our strategy over there? I understand that we are focusing on more market share. So may I know when the company will start focusing on the profitability of the market? Is it still a little bit too early? And that competition is still very keen? Should -- I mean should Carlsberg be listed? What is your view on the competitive environment afterwards? [Foreign Language]

Thank you. In India, we are focused on sustainable and meaningful top line growth that can translate to EBITDA and cash flow growth accordingly. [Foreign Language]

Our next question is coming from Lillian Lou from Morgan Stanley.

And thank you, YJ and Bernardo for the detailed answer previously. Congrats to Bernardo for your new role. I have two questions. The first one is on China pricing because YJ just mentioned that the raw materials are fully hedged and were relatively stable. But on the pricing side, any price action and mix shift that you observed that could improve the overall pricing in the market in general? [Foreign Language]

I can take this question YJ.

Go ahead.

Lilian, nice to hear from you. Thank you for the question. I think all the answers should start with the same reminder that our main priority, right, is growth and particularly to stabilize the volumes in China. It's true that in the first quarter, our net revenue per hectoliter was below last year and this was impacted by investments, mainly in 3 objectives for the investments to support our wholesalers, to activate our brands and also to accelerate the growth in O2O.

But on the other hand, we had positive mix effects coming from our brands, mainly driven by our Premium and Super Premium brands. I think it's important to mention to you and the press that we expect to continue to invest in 2026.

Regarding price, we will continue to monitor always the prices in the market, and we are open to adjustments if something changes. But at this moment, we don't have any news regarding price increase for China.

My second question is on Korea -- South Korea market. We all know that last year, April, you had a price increase, which still benefited the first Q this year on the pricing side. But what will drive the South Korea revenue and also pricing and the EBITDA growth for the rest of the year, in particular, the industry remain a little bit soft and the competition is still there. So this is the question on Korea. [Foreign Language]

I can take this one too. Very good question, Lillian, thanks. When we think about like a medium-term margin growth for APAC East and Korea, I think there are mainly 3 things that can drive this. One is, of course, pricing. The second one, operational efficiencies. And the third one, I think it's important to mention is mix and innovations. Maybe let me talk about each one of them.

On prices, of course, we always consider our pricing decisions looking at what's happening in the beer market, but also the macroeconomic situation in the country. We'll continue to monitor similar to China. We don't have anything to announce at this point. On the second part, operational efficiencies. Here, we continue to implement cost management initiatives. This is one of our main strengths at Budweiser APAC, as YJ was talking about our efficiency and excellence programs that we have so this is something that we still see opportunities. And number three, I think mix and premiumization and innovations are very important for us in the future.

Maybe I can share a couple of examples one of them is the growth of Stella Artois in the on-trade. I think that's a prudent healthy growth. The other one is the nonalcoholic beer, like example like Cass 0.0. I think both of them are good examples of innovations that can both drive volume growth, but also margin expansion. So overall, I think that we see opportunities to keep recovering margins in Korea in the future. Thank you for the question.

In interest of time, our final question will come from Linda Huang from Macquarie.

My first one is regarding for the dividend. And given that Bernardo has really taken up the CFO role. So I just want to know that whether from the group perspective, whether you will change the capital allocation approach. Especially the last 2 years, right, we -- they paid out USD 0.0566 per share dividend to the shareholders. So whether this is the dividend per share policy under review. So this is my first question. [Foreign Language]

Thank you, Linda. Nice to hear from you. Thanks for the question. So I think it's important to remind everybody, right, we are working to deliver sustainable long-term results for our shareholders, right? And the other message is that our capital allocation strategy remains the same. Our first priority continues to be to invest in our business like we are doing this year to drive organic growth. followed by M&A when we see opportunities for acquisitions. That's the second one.

And then the third one to return to our shareholders, for example, via dividend, but it's also what we have been doing, right? So I think we are very proud of our dividend track record since the beginning, recently with the announcement of the $750 million dividend that we announced for 2025, which by the way, was consistent to the dividend for the previous 2024.

So I think if I have to summarize, we are working towards improving our business performance this year to be able to keep this consistency in the future. Thanks for the question.

My second question is regarding for our products, and I think this may be YJ can help. So when we compare China to the other Western countries. I think there's always plenty of alcohol product innovation. So I just want to know that, again, whether the management can elaborate more about our product innovation plans? And then what kind of the innovation strategy will fit well for our China market. [Foreign Language]

[Foreign Language]

Thank you. That concludes our Q&A session today. I would like to turn the conference back over to YJ for the closing remarks.

Thank you. As I mentioned on our 2025 annual results call early this year, our priority is to stabilize volume and rebuild our market share momentum in China by investing in our in-home route to market and a leading permium portfolio. The progress we have been seeing in the first quarter and have been encouraging.

On this positive note, thank you all for joining us today, and I'm looking forward to speaking to you soon.

Thank you. And this concludes today's results call. Please disconnect your lines. Thank you.

Welcome to the 2025 9 months results announcement conference call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. YJ Cheng, Chief Executive Officer and Co-Chair of the Board; and Mr. Ignacio Lares, Chief Financial Officer. The results for the 9 months ended 30th September 2025 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange's and Budweiser APAC's websites.

Before proceeding, let me remind you that some of the information provided during this results call, including our answers to your questions on this call may contain statements and future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. It is possible that the Budweiser APAC's actual results and financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. Budweiser APAC is under no obligation to and expressly disclaims any such obligation to update the forward-looking statements as a result of new information, future events or otherwise. For a discussion of some of the risks and important factors that could affect Budweiser APAC's future results, see risk factors in the company's prospectus dated 18th September 2019 and the 2024 Annual Report published and any other documents that Budweiser APAC has made public.

I would also like to remind everyone that the financial figures discussed today are provided in U.S. dollars, unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated. Percentage changes refer to comparisons with the same period in 2024. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities.

As normalized figures are non-GAAP measures, the company disclosed the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2025 9 months results can also be found in the press release.

It is now my pleasure to pass the time to YJ. Sir, you may begin.

Thank you, Rick, and good morning, everyone. Thank you for joining our call today. Our performance in China has been challenged over the past few quarters, as our results have not delivered on the full potential of our brand and organization. While the overall industry has been impacted by soft economic cycle, which had been even more pronounced in our footprint and mix of channels, we have recognized clear opportunities to enhance our route to market and portfolio execution to better align our results to our capabilities.

As a company of owners who struggle every day for operational excellence with our customers and consumers, we have been working in China to rightsize inventories and allocate resources. We have a clear view of where to improve. Our priority is to reignite growth and rebuild our market share momentum. We are moving with speed, focus and discipline to ensure that our business turns stronger, more efficient and better positioned to improve over time to outperform for the long term.

I will now hand it over to Iggy to provide more on our performance in the first 9 months and the third quarter for 2025. Thank you.

Thank you, YJ, and good morning, everyone. In the first 9 months of 2025, total volumes decreased by 7%. Revenue decreased by 6.6%, while revenue per hectoliter increased by 0.4%. Our normalized EBITDA decreased by 7.7%, and our normalized EBITDA margin contracted by 37 basis points.

In the third quarter, total volumes and revenue decreased by 8.6% and 8.4%, respectively, with ongoing challenges in China, partially offset by our performance in India. Revenue per hectoliter increased by 0.1%, driven by a positive geographic mix in India and revenue management initiatives in APAC East, partially offset by our performance in China. Our normalized EBITDA decreased by 6.9%, impacted by our top line performance, while our normalized EBITDA margin expanded by 46 basis points.

Now let me discuss some highlights for each of our major markets. In APAC West, in the first 9 months of the year, volumes and revenue decreased by 7.9% and 8.7%, respectively, while revenue per hectoliter decreased by 0.8%. Normalized EBITDA decreased by 9.7%.

In China, volumes in the third quarter decreased by 11.4%, impacted by continued weakness in our footprint and on-premise channels. Revenue decreased by 15.1%, while revenue per hectoliter decreased by 4.1%, impacted by increased investments behind innovations and brand activations as well as efforts to expand our in-home presence coupled with an adverse brand mix as we managed inventories. Normalized EBITDA decreased by 17.4%, impacted by our top line performance and operational deleverage.

On that note, as YJ mentioned earlier, we have a clear view of where we look to improve in China and how to achieve this. Accordingly, we are focused on improving our top line performance through the following areas: further strengthening our route to market with an elevated focus on the in-home channel across online, offline and O2O; increasing investment in our mega brands, such as Budweiser, Harbin and Corona, to win in the Premium, Core+ and Super Premium segments now and as the industry recovers; leading innovation within the industry across packaging, brands and liquids to increase category participation and develop new consumption occasions; expanding our footprint through targeted geographic expansion; and restoring our excellence in execution. We made further progress in our channel expansion strategy in the third quarter, focused on premiumizing the in-home channel as in-home consumption occasions continue to develop. In the first 9 months of the year, the contribution of the in-home channel to our volumes and revenue increased as we began to extend our distribution within this channel.

On the portfolio side, we continue to invest in diverse marketing campaigns and innovations to further increase the brand power of our portfolio, connect with consumers across more occasions and increase sales momentum. Corona expanded its signature Drinking with Lime ritual from bottles to cans with the launch of a full open-lid can design, which further reinforces the brand's differentiation and appeal. This innovation is now rolling out across online and retail channels to expand Corona's reach in in-home drinking occasions.

Budweiser introduced Budweiser Magnum in a 1-liter can, broadening its consumer reach with a greater in-home presence while retaining its striking black and gold design. The new packaging format further highlights the brand's distinctive brewing and aging process as well as its unique flavor.

