Budweiser Brewing Company APAC Limited Aktie

Welcome to the 2026 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. Bernardo Novick, Chief Financial Officer. The results for the 9 months ended 30th September 2026 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange and Budweiser APAC 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 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 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, 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 same periods in 2025. 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 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, and good morning, everyone. Thank you for joining today's call. Our business in China continues to face challenges, while our overall results remain below our potential. We saw progress in areas of strategic focus, and we are taking actions to support our future volume recovery by strengthening execution, evolving our channel mix towards in-home and digital channels and continue to invest behind our mega brand and innovations.

Beyond China, we continue to see positive commercial momentum in South Korea and strong volume growth in India. reflecting the strength and resilience of our geographic footprint. Specifically, in the third quarter, our business in China faced a challenging industry environment, which was impacted by abnormal weather and ongoing weakness in the on-premise channels.

In South Korea, continued market share gains in both on-premise and in-home channels helped partially offset industry softness. In India, industry growth, market share gains and the continued momentum of our premier (sic) [Premium] and above portfolio drove digital -- double-digit volume growth.

I will now hand it over to Novick to discuss our performance in more details. Thank you.

Thank you, YJ, and good morning, everyone. In the first 9 months of 2026, total volumes decreased by 4.9%. Revenue decreased by 3.7%, while revenue per hectoliter increased by 1.2%. Our normalized EBITDA decreased by 13.2%, while our normalized EBITDA margin contracted by 297 bps.

Further, our profit attributable to equity holders of Bud APAC decreased from $594 million in the first 9 months of 2025 to $565 million in the first 9 months this year as we were impacted by a $52 million non-underlying income tax charge from an internal restructuring in China and a $30 million receivables provision related to the supply of products in India. In the third quarter, total volumes decreased by 10.1%, impacted by our performance in China and partially offset by growth in India.

Revenue decreased by 8.4%, while revenue per hectoliter increased by 1.9%, benefiting from a positive country mix. Our normalized EBITDA decreased by 22.9%, impacted by our top line performance in China, cost escalation, operational deleverage and reduced other operating income.

Now let me cover some highlights from each of our major markets. In China, volumes in the third quarter decreased by 16.8%, as we faced a challenging industry decline of high single digits, which was impacted by adverse weather and continuous weakness in the on-premise channel.

Revenue decreased by 16.9%, while revenue per hectoliter was flat with a positive brand mix offset by promotional investments in the in-home channel. Normalized EBITDA decreased by 30.2%, impacted by our top line performance, operational deleverage and reduced other operating income. In the first 9 months, both volumes and revenue decreased by 9.7%, while revenue per hectoliter was flat. We continued to execute our channel expansion strategy, focusing on premiumizing the in-home and expanding our penetration in O2O.

We delivered strong double-digit growth in the channel in both third quarter and the first 9 months of 2026, supported by package innovations and brands. We also continue strengthening the brand power of our portfolio as we invest behind our mega brands and innovations and focus on connecting with consumers across multiple occasions and increased sales momentum, particularly in the in-home channel.

In South Korea, volumes in the third quarter decreased by low single digits, outperforming a soft industry. Revenue per hectoliter decreased slightly, impacted by a negative packaging mix, partially offset by a premium brand mix. Normalized EBITDA decreased by low double digits, impacted by weaker volumes and commodity headwinds.

In the first 9 months, we outperformed the industry with market share gains in both on-premise and in-home channels. Normalized EBITDA decreased by low single digits with stable margins supported by revenue management initiatives and positive brand mix, partially offset by negative channel and packaging mix. We continue to invest behind innovations tailored to consumer preference in South Korea.

In September, we launched Chalrang, a zero-sugar soju, featuring Jeju volcanic bedrock water and lava seawater salt as ingredients. The product is positioned as a differentiated offering within the soju category.

And finally, in India, industry momentum continued and consistent execution of our strategy drove further market share gains. Increased commercial investment support accelerated growth across our portfolio with the premium and above segment delivering double-digit growth in both third quarter and in the first 9 months of the year.

The Budweiser brand continued to outperform the industry, with India now ranking among the brand's top 3 markets globally. And with that, YJ and I are here to answer any questions that you might have. Thank you.

[Operator Instructions]. Our first question is coming from Linda Huang of Macquarie.

[Foreign Language] Now my first question is for YJ. This is regarding the overall beer market because it seems to us that the China business adjustment is longer than the market expectation. It could be the macro issue, could be the industrial issue. So I just want to know, is there any of the company-specific strategy that we can see the business to turn around?

[Foreign Language]

[Foreign Language] My second question is for Bernardo. So in consumer space, right, lately, I found that many investors they care about dividend, especially the sustainable dividend is more important than anything else now. Given that operation is quite tough, right? So will management change the dividend policy? Is there any long-term dividend guidance?

[Foreign Language]

Linda, thank you. Nice to hear from you. You're right. I mean, we fully recognize how important is our dividends for our shareholders. But in my answer, I will have probably to be consistent with what I have shared with all of you on the last quarter. Our capital allocation strategy doesn't change. The first priority is always to focus on organic growth and allocate resources to strengthen our business, and that's what we have been doing.

The second one is inorganic opportunities that haven't appeared yet. And the third one is return capital to shareholders, which is what we have been doing consistently in the past. Then the question about the future, I repeat the same. I think it's -- yes, it's fair to assume that if results remain challenging and do not improve, it of course, becomes increasingly difficult to maintain the same dividend.