On the digitization front, the usage and reach of BEES, our B2B wholesaler and customer engagement platform, continued to expand. As of September 2025, BEES was present in more than 320 cities across China. We continue to leverage technology to further enhance our commercial capabilities, optimize our route to market and strengthen our customer relationships.

While our performance in China has been disappointing, our businesses in South Korea and India have continued to deliver solid results. In India, in the third quarter, we delivered double-digit revenue growth, which translated into a strong EBITDA performance, further compounded by the lapping of additional costs incurred in the third quarter of last year on projects to enhance the digitization and integration of both financial and nonfinancial information. In the first 9 months of the year, the Budweiser brand continued to grow ahead of the industry with the volume and revenue of our Premium and Super Premium portfolio increasing by double digits.

In APAC East, in the first 9 months of the year, volumes decreased by 0.5% with revenue and revenue per hectoliter increasing by 1.8% and 2.3%, respectively. Normalized EBITDA increased by 0.3%, with our EBITDA margin decreasing by 46 basis points.

In the third quarter, volumes in South Korea were flattish as we continue to offset ongoing industry weakness by outperforming the industry in both on-premise and in-home channels. Revenue and revenue per hectoliter both grew by mid-single digits, driven by our ongoing revenue management initiatives and a positive brand mix. Meanwhile, our EBITDA and EBITDA margin expanded substantially supported by a strong commercial performance and commodity tailwinds.

We increased our commercial investment to bolster our competitiveness in the lead-up to Chuseok, one of the key selling periods in South Korea. From a portfolio perspective, we also unveiled recently Cass ALL Zero, South Korea's first nonalcoholic beer to emphasize a 4 Zero concept of 0 alcohol, 0 sugar, 0 calories and 0 gluten.

And with that, YJ and I are here to answer any questions that you may have.

[Operator Instructions] Our first question is coming from Lillian Lou from Morgan Stanley.

Can you hear me?

Yes, very well, Lillian.

I have 2 questions. One is about China. In particular, you mentioned in-home mix has been increasing but underlying -- and I would like to get more color about the brand performance, in particular, the major mega brands' performance relatively in third quarter. And also, what's the latest trend for Budweiser, Harbin Super Premium segments? That's my first question. I will ask the second one after that.

Okay. This is YJ, Lillian. Thanks for your question. In terms of brand performance, let's talk about it by channel. By channel, on-premise got impacted by the industry in the past few years' weakness. We also got impacted as well. And also the new trend for the channel, which is in in-home O2O, that's one we have a gap, and we are working with the vendors, retailers to build a platform to fill the gap, what we have and which linked to the brand portfolio we have. The brand portfolio we have, which the consumer knows and love, we have rich portfolio.

For the -- we've also focused on innovation to meet the consumer needs by channels, for example, Budweiser, fits the in-home channel, it created a 740 ml, a bigger can, which is a quite good performance in the in-home channel. And also in terms of O2O, we also create a Bud Magnum 1-liter can to fill the gap and the channel, O2O. And for the Super Premier, we see the O2O trend, the performance is quite good. We have a rich portfolio of Super Premier as a company we are. And give example, Corona, we also developed a full open-lid can, not only bottle with lime but also able to allow the consumer to drink Corona with lime in a full open-lid can.

So those are -- talk about brand linked to the channel with the innovation. See the gap we have. See the soft weakness that we have in the Premier. Those are the actions we see -- we take in terms of channel investment, cooperation and also the innovation we develop. We see good trend on this.

And also for the Core+, we are working hard on it. And we do have a very good example, the benchmark in Korea. You see the cost, so priority, I think to the innovation. There's a big innovation, big best practice we're going to apply and learn within the APAC. So -- but I try to break this by channel linked to the innovation and the gap we have, the action we take, investment we take, best practice we learn from Korea to be able to answer your question. Thank you.

Thanks, YJ. My next question is about Korea. In Korea, we understand that the whole industry demand is still pretty weak and Budweiser and Cass are gaining market share. I'm trying to understand what is the latest demand trending into fourth quarter and next year and reacting to that, what the competition dynamic could shift to.

No, thank you for the question, Lillian. I'll take that one on Korea. So you're correct that the total industry remains soft, right, given the macroeconomics. The demand has been soft now for several quarters. If you take a look at maybe the economic indicators, we've seen CPI stabilized, so inflation has stabilized and consumer sentiment actually has been improving sequentially over the past few months. However, by the same token, the savings rate, right, for consumers has been on the rise, and that's despite inflation being under control and actually, interest rates being cut in Korea as well.

So consumers are effectively acting as if they're under some level of pressure, and they're prioritizing essential spending, which, of course, includes food and utilities within that category. So this consumer frugality trend or kind of short-term effect is currently, of course, impacting overall alcohol consumption as well as the natural structural trade up, right, that you often see from lower-priced alternatives, such as Soju, of course, into beer, which has been long standing in Korea.

But even within this context, right, you still see pockets of growth within Korea. And so we see nonalcoholic beer growing. We see flavored beer growing. We see RTDs outperforming. So these are also gaining popularity as they are in other developed markets or more developed markets, right, which presents, of course, opportunities for us as well.

Then from a competition perspective, the way I would look at it is, I mean, the summer and the Chuseok selling periods are usually the most active, right, in terms of promotional activity, investment innovations, and this year really has been no exception. In this context, we're very pleased with the commercial results from the South Korea team in the third quarter. They continue to gain market share in both the on-premise and in-home channels, and that was led, of course, by the Core portfolio and by Cass, which helped to offset, of course, the soft industry, right, the soft demand, as we just discussed.

But I think most importantly, perhaps the fact that the brands are very healthy there, the innovation pipeline has been very effective at solving consumer needs, right, in the last couple of years. In Core specifically, of course, we've continued to increase consumer participation in the category via nonalcoholic beer, flavored beer and several other liquid innovations, including Cass 0.0, the Cass ALL Zero, of course, that I discussed in my comments earlier, and then different variants, of course, the Cass Lemon Squeeze as well, not to mention, of course, HANMAC's Extra Creamy Draft can as well.

On top of that, we're still focused, of course, on continuing to lead premiumization, which we see as an opportunity as well given it remains under-indexed in Korea relative to other more developed markets. So I think as we move into this last quarter of the year and into 2026 with our brand portfolio healthy, with it being very well supported by the route to market we have there and by the very strong team in Korea, we see ourselves as ready to continue to lead beer industry growth across Korea for the future. So I hope that answers your question. Thank you so much, Lillian.

Our next question is coming from Wenbo Chen from CICC.

I have 2 questions. First is about channel inventory. We have seen ongoing progress with destocking in the third quarter. So could you please share what's our outlook for the China market in the fourth quarter and the coming year? And do we expect a rebound in the selling performance?

Wenbo, no, thank you for the question. I mean you're correct. We've been proactively taking steps, right, to adjust or manage our inventory in the current business environment, and that's with the intent, of course, of ensuring the health of our route to market, right? And we've been doing that since about the late third quarter of 2024.

Our inventories as of the end of the third quarter this year, third quarter '25 are now actually lower than they would have been in the same period of last year. And that's both in terms of absolute inventory and days of inventory, and we would expect this, of course, to be lower than the industry average. So we've made good progress, I think, on the inventory front thus far.

Going forward, we'll continue to manage our inventory very attentively, so we don't give an explicit outlook, but we always want to make sure that we're on top of inventories and managing it very attentively. And there will be adjustments, of course, based on sell-out trend changes as we move forward. However, we wouldn't expect these to be necessarily as significant as what we have done, of course, over the past year. So I hope that answers your question, Wenbo.

Okay. And my second question is about the in-home channel. We have made great progress in the in-home channel this year, and you just mentioned our optimized product mix. Could you also share the current penetration level of the in-home channel across the business in the first 3 quarters? And also, what are the plans for the further expansion in the fourth quarter in the next year?

Yes. First, thank you for the kind words. We've been working very hard, as YJ also mentioned, right, on making progress in the in-home, which is a big priority for us. And of course, you can see that in many of our markets. Maybe the way we tackle this is, I mean, first and foremost, with increasing disposable income and market maturity across China, we would expect both the in-home channel to continue to grow and the premiumization trend to take more root there over time. And this, of course, offers us one of the largest opportunities to expand our business moving forward.

When we look at the current -- to your point on penetration, current level of the off-trader in-home channel in China, it's directionally 60-plus percent of the industry. However, it only accounts for a little bit more than 50% of our channel mix, right? So we still have a big opportunity to expand our presence closer to the industry average. And we know that the in-home will continue to grow its share of industry, as I mentioned, as the market continues to mature. So we'll hopefully catch both, right? Close the percentage mix here and its weight will increase rather over time.

Then from a brand and portfolio perspective, and YJ was alluding to this earlier, right, in retail, it's essential to have a full portfolio, right? And you need to have various packages at each critical price point to fulfill different consumer demands. We're very fortunate, right, to have the portfolio that we have available to us. And the brand power of that portfolio is actually significantly higher than our market share, right? So we know that it offers the potential to drive far more penetration that we have today. We have solid plans here, and we're going to continue to invest behind our mega brands with the strong mega platforms we have to achieve that.

The teams also continued to make progress on the right packs, right? So it's important to have the right assortment, as we were discussing, at the point of sale and to have key price points covered. And the biggest remaining opportunity, as we've shared before and YJ mentioned earlier on the call, is really on Core+, right, which is particularly relevant in the in-home channel.

Then from a route-to-market perspective, the key to successful in-home expansion is really to expand the high-quality distribution network to be able to cover more points of sale. We've been doing that over the past couple of quarters going wider and deeper even in geographies where we already have a well-established presence. So we're developing new Tier 1 and Tier 2 wholesalers to help us expand to more points of sale. This takes time, of course, as you need to recruit wholesalers and build capabilities, right, to ensure that you have the right picture of success in every in-home point of sale.

But the teams are very encouraged with the progress here and maybe 2 proof points I would probably give are: one, the contribution of the in-home channel to our total volume and revenue has continued to increase, so that focus is driving us in the right direction; and second of all, when we look at the in-home channel, actually, Premium and Super Premium's contribution within in-home is now outpacing that of Chinese restaurants, right? So we're seeing the in-home channel premiumize as the teams exert their energy and their efforts there.

So I would echo YJ's points, right? I would say the team has the right plan and the right initiatives in mind. There's progress already on several of the portfolio and route-to-market areas, and now there's just a lot of work to do, a lot of work to be done, right, to scale this with consistent execution in the quarters to come. So thank you so much for the question, Wenbo.

Our next question is from Chen Luo from Bank of America.

So I've got 2 questions. Both of them are on China. The first question is about our branding strategy. Early this year, we heard about our commitment to developing the Harbin brand nationwide, and most recently, channel [ checks ] seem to suggest that we are making even further commitment to the same strategy.

Considering the rise of the local and regional brands and the very niche brands in China recently, do we think Harbin is strong enough to compete, especially to compete in Guangdong province. So this is our stronghold province, but we now see big pressure of share losses to local brands. Do we believe local consumers are willing to switch from Zhujiang or Liquan to Harbin, which originated from Northeast in China? Are we going to develop some regional brands to bond with local consumers given the success of Sedrin [ Lychee ] in Fujian province? So maybe I'll stop here. Later, I will ask my second question.

Okay. No, thank you for the question, Luo Chen. Maybe let me start here. I think if we didn't have confidence in Harbin, right, we wouldn't have prioritized it for our first offering in the Core -- in the RMB 8 price point, right? So if you think about it, Harbin has been a national brand for years and has a broad presence nationwide across different channels, right? It's -- given the amount of time the brand has existed for, given the presence in multiple provinces, it's one of the few truly national brands in China. In Guangdong specifically, the brand has been there for a long time, and we've been developing the brand, particularly in the on-premise channels but also, of course, in the in-home more recently, focusing historically more on the RMB 6 price point.

As we expand into the in-home, we chose Harbin Icy GD Zero Sugar priced at that RMB 8 price point [ in CR ] to kind of leverage the brand power of Harbin, both nationally but also in Guangdong, which actually stacks up very well versus other local brands. So we're, of course, bullish on Harbin overall in Icy GD, in particular, based on that starting point from a brand power perspective.

And then as YJ mentioned earlier, based on the superiority framework we have in place, where we test liquid, packaging, positioning, communication and value with consumers, we know that we have a superior offering, right, one that should outperform other offerings in the market at the price point at which its being offered. So we know we have a strong horse in the race.

From that perspective, the sales volume of Harbin Icy GD Zero Sugar, we also actually tested with consumers where the volume would come from. And actually, most of that volume is either sourced from existing consumers trading up within our portfolio, so moving up from RMB 6 such as Harbin Icy into RMB 8 or also successful conversions from other local competitor brands, right? And so the fact that it has both a functional benefit and a specific partnership behind it, right, with the NBA, so zero sugar plus NBA partnership, made it a superior offering, which is explaining a bit that advantage that it has against other brands.

By the same token, you're right. China is a very large country, and you need more than one brand to be successful. Harbin Icy GD Zero Sugar represents our first offering in that RMB 8 price point, and it is a priority for us to capture growth opportunities with this brand, but we know that we will need a portfolio over time. In other places, we might complement our portfolio with other Harbin innovations. We, of course, have local brands that have innovation opportunities, as you mentioned as well.

Beyond Harbin, of course, we've got Sedrin in Fujian, which is doing very well, and I'm sure you would have seen it during your most recent visit there, Nanchang in Jiangxi, Big Boss in Jiangsu, Double Deer in Wenzhou and so on and so forth, right? So we can also invest behind some of these local brands, and we have a very solid innovation pipeline across different regions, which is designed to be tailored for local consumer needs and should be complementary to what we're doing on the Harbin brand today.

So I think from a brand and portfolio perspective, we're in a good place. I think the key element, going back to YJ's point, will be the expansion of our in-home coverage and distribution and the enhancement of our trade execution. So I think the better those 2 things are done, the more we will get it at the portfolio that I just mentioned. So lots of work to do but the teams are committed to the brands, and they're actually quite excited about the growth potential that they show at this point. So I hope that answers your first question.

That's very helpful. The second question is about the channel in China. Despite our progress with the in-home channel, the on-trade channel is still witnessing quite big declines. How are we going to sustain the sales momentum in the on-trade channel? How are we going to cope with the rise of the new channels amid the increasing channel fragmentation?

Well, thank you for the question. Yes. So I think there's a couple of things. It's more of a question of the magic of the and versus or, right? We need to do well in both channels. We've been somewhat conservative on our expectations on on-premise recovery because, of course, the trend for consumer occasions growing in the in-home continues, and it's been taking place at a similar rate for a while. So in terms of on-premise recovery, we haven't really seen a significant improvement yet.

By the same token, we continue to sustain our investment in the channel. This is still a critical place, right, to do brand building, to have effective innovation launches, et cetera. And it's very important for the health of many of our wholesalers. It will be very important for us to continue to invest here, particularly for when the on-trade begins to recover as well.

In the interim, though, we're focusing on the factors that are more inside of our control, right? We're closely working with the distributors to optimize packaging assortment, right? And so the launch of different packaging examples like the ones YJ gave before on Budweiser and Corona and also Blue Girl are tailored for that current consumption environment. We're also investing significantly in trade execution, so I think brand promoters, targeted food streets, essentially things that allow us to elevate the consumer drinking experience and promote on-premise consumption in the areas and sub-channels that have been more resilient within there.

But you're right, in terms of emerging channels, right, the instant retail, O2O and e-commerce channels continue to grow. They're a big focus for us moving forward. The O2O channel actually conveniently skews more premium, which is beneficial, right, to our in-home premiumization efforts, and we benefit from having a full portfolio there. And of course, the contribution of O2O to our in-home sales mix is also increasing.

So yes, we're engaged with our wholesalers to utilize these platforms to drive traffic, to promote different drinking occasions for our full portfolio and to capture growth opportunities. So I don't think we can choose one or the other. I think we need to do a good job of maintaining the on-premise, while building a stronger in-home presence, which we're doing very actively today. Thank you for the question, Luo Chen.

Our next question is coming from Mavis Hui from DBS.

My first one is on low-alcohol beer. On the back of rising health awareness, what could be our impending strategies on product innovation and advertising and promotion to further seize market share in low-alcohol products? And do we have some expectations on -- or the targets on the proportion of our sales coming from light beers or alcohol-free products in 5 years' time?

Thank you for the question, Mavis. Yes. So where I would start is, I mean, we constantly interact with consumers to get feedback on their needs, and then we innovate, right, to ensure that our portfolio is providing balanced choices that meet these needs. And we're seeing nonalcoholic and low-alcohol beers gaining popularity in many markets.

If you look at APAC overall, the development of both nonalc and low alc is actually quite different by market. So maybe I'll cover it by country. I think if you go to China, nonalc and low-alc beer is still a niche market today, right? And consumers have many different nonalcoholic options, which can serve as great alternatives in nonalcohol-appropriate occasions. However, when consumers drink beer, they generally still prefer to consume alcohol, right? So we're here present with Budweiser 0.0, with Corona Cero as well here in China, but it's more with the intent of growing the nonalcoholic beer segment in the right way and preparing for the future as the China market matures.

If you move to South Korea, it's a bit different, right? Nonalcoholic beer is gaining popularity, and we expect, of course, that momentum to continue. There, we have several nonalcoholic product innovations behind Cass, right? So we have Cass 0.0. We have the all-new Cass ALL Zero, which we mentioned earlier, and we have flavored variants, right, like the Cass Lemon Squeeze 0.0 as well.

So we're seeing success with different offerings there, and all of these offerings are actually quite helpful because in both the nonalcoholic and low-alcoholic space, they're increasing consumer participation in the category. They're providing incremental volumes, right, to the team there, so they're helping us to offset some of that industry softness we discussed before. And they're actually also incremental to our profitability as well. So it kind of serves all 3 purposes.

And then if we move to India, right, the beer market has been traditionally dominated by hard liquor and very high alcohol percentages, right, so 40-plus percent ABV products. Beer is growing in India and strong beer, so think 6% to 8% ABV are a big part of the India beer market today. However, there's a growing trend, right, towards lower alcohol products, which favors, of course, the growth of the beer category overall in India.

And yes, within this context, nonalcohol beers have a role to play. They'll help to provide consumers in India more choices, right, to match their needs and their lifestyles. And our leading nonalcoholic offerings in India today include Budweiser 0.0, flavored Budweiser, which is Green Apple and Hoegaarden 0.0, right?

So I think each of the markets is in a different place. We haven't shared targets at a -- by market level, but we have high growth ambitions across the board. It's just a question of taking advantage of market maturity to make sure we have the right offerings in the right place, and we lead the development of the nonalcoholic segment as well. Thank you for the question, Mavis.

And my second question is about India. Can we have some more updates on the biggest barriers to scaling up faster in India aside from religious or cultural diversity? For example, would it be the route to market, regulatory hurdles or maybe consumer education? And where do we see the most untapped growth opportunities in the market over the next 1 to 2 years?

Thank you for the question, Mavis. Look, in India, we're focused on consistent and sustainable top line growth, first and foremost, particularly given the maturity level of our India business. And of course, we want it that to translate both to bottom line and cash flow growth as well. In India, we have strong growth momentum. The Premium, Super Premium revenue, which is roughly 2/3 of our business in India today, grew by double digits, both in the quarter and year-to-date, right, first 9 months of the year. And the Budweiser brand, of course, continues to grow ahead of the industry.

Premiumization continues to be the most critical driver, right, of EBITDA performance as well. We delivered strong results with double-digit revenue growth and significant EBITDA margin improvement, which you would have seen in our APAC West results. And of course, admittedly, this was on a softer base in the second quarter last year, but we still see the benefit of strong premium growth in our quarterly results.

In terms of the industry overall, year-to-date, it continues to grow, which is also helpful, of course. As you'll recall, India has very low per capita consumption, so that's what makes the opportunity so enticing long term. The industry is expected to continue growing, and that's both in volume and revenue terms, and that's actually even before we consider the impact of moderation initiatives, which we see as an opportunity to unlock an even more exciting future for India.

And I mean we're encouraged by a few things we've seen in the last few quarters, right? So the number of points of sale in some states, including Uttar Pradesh, for example, have increased. In Uttar Pradesh, they actually roughly doubled the number of outlets that are allowed to sell beer, so there's more than 10,000 points of sale of beer now. Some states are experimenting with low-alcohol bar retail vans, which can serve beer or wine. And as these become allowed and they're introduced in some key cities like Noida and Lucknow, we see, of course, that picks up consumer demand. And then in Maharashtra, we've also actually seen positive changes for both excise as well as how beer distribution can be done. So we see some signs in different places that help to advance the industry moving forward.

And then among things we can control even through that period, productivity is also an important driver, right, of our ambitions in India. That will help us to drive EBITDA margins. And the way we're doing it is the supply chain teams continue to make progress here by benchmarking our best-in-class small breweries in China, which are referenced, looking at initiatives that they can replicate there in India, and we see very good progress on these initiatives that are helping us to accelerate profitability. So it's a bit of these different buckets, but hopefully, that answers your question as well, Mavis. Thank you so much.

Our next question is coming from Anne Ling from Jefferies.

I have 2 questions, 1 for China and 1 for Korea and Taiwan. So first, on the China side, on the commercial investment, how do you allocate resources between the on-trade and off-trade currently? And management mentioned previously the mega platform investment in third quarter '25. So would you share with us what is the ROE when you compare to like some of the previous initiatives? And looking ahead, how do you plan to allocate ad spend or marketing spend across different channels, for example, digital platform, entertainment or sports events? That's my first question.

Okay. Thank you for the question. A few things to unpack here, so let me maybe try and break it down into components. I think the first piece on mega platforms, I think we're very fortunate, right, to have access to the mega platforms. That's one of the big benefits that we have. And these, of course, would not necessarily make sense to pursue on an individual country basis, right? So here, we're very lucky that they're relevant with consumers in many markets, and we benefit from 2 things. We benefit from, of course, a more manageable cost by taking on these mega platforms at a global level and if we undertook them, of course, ourselves for 1 or 2 markets. But then we also get the opportunity to activate them with different brands in different markets based on consumer preferences and needs, right? So that's helped a lot to make the mega platforms high ROI initiatives in general. And then, of course, good examples of that would be things like FIFA, the Olympic partnership and many music platforms, right, a good example being Tomorrowland, which we'll be doing in Shanghai, right, later in November.

In terms of commercial investments by channel and how we think about them, going back to maybe the question earlier, right, we're sustaining our investment in the on-premise channels because we still see them as critical for route to market, critical for brand building. So despite, of course, the pressure on the on-premise channels, they still play a critical role. By the same token, the incremental investments that we're making are going more towards the in-home channels, right, and especially as YJ was saying before, the emerging sub-channels, so to all instant retail, e-commerce, right? So as in-home occasions continue to develop, we're putting a larger proportion of our spend in that direction.

And then given, of course, the market, right, has been shifting quite a bit, we look to continue to remain agile in the context of that macro environment. So as channels recover, et cetera, we're actually in quite an easy position to increase or adjust our spend accordingly.

Then in terms of marketing spend or marketing investment specifically, the brand power of our portfolio is the critical element for driving premiumization, right? So that's our reference for market share growth potential. And from that perspective, we look to continue to give differentiated offerings to our consumers and drive more value, right, for our premium brands with unique experiences.

In the kind of 9 months of '25, our investment as a percentage of revenue increased, and that was driven mainly by marketing investment on our mega brands and behind our mega platforms, right? So they're the FIFA focus, right, for Budweiser, the music focus for Budweiser, the NBA sponsorship and campaigns for Harbin have been the places where we look to continue to create premium and kind of trend-setting experiences. And these need to be rooted, of course, on consumer passion points.

The second piece has been around innovations, right? So launching the Budweiser Magnum 1 liter that YJ mentioned, the Corona full open-lid can as well that YJ mentioned, which give us a chance to increase category participation and develop new consumption occasions as well, right? So if you think about the Corona full open-lid can, it allows consumers to have a lime experience in a can in in-home setting, which is something that, of course, is a much nicer experience than without it.

And then the third area of focus is increasing direct consumer communication, right, so with differences from media channels and points of contact, making sure we increase our consumer reach and contact frequency to deliver that innovation and that mega platform messaging in the right way. So we'll continue to invest in diverse marketing campaigns and innovations, and the goal will be to further bolster the brand power of the portfolio to continue to connect with consumers, obviously, across more occasions and then, of course, to increase our sales momentum as we move forward. Thank you for the question, Anne.

Got it. Got it. And my second question is on -- back to the Korea and also like the Taiwan custom update. And so would you give us an update on the status on the 2 -- these 2 recent event? Number one is that the current customer tax dispute, first reported in Feb '24 and then like in June, you also have an update on that. So I would like to get an update on the Korean dispute.

And the second is the impact from the antidumping duties in Taiwan for the 4 months from July. So we understand both are like small events but would love to hear some comments from you. That's all my question.

Thank you for the question, Anne. So on the Korea customs tax side, I mean, the dispute is ongoing. What I can share is what we shared via the press release, which is obviously in 2023, right, during the year ending 2023. Oriental Brewery, which is a wholly owned subsidiary in South Korea recorded USD 66 million nonunderlying charge, and that related to a customs audit claim, right, which is reported in our financial statements that year. During the third quarter of this year, right, so the period ending 30th of September of 2025, OB recorded an USD 18 million nonunderlying charge, and that was related to these same customs audit claims but for the remaining audit periods. So accordingly, the aggregate amount of nonunderlying charges that are related, right, to such claims is now USD 84 million, and we shared that the potential penalty exposure was not expected to be material to the company.

As you're well aware, we continue to vigorously defend against the customs tax dispute, which, as we mentioned in the past, can be a lengthy and potentially multiyear process. And we remain committed to upholding the highest standards of compliance across all our operations as well.

On Taiwan, specifically, the -- there was a provisional tariff, which, you're correct, which is more than 33%, which was announced back in June. Since then, the rate has been slightly adjusted by 2.5 percentage points down to 31.3% in the third quarter. And of course, we're closely following the situation and continue to monitor for further updates in the months to come. But that's the only update thus far, right, a small adjustment down in the tariff rate in the third quarter.

I think the point for us on Taiwan is we value the Taiwan market, and our priority there is ensuring that our consumers and our customers have full access, right, without any disruption to our portfolio of beers, the full portfolio of beers, right, they choose from. So we continue to carefully assess actions to support our wholesalers and local consumers with that perspective in mind. So I think that's all I have for those 2 topics, Anne.

Our next question is coming from Leaf Liu from Goldman Sachs.

Can you hear me?

Yes, very well, Leaf.

I also have 2 questions. The first one is on the product innovation in Korea. We indeed deliver quite strong results in Korea, especially with ASP up 5%. So won't you discuss how to look at your future premiumization strategy in Korea? Also, any specific color on the performance of all the great new products launched in the recent 2 years, as you mentioned, Cass Zero and -- 0.0, Cass Lemon Squeeze? And also, will we continue to see strength in ASP and product mix in Korea going ahead?

Thank you for the question, Leaf. I mean South Korea, as we discussed previously, it's one of the more mature markets we have in Asia and the Premium segment is still quite underdeveloped, right, versus other similar markets. And the price and margin ladders in Korea are historically much more compressed than in other countries, so consumers have been less aware of the reasons really to pay a premium price for premium products. And this, of course, means that the premium mix growth in the past was not as pronounced as it could be.

So I mean, we've been making an extensive effort, right, to drive premium experience at an expanded price, Premium to Core. We've been doing that in the on-premise channel, leading with Stella Artois, but the rest of the Premium portfolio has been helping there, too. And you've probably seen, right, the Perfect Serve program that the teams have been executing with Stella draft. So the toolkits that we provide there to bars and restaurants make the consumption experience far more elevated than historically would be the case. They strengthened our Premium brand equity and they allow consumers to pay more, right?

And so in the on-premise channel, of course, the weight of premium beer has increased as a result. And actually, more recently, Stella Artois has taken the #1 position in premium draft as well, which the team is very proud of there. So in the past 3 years, it's really been about helping consumers to see the value of premium products, and this helps to expand the price ladder for premium products moving forward.

And in terms of innovation or new products, right, we share your excitement about innovation in Korea. So thank you for the kind words. HANMAC Creamy Draft, which is priced at a premium to Cass, is gaining popularity in the on-premise channel. So the teams are quite pleased with that as well, and we continue to expand its presence in bars and restaurants. In the third quarter, actually, HANMAC grew by double digits, so it's reinforcing its position within the portfolio there.

We also continue to increase consumer participation, as I was saying earlier, via non-alcoholic beer and some of the other flavored innovations, so Cass 0.0, Cass ALL Zero and the different variants of Cass Lemon Squeeze are doing very well there, too. So yes, we're very pleased with the healthy brand portfolio, the strong route to market and the people capabilities we have there, and we're excited to continue to lead the beer industry growth in Korea moving forward. Thanks for the question, Leaf.

That's very clear. And my second question is on group level cost. So how to look at any potential cost-benefits into next year with our 12-month rolling hedging scheme?

I mean, through the first 9 months of the year, our cost of goods on a per hectoliter basis has roughly been flattish, right, remained largely flattish. In fact, it decreased by 0.4%. So we've been taking advantage of commodity tailwinds this year, right, which is a product of 2024 hedged pricing, right, versus 2023 as well as the efficiency improvements that you count on us to do, and that's been partially offset by country mix, right, with Korea outperforming relative to China -- Korea and India performing relative to China.

We've not really made any changes to our commodity hedging strategy, so you can still think directionally speaking around packaging material cost trends in the context of a roughly 12-month hedging policy. If you look at spot pricing, right, for the last few months, barley has continued to decline or been softer than the previous year even if in a more muted rate, so I think more like low single-digit decline. If you look at aluminum pricing in the market, it's continued to increase in 2025 versus 2024, so that one presents a bit of a headwind. It's now sitting in the high USD 2,000s per ton, whereas it was more low to mid-2,000s, right, at kind of bottom.

Energy is a bit harder to predict and to hedge, but it's been mostly neutral thus far, right? So we don't really give a guidance, but if you just took a look at 2025 pricing versus 2024 pricing and you used a fairly simple view of hedging, you'd expect probably a slight headwind, right, in commodity pricing. As, of course, given we're already late in '25, we would be mostly hedged for next year.

But I think the reality is the way we structure our business, and we've said this in the past, is to leverage our efficiency improvements and cost management initiatives to be able to manage, right, these types of changes. And given commodity escalations fairly moderated, it wouldn't be a stretch for us to ask our operations, right, to do their best to offset as much of the impact of commodities moving forward. So if everything goes this way, that should leave us a premiumization as ideally the most meaningful driver or variable, right, for cost of goods escalation as we move forward and look into 2026. So thank you for the question, Leaf.

In the interest of time, our final questions will come from Linda Huang from Macquarie.

I have 2 questions regarding China. The first one is regarding for the net revenue per hectoliter because during the third quarter, we found that it's under the bigger pressure compared to the first half. So can you give us some of the context what is driving this? And then how do you see this trend going forward?

Yes. Thank you for the question, Linda. I mean, in the third quarter, our net revenue per hectoliter decreased approximately 4 percentage points, and this was a consequence of increased investments behind brand activations and our innovations with a focus, of course, on expanding our in-home presence, coupled with an adverse brand mix, particularly as we managed inventories as well.

I mean we remain very agile in our investments, and within the context of the current consumption environment, that means where, how and how much we invest. If we look at the third quarter specifically, a greater proportion of our investments actually went to through-the-line campaigns, which were designed to provide as much value as possible to our consumers, to drive traffic for the in-home and to support our route to market in that regard as well. So you would have seen a lower net revenue per hectoliter with, on the other side, kind of a reduced sales package investment at the same time. So you could think of it as a bit of a switch in kind of investment mechanisms or areas of focus, right, with maybe more above-the-line or gross profit investment and less sales and marketing or SG&A investment.

Despite the increased investment, though, both behind brands and innovations, the contribution actually of our Premium and Super Premium segments to our total revenue continued to increase in the quarter. And yes, equally important, I mean, we continue to maintain pricing discipline while investing, right? So we'll look to lead and grow the category and drive value for our consumers in a disciplined way. And so yes, as we move forward, we still expect premiumization will continue to be the primary driver for both top line growth and for margin expansion as well. Thank you for the question, Linda.

Yes. So the second one is regarding for industry because I also noticed that the private label trend is taking off in China, and there's many retailers right now, they also have their own beer brands. So does the company have any plan to work as an OEM with those retailers?

Yes, Linda, this is YJ. Let me take this question. In terms of OER, I think the major thing that are linked to the people who like to have retail, like to have OEM is why is the consumer want to have a differentiation of the beer. And second one is with the current industry, the extra capacity and the efficiency in the breweries.

So thanks for everybody really to our Fujian market and Fujian brewery back in the week of September 15. So you already see we are the company, how a rich portfolio can provide consumers the differentiation of the brand and package. So we have a big advantage in terms of differentiation that can meet consumers' needs.

And second one, see the capability in the brewery and the efficiency we have in Fujian and also linked to the new technology, linked to the high quality growth. So we do have this kind of advantage in terms of differentiation of the brand and also efficiency improvement, the excellent program and the high technology we have. So that's all the advantage we have regard to make this happen.

And let me summarize what we just talked about. First, in terms of brand portfolio, we have rich -- we got to strengthen this further to the consumer. And our route to market not only on-premise but also the new channels, in-home and O2O, that are going to invest and build our platform. And third one is the most important for us, after we have a plan, we have our initiative, the key is execution. So the execution, I'm talking about across 3 R: responsibility, resources and recognition. We're going to have the team on the field to own the plan and initiative, which is a very clear target and KPI to be able to track it.

In terms of the resources, we're going to further invest the channel and also the brand. So we're going to use an excellent program to develop the best practice and the toolkit to help people to be able to implement the target we have.

And at the end of the day, we're going to recognize people who's better, who's not good and recognize people and to reward and consequent people clearly. So those are the 3 I talked about. We also developed a platform we call [ One Bud ] platform between commercial and the supply chain to work together to make this happen. We are on the stage to build a 1-year plan for next year, so our direction is quite clear, keep the momentum and build -- see the gap we have, build a plan and the portfolio, the route-to-market execution and to have the next quarter as a bridge to bring our performance to be stabilized and further get -- improve time by time.

So I want to use this opportunity to thank the analysts, investor for your attention to our performance. We're going to speed up the speed, focus and the discipline of the execution. Thank you.

This concludes our Q&A session today. I would like to turn the conference back over to YJ for the closing remarks.

Thank you, Rick. As discussed on the call today, we recognize that our results are out of sync with the quality of our brand portfolio, route to market and people. We are actively correcting this by focus on strengthening our key portfolio offerings, speeding our in-home route to market and enhance our execution to capture future growth opportunities in China.

We are pleased with the results of our business outside of China and looking forward, continue their momentum as we improve our results to be more in line with the potential of our business.

Thank you all for joining us today, and I'm looking forward to speaking to you again soon.

This concludes today's results call. Please disconnect your lines. Thank you.

Welcome to the 2025 First Half Results Announcement Conference Call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. YJ Cheng, our Chief Executive Officer; and Co-Chair of the Board; and Mr. Iggy Lares, Chief Financial Officer.

The results of the 6 months ended June 2025 can be found in the press release published earlier today and available on the Hong Kong Stock Exchanges and Budweiser APAC's websites.

Before proceeding, let me remind you that some of the information provided during this result call, including our answers to your questions on this call may contain statements of future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. It is possible that Budweiser APAC's actual results and the financial condition may differ possibly materially from the anticipated results and financial condition indicated in these forward-looking statements. Budweiser APAC is under no obligation to and expressly disclaims any such obligation to update the forward-looking statements as a result of new information, future events or otherwise.

For a discussion of some of the risks and important factors that could affect Budweiser APAC's future results, the risk factors in the company's prospectus dated 18th September 2019, the 2024 annual report published and any other documents that Budweiser APAC has made public.

I would also like to remind everyone that the financial figures discussed today are provided in U.S. dollars, unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated. Percentage changes refer to comparisons with the same period in 2024.

Normalized figures refer to performance measures before exceptional items which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities.

As normalized figures are non-GAAP measures, the company disclosed the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2025 first half results can also be found in the press release.

It is now my pleasure to pass the time to YJ. Sir, you may begin.

Thank you, Ray. Good morning, everyone. Thank you for joining the call today. In the first half of 2025, we continue to invest behind our major brands in a focused way with disciplined execution to navigate the current challenges and pursue long-term growth. Our business in China was impacted by ongoing weakness in our footprint in on-premise channels.

In South Korea, we continue to outperform across all channels despite a soft industry. And in India, we accelerated our growth momentum with the Budweiser growing ahead of the industry.

In the second quarter, our volume in China underperformed the industry as we experienced weakness in our key regions and channels. In spite of this softness, we delivered EBITDA margin expansion in China.

In South Korea, while we continue to gain market share in both on-premise and in home channels, our volume was impacted by shipment phasing.

In India, we accelerated our growth momentum as we continue to lead premiumization in this market.

I'll now hand it over to Iggy to provide more details on our performance in the first half and second quarter. Thank you.

Thank you, YJ, and good morning, everyone. In the first half of 2025, total volumes decreased by 6.1%. Revenue decreased by 5.6%, while revenue per hectoliter increased by 0.5%.

Our normalized EBITDA decreased by 8% while our normalized EBITDA margin contracted by 82 basis points.

In the second quarter, total volumes and revenue decreased by 6.2% and 3.9%, respectively. Volumes were impacted by ongoing challenges in China as well as shipment phasing in South Korea. Revenue per hectoliter increased by 2.4%, driven by a positive brand mix across APAC and revenue management initiatives in APAC East. Our normalized EBITDA decreased by 4.5% and while a normalized EBITDA margin contracted by 21 basis points.

Now let me cover some highlights for each market. In APAC West, in the first half, volumes and revenue decreased by 6.9% and 7.1%, respectively, as revenue per hectoliter was flattish. Normalized EBITDA decreased by 8.8%.

In China, volumes in the second quarter decreased by 7.4% impacted by continued weakness in our footprint and channels. Revenue decreased by 6.4% while revenue per hectoliter increased by 1.1% as we benefited from positive brand mix. Normalized EBITDA decreased by 4%, impacted by our top line performance and a decrease in other operating income, partially offset by cost management initiatives. Our EBITDA margin expanded by 86 basis points.

We made further progress in our channel expansion strategy, focused on premiumizing the in-home channel as in-home consumption occasions continue to develop. In the first half of '25, the contribution of the in-home channel to our volumes and revenue increased. The volume and revenue weights of our premium and super premium portfolio within the in-home channel exceeded the respective weights within the Chinese restaurant channel, driven by our mega brand efforts.

On Budweiser, we launched the FIFA Club World Cup campaign during the peak summer period with activations across all channels. The launch event featuring legendary player Ronaldo topped social media engagement rankings, including becoming the #1 hot topic locally on Douyin.

Harbin embarked on its bold next-gen of Harbin transformation program, focused on sports and hip hop to transcend traditional marketing boundaries and appeal to generation Z legal drinking age consumers. By blending holographic designs with its signature 3 peak iceberg logo, Harbin's refreshed packaging also showcases the brand a boundless energy and consumer relevance.

On the digitization front, the usage and reach of BEES, our B2B wholesaler and customer engagement platform continue to expand. As of June 2025, BEES was present in more than 320 cities across China. We continue to leverage technology to further enhance our commercial capabilities, optimize our route to market and strengthen our relationships.

In India, we delivered double-digit revenue growth and significant EBITDA margin improvement. The Budweiser brand continues to grow ahead of the industry.

Moving to APAC East. In the first half, volumes decreased by 0.5%, with revenue and revenue per hectoliter increasing by 0.6% and 1.1%, respectively. Normalized EBITDA decreased by 4.5% with EBITDA margin contracting by 157 basis points.

In the second quarter, volumes in South Korea decreased by high single digits, mainly due to shipment phasing. Revenue decreased by high single digits due to lower volumes, while revenue per hectoliter increased by low single digits driven by our ongoing revenue management initiatives.

In the first half, volumes were flattish as we continue to offset industry weakness by outperforming within the on-premise and in-home channels.

From a portfolio perspective, we continue to increase consumer participation through innovation. In June, we launched Cass Lemon Squeeze 7.0, a new version of our popular cast lemon squeeze product, and unveiled Cass Fresh ICE, a limited summer edition beverage that amplifies the signature Christmas of Cass with an intense ice sensation.

Likewise, we launched the HANMAC Extra Creamy Draft Can to further enhance drinking experiences through innovative packaging.

Finally, we continue to maintain a sound balance sheet in line with our disciplined financial practices and capital allocation priorities. As of the 30th of June 2025, our net cash position was USD 2.4 billion.

And with that, YJ and I are here to answer any questions that you may have.

[Operator Instructions] Our first question is coming from Anne Ling from Jefferies.

And first is on China. So regarding the anti-extravagance at impact. So we heard that the anti-extravagant at has a negative impact on the catering business as we have seen like since end of June, and also the government catering data and also suggest some impact as well for June data. So would you comment on its impact on the industry speed volume in third quarter to date? And is Bud APAC having more or less impact on the back of this? So this is my first question.

Thank you, this is YJ. I will take these questions. First of all, we cannot speak for the industry. However, we did see a slowdown in the Chinese restaurant channel in quarter 2. We also see a great impact in the provinces where we have more coverage of restaurant. Of the recent we had of this channel slowdown has continued into the start of quarter 3. For the year to go, we continue to focus on what we can control. First, we're going to continue investing more in our mega brands like Budweiser and HARMAN, and also focus on expanding the in-home channel and enhancing our trade execution. We remain agile in both commercial investment and inventory management. Thanks for the question.

And my second on South Korea, custom and also the Taiwan, like antidumping update. So would you at us on the status on the 2 [indiscernible] event. First on the South Korea's custom tax which was first reported in a year 2024. And recently, we have another in June, end of June, right?

And then the second one is on the impact from the antidumping duties in China for the coming 4 months, starting from early July this year. So we understand that both are not like event definitely love to hear your comment on these two.

I would like to hand over this question to Iggy. Iggy, go ahead.

Thank you, YJ. Thanks for the question Anne. So I guess in the Korea Customs tax update, first, the dispute you are correct that during the year ended 31st of December of 2023. In South Korea, we recorded a $66 million non-underlying charge relating to a customs audit claim, and we reported that, of course, during our full year '23 earnings. So that claim is being contested.

As of June 30, 2025, we still continue to defend against the customs tax dispute, which as we mentioned in the past, we need to play out through the corresponding legal system, and this can be in the multiyear process.

There are no additional news since the update we provided on the 30th of June. From a financial perspective, we did share that the potential penalty exposure was not expected to be material to the company at that time. And most importantly, as always, we intend to continue to [indiscernible] defend the matter as we have until now. And we remain committed to upholding the highest standards of compliance across all of our operations. So that's on the Korea custom tax portion.

When we speak about Taiwan, on Taiwan, frankly, it's a bit early to tell what the impact will be. We're closely following the situation, as you're aware, there's an interim ruling in place and continue monitoring for any final determination in the months to come.

As you can imagine, we value the Taiwan market. Therefore, our priority is ensuring that our customers and our consumers continue to have full access without any disruption to the portfolio of beers that they're accustomed to having access to. We will continue to carefully consider any actions that we can take to mitigate any impact to our wholesalers and to our local consumers as well. But it's too early to have a full view on impact at this point. Thank you for your question.

Our next question is coming from Lillian Lou from Morgan Stanley.

I also have two questions, both on China. I will ask the first one first. It's on China inventory destocking process. How is it going so far? And when we expect it will complete, and related to that, the destocking process, how we look at this sales growth outlook in China for the second half?

Yes. So I can take that question, Lillian. Thank you for the question. So first, maybe on the inventory side, if we take a step back and recap maybe the inventory management progress we've had since last year, I think it makes it easier to see how this is unfolding.

Last year, so in 2024 in the second quarter, we had increased our inventory in preparation for the summer season, as we usually would. People expected a market recovery. And that's at the time our STWs right sales to wholesalers outpaced our sales to retailers as we build inventory for the summer.

However, unfortunately, the industry was softer than people expected. We ended up with a higher inventory [indiscernible] desired. And since the tail end of the summer last year, around September, October onwards, through to the first half of this year. So both first and second quarter, we've been proactively taking steps to adjust our inventory to the current business environment and of course, ensure that our -- the health of our route to market is maintained.

Our inventory level this year, so second quarter '25 is actually lower than in the same period of last year, both in terms of absolute inventory and also days of inventory, and we would actually expect it to be significantly lower than the industry average as well.

As mentioned by YJ earlier, the on-premise has been disproportionately impacted at the end of the second quarter. And frankly, speaking, we expect, at least based on July data, that this impact will continue into the second half of the year as well. So accordingly, we're going to continue to manage our inventory very attentively in the third quarter. And you would then, of course, expect a more normalized base as we reach the end of the year, given in the fourth quarter, we will be lapping inventory reductions from last year. So I hope that answers your question, Lillian.

That's very clear. My second question is about the channel. So it's where there's an opening remark, also your opening remarks mentioned that in first half, Premium and Super Premium mix in in-home channel is already higher than its mix in the restaurant channel. So we did expand quite a lot in in-home. So how is the progress of the penetration level of in-home for the whole business in the first half? And also what's the plan for further expansion in the second half?

Yes. I mean I think with increasing disposable income and market maturity evolving in China, the premiumization trend of the in-home channel should offer and should continue to operate a massive opportunity for us to further expand our business.

If you think about today, the off-trade or the in-home channel in China is roughly 60% of the industry, but it only accounts for a little bit more than half of our channel mix, right? So we have an opportunity to expand our presence both closer to the industry average. And we also know, as we've discussed in the past, at the in-home channel, we'll continue to grow, right, at share of industry as the market continues to mature.

So then there's maybe 2 angles in which we can look at our progress on in-home penetration thus far. I think there's the brand and portfolio perspective. There, if you look at retail overall, it's essential to have a full portfolio where you need more packs at each price point to fulfill different consumer needs, the nature of the channel. Obviously, the brand power of our portfolio is a priority, and it's very high, which offers us the potential of premiumization. And that's also contributing, as you mentioned, right, to Premium and Super Premium weight in the channel going up.

We have solid commercial plans here, and we'll continue to invest behind the mega brands and the strong mega platforms because both are proven right to drive value. But it's also going to be important for us to make progress on the right packs, right, to ensure we have magical price points covered et cetera. And probably the biggest remaining opportunity on the portfolio side is to increase our share of Core+ and Core++, which are particularly relevant as a segment in the in-home.

When I look at it from a route-to-market perspective, the key here for successful home expansion is developing a high-quality distribution network. So it's as simple as that, to cover more POCs in the right way.

We have been expanding both wider and deeper. Actually, even in geographies where we're well established. That includes developing new Tier 1 and Tier 2 wholesalers, which, of course, helps us to expand to more points of sale. However, that's going to take time. There's both the recruitment and the capability building right that's required to ensure we have a picture of success, not just product in store, but a future success in every in-home point of sale that we target.

But yes, the teams are quite encouraged actually some of the progress. The contribution of the in-home channel to our total volume continues to go up to our total revenue continues to go up as well. the Premium, Super Premium in the channel continues to go up and the fact it's higher than Chinese restaurants is also encouraging. So I think we're at a place where, I would say, there's a clear plan in place today. We see some progress on various portfolio and route to market areas, but there's still a lot of work to be done. The focus would be on consistent execution on the strategy in the quarters to come. Thanks for the question.

Thank you. Our next question is coming from Euan McLeish from Bernstein.

I wanted to -- I've only got one question. I wanted to focus on Guangdong, please. because it's such an important province for you. The data that we're looking at shows kind of monthly improvements in home consumption in Guangdong, but it seems that you've been losing quite a bit of share in that channel. At the same time, the data shows restaurant channel remaining weak, as you've referred to. I just wanted to understand what's working and what's not working in Guangdong. And how are you trying to turn around your momentum in the province? It would be really helpful if you could talk about, a bit about the nature of competition, what's happening on the ground as well as our main [indiscernible], your Core++ and your Budweiser strategies there.

Thank you for the question, Euan. A lot to chew. Let me try and break this up into a few parts. I mean as we're all well aware, Guangdong is the largest profit pool in China's beer industry. And so it's naturally obviously very competitive, always has been, and we expect it will continue to be the case, right? Everyone wants to participate and capture some of that premiumization opportunity.

From a channel perspective, as we were mentioning earlier, yes, the restaurant channel remains weak. However, if you look at the depth of our distribution and the channel and the strength of our portfolio, it probably explains why maybe some of that data you have, which I don't have access to could suggest that we're performing well. I mean, historically, we have over-indexed right in the entree channel in Guangdong as you're well aware, and we built our brand power there. So naturally, we have a stronger base there.

The focus for us is really on accelerating the expansion of our coverage in the in-home channel. We've been developing that high-quality distribution network. I was mentioning a second ago to cover more POCs in what we call a qualified way. So that means right picture of success, right execution so that it's sustainable, right, and that takes time.

We're seeing some acceleration in both the rate of premiumization of the home channel. And this happens when we leverage the full brand portfolio, the full pack assortment with good execution. So we do see a difference in that place. We just need to accelerate the coverage, right, at that level of execution. To do that, we're investing with our wholesalers. So together with them to increase the number and capability of our in-home sales force. So we have more specialized sales representatives, individuals that have capabilities to execute, drive the picture of success in trade. And that will include shelf management and store displays and the traditional things, right, that you see in the in-home channel.

And then in the areas where the route to market is less developed, we're recruiting, as I was mentioning before, more Tier 1 and Tier 2 wholesalers with the right capabilities. And we need to do that right to get to more box at a faster rate. So that's a bit the name of the game and in-home for us. I mean at the end of the day, we remain committed to investing and growing the business in Guangdong. And we're doing that in a sustainable way for the long term, right? This plays a critical partner strategy long term.

There's always decisions to fine-tune. However, I'd say, for the most part, the teams have clarity on the portfolio choices and channel priorities, which is essential. So it's mainly a matter of execution at this point, right?

To your point on portfolio, Budweiser continues to be the #1 priority. We're also allocating more resources to both Core+ and Core++ in response to the current consumption environment and also that's probably the most competitive space, if you think about it within the in-home. Based on our observations, we're seeing that this segment continues to outperform other subsegments, so we need to be strong there. And we're looking to accelerate our distribution so that we get to scale, right, in Core++.

And then beyond that, I mean, we'll continue to selectively invest behind Super Premium as well in the right places, particularly in the more developed cities and sits within Guangdong. As we continue to see this as part of the portfolio and it can play a key role there as well. So it's a bit of the kind of context and we'll note today, Euan. Thanks so much for the question.

Okay. So can I just clarify a little bit. So in terms of losing the share in the in-home channel, is that because you're in the wrong geographies and these geographies that you're not strong in are growing faster? Or is this something is happening within geographies in which you're already present?

No. The fastest-growing channel in Guangdong by far is in home, right? And we're under-indexed and expansion, right, number of POCs and execution in home is growing for all participants in the industry. So we need to accelerate within our existing geographies, Euan, to more point of sale with the full portfolio. So that's essentially the priority for the team there.

Our next question is coming from Chen Luo, BofA. Please go ahead.

So this is Chen from Bank of America. So actually, my questions have been partly addressed by the previous speakers, but I still like to get additional color.

So first of all, in China, we understand that the anti-extravagant campaign recently and our over in-depth exposure to the entree channel as well as destocking may have some impact on second half. So given all the pressure, is it fair to say that our volume in China in Q3 will still see some challenges, and we can only achieve positive volume growth from Q4 this year due to extremely easy comps? So this is my first question.

Luo Chen, thank you so much for the question. It's a fair view, maybe how I would characterized first half given this consumption environment was still soft, particularly in the on-trade channel and overall consumer confidence remains low. That's why you see the softness, right, in our footprint and channels. And at the end of the day, given we continue to have a geographic footprint and channel weight market share headwind, we need to find continuous improvement in our like-for-like performance to offset it.

If you lay on top of that, of course, the recent softness right of the Chinese restaurants and on-premise from a policy perspective and the inventory management that I discussed earlier, you should still expect some volume headwinds, right, through the third quarter as well.

The fourth quarter will have easier comps. So both the ongoing on-premise channel softness will at least be partially offset by the more normal base. And that makes sense, right? Because if you think about it, we started the inventory management with scale during the same period last year. So we'll be lapping, as you mentioned, a softer or an easier base.

And then within that context, going back to YJ's comments at the start of the call, right? What we've asked the teams to do is to continue to focus on the factors within their control, so enhancing execution of the mega brands. expanding, right, the distribution and coverage the in-home channel and accelerating the speed of premiumization within home channel.

The faster and the better we execute those 3 elements in the months to come, the sooner you will see an improvement in trend as it will help us to offset the geographic and channel mix headwinds as well. So I hope that answers your question.

Sure. The second question is about the Core+ segment in China. It appears this segment is actually performing weaker than our Premium segments such as the Budweiser brand. And within the Core+ segment, Harbin has been a key brand, and I understand that we are also focusing on the mega brand this year. So based on the China checks, we think that our Core+ segment is facing big complication pressure from local brands such as [indiscernible] on a nationwide basis and also from Zhujiang and [indiscernible] chain in Guangdong, specifically. Is there any measure for us to improve our Core+ segment so that we can actually counter the macro pressure and start to see improving more momentum going forward?

Thank you for the question. So look, at the end of the day, Core+ and Core++ is indeed an important segment for us, right, particularly in the in-home as I was mentioning before. And we have a large distribution opportunity to fill Today, this is a priority we're looking to capture. And in the in-home channel to do this, you need the brand fundamentals, right, for success to be working in the right way. The first one is brand power. So consumers obviously play a larger role in choosing what they consume in the in-home channel, so brand power becomes more relevant, right?

We've built brand power -- or the brand power of the total portfolio to have significant potential to drive both share and premiumization. However, to your point, we're further ahead on that. Luciano and Budweiser, right. We had a very strong campaign at the start of the year, big investment focus, big priority as we mentioned, #1 priority. And we need to do the same on Harbin ICE variance, including Harbin Ice Zero Sugar, which is still on a relative basis in its development phase, right? So I think the recipe there is very clear and it's doing more of that.

Product superiority, Similarly, right, we use the core Superiority framework. We've discussed in the past to make sure we have the best liquid, the best package, the best communications for our brands to ensure we have a winning proposition. And here, we just further enhance actually the visual brand identity and the liquid of Harbin. And that's freshly in the market, right, since May. So you will have to wait for a few months probably to see the impact. But we're quite pleased with how this tested. We're quite pleased with how this has gone to market, and this should help to increase the relevance of the brand, particularly among younger adult consumers.

Then on the assortment side, right, you also need a broader brand and pack assortment that would generally be available in the on-premise channels. So opportunity here will be to also expand the distribution of this spotter assortment for both Core+ and Core++ to fulfill different consumer needs, and the teams are working on that as we speak.

And then innovations can play an interesting role as well. To your point, it's very local specific competition, particularly as you move down to the Core+ segment. So we have some local brand innovation opportunities, nothing to discuss today. But as you can imagine, a solid innovation pipeline also supports the different regions in a tailored way for local consumer needs. It can be quite complementary to our strategy.

And then all of this will need to be supported by our expanding of the in-home coverage and distribution. So yes, lots of work to do, but we're committed to the brands, and we're excited about their growth potential based on the green shoots we're seeing in some of the initiatives in the market. So that's a bit of summary, I think, on the Core+. So I hope that answers your question.

Yes. That's very helpful. So it seems that we have a very good action plan and playbook I understand there is a lot to do, and we may still be in the early stage of the journey, but we definitely look forward to more achievements and milestones to be made in the future.

Thank you very much.

Our next question is coming from Christine Peng from UBS.

I have two questions. One is for Korea. And another one is for Indian market. So with those questions 1 by one. So the first question is about the Korean outlook. So given the sluggish industry volume trends in South Korean market, what would be the margin outlook in the future?

So I'll take that one. Thanks for the question, Christine. I mean in the first half, our volumes were flattish, and kind of the narrative would be that we've continued to outperform from a commercial perspective to offset that industry weakness you were mentioning.

I mean the main drivers of margin growth in APAC East continue to be, first and foremost, price than operational affinities and then mix. And on pricing, I mean, we recently announced, of course, a 2.9% price increase for our core brands from April as of this year. That obviously didn't kick in until the second quarter, and that explains why you see a stronger net revenue per hectoliter performance and obviously, the margin contribution of that in the second quarter versus the first quarter.

In terms of operational efficiencies, we continue to implement the cost management initiatives that we have across our business. We see this as a core capability. So we wouldn't expect any change in the way the teams execute that.

And then lastly, on the mix side, I mean, we anticipate the industry will continue to premiumize. It's still significantly under-indexed versus other mature markets. Of course, we're very well positioned to capture an outsized portion of that growth with our comprehensive portfolio of premium brands. And over time, with the differentiation and pricing that we've been creating, right, by taking more price on the high-end portfolio than we do on mainstream, we see an opportunity, of course, for that to drive as well a long-term mix benefit.

But on top of that, probably what's new, which is also beneficial as we continue to focus on increasing consumer participation. So these introductions of nonalcoholic beers and some of these other innovations, help to bring more consumers into the beer category overall, and that should also serve as a tailwind in the future, particularly as consumer confidence in brewers in Korea.

So on this basis, longer term, we don't see any barriers for future margin recovery. In fact, if I go back to the views that we shared during our Investor Day in Korea back in late 2022, where you recall we saw this underlying structural margin tailwind from these growth drivers. Our view still holds today. And we continue to see growing market share and top line as the critical drivers to expand EBITDA margin, even in a soft industry. So we're confident with the strategy. We're confident on our commercial capabilities, which position us for future sustainable growth, and we continue to continue down that path. So thank you very much for the question, Christine.

So my second question is about Indian market. So can management share with us the latest trends for India market in terms of volume growth mix and profitability?

Yes, let me give a bit of color on India. So I mean in India, we are focused on consistent and sustainable top line growth. That's the priority, right? And that needs to then translate into EBITDA and cash flow growth for us as well. Our India business has strong growth momentum. The Premium and Super Premium portfolio there, which is roughly 2/3 of our total business, grew by double digits, both in the quarter and in the first half of the year. And the Budweiser brand continues to grow ahead of the industry. So that's really important, right? That's kind of what underpins the growth in India.

Premiumization continues to be a very important driver for the business and for EBITDA performance. We've delivered strong results with double-digit revenue growth and significant EBITDA margin improvement in the quarter.

Yes, we had a softer base in the second quarter to be fair. However, we see the benefit of the strong premium growth translating into our quarterly results and moving the needle.

In terms of industry overall, I mean, it continues to grow, which is also helpful. The per capita consumption is still very low in India, as you're well aware. And the industry is expected to continue growing both in volume and revenue terms. And that's even before we consider the impact of any moderation initiatives, which can unlock an even more exciting future for the Indian market.

Moderation specifically, we're seeing several states recognizing beers a drink of moderation, reflecting that in their policies. And that can mean either more access to beer or taxes being either raised less than for other higher alcohol categories or not raised at all.

We've got a few examples actually in the last few months. Uttar Pradesh, for example, roughly doubled its number of outlets. So now it's about 13,000 outlets that can sell beer there, which is quite a significant increase when you think about all of India has maybe 80,000 to 90,000 licenses today.

Low alcohol bar retail events, which allowed to serve both beer and wine are now allowed and introduced in a few key cities like now. And then in Madhya Pradesh, we've actually also seen some positive changes for both excise as well as beer distribution. So we're seeing progress on the moderation agenda as well.

And then the last one, which is fully under our control is on productivity, right? And this will be an important driver as we mentioned in the past for EBITDA margin. Our supply chain teams are making continued progress. They're benchmarking our breweries there against the best-in-class small breweries that we have in China. And we see very good progress on the initiatives that they're putting in place, and that will play a very critical role in making sure that, that top line growth translates to bottom line and cash as well. So we had a stronger quarter in the second quarter in India, and we're pleased with the progress. The teams have a lot of work to continue down that path as well. Thank you so much for the question, Christine.

Our next question is coming from Linda Huang from Macquarie.

I ask two questions. The first one is regarding for our financial. Because I noticed that there is USD 53 million. This is the underlying income tax. So can you help us to understand what this -- the underlying income tax is about? And will there be any further impact on the company's financials? So that's my first question.

Thank you for the question, Linda. So when we think about long-term value creation about APAC, optimizing our capital structure is a focus. Specifically, in the second quarter, we performed an internal restructuring. And so that's what drove the $53 million in capital gains and withholding taxes on distributed earnings.

The financial impacts were undertaken in the second quarter. That's why we reflected them accordingly. They're in non-underlying income tax since essentially, they're outside of regular operational activities, right? So the impact is contained or condensed within the second quarter.

And then the thought process behind this is the benefit from this transaction is the opportunity for us to have more efficient deployment of cash, which can include, among other things, interest income arbitrage. So we did a bit of an internal restructuring here. That's what drove that transaction. So I hope that answers your question, Linda.

And then the second question may be related to the deployment of the cash more efficiently. Because I think the -- especially for your previous announcement, investor, they highly appreciate companies their generosity to pay the 0. This is U.S. DPS and even the earnings decline in 2024. So I remember in the announcement, management also mentioned that to sustain will grow the dividend payout amount. So can we say that this $0.0566 dividend per share can be we expected given that 2025, the earnings looks likely to be challenging.

Thanks for the tough question, Linda. You're painting into a corner here, but, maybe let me take the stab at it. Look, we continue to focus on maximizing value for our shareholders. And this, of course, includes providing a competitive dividend as well. At the time of the IPO, when we shared our dividend policy was to maintain at least 25% as a dividend payout. And of course, since the IPO, our dividend payout ratio has always been higher than that commitment.

We've been increasing, obviously, the dividend amount in absolute dollars steadily year-over-year since the IPO. And you're right that the most recent payout was USD 750 million of USD 0.0566 per share. We still continue to aspire to maintain or grow our absolute total dividend amount. So the logic holds, right? We plan to do that over time while maintaining, of course, a solid balance sheet for future growth. So that's a bit the intent still despite the current, call it, business pressure. And we're still very confident of our future cash flow generation capabilities for the business as well as the ability to fund the different capital allocation priorities we have. So still, organic growth complemented by strategic and organic opportunities. And of course, still returning cash to shareholders where possible as appropriate as well. So I think that still holds, Linda. And hopefully, that answers your question.

In interest of time, our final question will come from Leaf Liu from Goldman Sachs.

I got two questions. The first is on Korea. So would you please share color on the market share strategy following the pricing hike and also have the Korean consumer receiving the pricing hike so far and also the response from our competitors. How to look at the marketing investment level in Korea going forward?

I would like give to Iggy this question. If you have a second one will take.

Sounds good. Thank you, YJ. Thanks for the question, Leaf. So look, on pricing, I mean, we always make decisions in a greater context, right? We look at the macroeconomic environment, the strength of the portfolio, the competitive landscape, this is a constant process, right? The teams have undertaken with a disciplined approach for a long time, and you can count on us to continue to do that. The most recent announcement was a 2.9% price increase for our core brands as of April this year.

Regarding the price pass-through, I mean, please recall that an increase in a factory price doesn't necessarily lead to an increase in on-trade market prices, right? At the end of the day, the final retail price is determined rather by the voluntary judgment of each business. And so far, if we look at the market there, this is in line with our expectations. But most importantly, I think the business needs to be in a good place to be able to make these decisions in the first place, right? And the brand power of our core portfolio is the strongest it's ever been. It's been complemented by a very strong innovation pipeline as well with Cass 0.0, Cass Lemon Squeeze, which we have multiple variants down in the market as well. And most recently, the HARMAN Extra Creamy Draft Can. So I mean in June, we launched Cass Lemon Squeeze 7.0, which is another version of the popular Cass Lemon Squeeze family of products. And this was timed right, to capitalize on the demand for premium and higher proof beverages during the summer, right? So we're quite pleased with that.

Then we recently also unveiled Cass Fresh ICE. So this is a limited edition summer variant that amplifies the kind of signature easy drinking Christmas of Cass by giving you an icy sensation. So I encourage you to try the next time you're in Korea, but we're also pleased with the halo effect that will have on the cash mother brand.

And then probably the third big innovation was we also looked at innovative ways to have packaging enhance the drinking experience. And so the HANMAC Extra Creamy Draft Can does exactly that. It's designed to generate the kind of bubble formation that you have in a [indiscernible] draft beer. So from the moment you open it, you get this rich creamy head that delivers that texture, smoothness and taste you expect from draft beer.

So effectively, we'll continue to do is invest in innovations with strong marketing plans in Korea. We're very pleased with the commercial momentum that the team has there, and they need to continue doing that as they have thus far. And that's really what underpins our ability to execute, revenue management initiatives within the market. So we're in a good place and things are progressing as they're expected from a commercial perspective.

Indeed, the new products were pretty impressive while I have the privilege to taste them. And then my second question -- the second question is on the China in-home channel development. Actually, for the partnership with [indiscernible]. So any progress that you can share with us in terms of the in-home distribution and any plan for the other white space regions under the umbrella of partnership with [indiscernible].

Yes. As I said, I'm going to take this question, Leaf. First, I will see, we carefully assess any opportunities at our route-to-market partnership, to extend our distribution.

And regarding the cooperation of partnership with Swire. We pick up Anhui and Hebei programs as a trial in the past 0.5 year and 1 year.

According to the latest Nielsen data, in the second quarter 2025, we continue to grow the market share in this in the in-home channel in these 2 progresses in [indiscernible].

And also, I just want to share -- I just matter the Swire APAC management last week in Hong Kong and see the excitement with our portfolio and also their commitment to grow the business with us. So this is a partnership with Swire between us has the potential to drive the top line and translate into a meaningful financial benefit for both. And at this moment, I have nothing to announce regarding further expansion, but we will continue to monitor the program we work together, and we will explore further expansion opportunity, if any, later. Thank you.

This concludes our Q&A session today. I would like to turn the conference back over to YJ for the closing remarks.

Thank you, Ray. As the second half of the year evolves, we continue to invest behind our major brands in a focused way. With disciplined execution, we overcome challenges and pursue long-term growth.

Thank you all for joining us today. and I look forward to speaking to you again soon.

This concludes today's results call. Please disconnect your lines. Thank you.