But having said that, there hasn't been any decision yet. But I want to reiterate, I say again that we understand the importance of the dividends for our shareholders. But of course, ultimately, it's about business performance, right? And our priority in order to achieve that is work on stabilizing our China business, so we can improve our profitability. Thank you for the question.

Our next question is from Lillian Lou of Morgan Stanley.

[Foreign Language].

So my first question is about China, latest trend on volume and demand. So any update on the latest sell situation? Any sign of recovery or you still expect some pressure to continue?

Lillian, thank you for the question. Look, I think that our -- the Q3 was very challenging. I think you are hearing from many in the beer industry. The industry was worse than we expected, around a high single-digit decline that was worse than Q1 and worse than Q2. We believe the main 2 reasons are both weather and also continued softness in the consumer environment and macroeconomics.

We saw particularly softness in the on-premise channels that impact our volume and our profitability usually more than that. We continue to lose share. This is clear in the volumes we shared. But at least we saw some positive pockets of good news. Like, for example, in the in-home, our trend of share versus last year is better.

Our innovations continue to grow. O2O continues to grow, although not as much as Q2. And our super premium portfolio is in the positive side, even in a tough quarter, right? So those are the good things. October so far, it's too early to tell for Q4, but seems to remain challenging, but let's see how the rest of the quarter goes.

But I think the important message is, in spite of a challenging environment in the industry, we continue to invest behind our brands because once the industry recovers, we want to be ready. We want to get back to market share -- our market share back and continue to strengthen our brands and our capabilities to wait for when the recovery comes. But thank you for the question.

My second question is also about -- related to that, the inventory situation. So how did -- if we look back in third quarter, it was still a destocking quarter. So how did sell-in compare with sales sell-out? What's the inventory level on quarter end versus quarter beginning after our so-called efforts to really adjust the business models?

And when should we see sell-in begin to track more closely to the underlying demand and whether 2027, we will see destocking to continue or actually we're going to build on a new norm and starting to see a more normalized trend? [Foreign Language].

Lillian, inventory has always come up, right, in some of these questions. I think the first point I want to make is that we have been working to improve inventory, so it's not new. However, we are not -- we are still not yet where we want to be. There's still more work to do. We are working on improving visibility, particularly on the different tiers of the market.

In China, we have different tiers. And we still believe that we are -- we have more than what we need to have, and we are -- we need to keep managing to keep our beer fresh. So we have plans in place, and we expect to keep working on this. So we expect some -- still some impact at least in the short term, but we are moving in the right direction. Thank you for the question.

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

I've got 2 questions. Both of them are focusing on the cost side. So first question is actually our outlook for how much aluminum and barley costs will go up in the coming 12 months compared with the cost that we have locked in previously. What's our assumption of the unit cost increase into '27. [Foreign Language] So this is my first question. I will ask my second question later.

Thank you, Chen Luo. So you're right. I mean, commodities are going to start and our costs are going to start facing some pressure because of the commodity increase, particularly now Q4 and next year. The main reason is, as you were saying, aluminum, you know that packaging represents a meaningful part of our cost base in beer. And aluminum within packaging, it's also a growing part and a very relevant part. And because of the aluminum, to have aluminum, you need a lot of energy and oil prices increased. You see now price of aluminum reaching $3,000 per ton, right? This is approximately 10% year-to-date or even 20% if you compare to last year.

And we have, as you all are aware, a 12-month hedging policy, right? So what you probably need to do is to go back to last year and make these comparisons to kind of have an idea of what is the impact in our costs, but it's definitely a negative impact on the commodity side. It doesn't mean that we are not doing anything to offset this.

It's clearly going to be difficult to offset the whole impact, but the supply chain team, if it is something in our company has been working very well in the past few years, is our supply chain, they work on productivity, on efficiencies to try to offset some of these cost increases, right? So again, the only thing I can say is that, yes, there are some cost headwinds that we'll have next quarter, this quarter and next year. But you can count that the whole team is working to drive productivity and efficiencies to try to offset at least partially these negative impacts.

My second question is on the pricing part. Given the cost escalation, do we have any plan for price increase in China either in Q4 or sometime next year? Or what if competitors raise prices are we going to follow? [Foreign Language]. So that's my second question.

It's a good question. I'd like to always start the answers reminding the strategy, particularly the strategy that we have in this phase that we are right now in the China business, right? And what we have been saying many times is that the priority right now is to stabilize volumes, right, stabilizing share as a first step in order to do that, right? When we think about pricing in [India], a significant part of our net revenue per hectoliter increase in the past has always been driven about premiumization, right?

And we expect this part to continue, even though, of course, now we're investing a little bit more to solve some of the problems that we have. So what I can say to you about next year is that we will, of course, always monitor not only the input cost, but the consumer dynamics, what everybody is doing. We'll always look to that to make a decision. But there's nothing that we can communicate right now regarding potential price increases in the China market. But thank you for the question.

Our next question is from Jessie Xu of JPMorgan.

This is Jessie Xu from JPMorgan. My first question is about the pricing trend in China. We have noticed that promotions in the in-home and also O2O channels appear to have increased in the third quarter. While if we look at ASP, it remains largely stable year-on-year, right? So how should we think about this and the trade-off between defending market share and pricing as of now? Are we -- are current promotions more tactical and temporary? Or do they point to a more structural reset in pricing? [Foreign Language].

I think probably the easiest way to explain some of these questions about profitability and investments. You always think maybe in our strategy like in 2 phases, right? We have -- the phase we are right now in the strategy is focusing on stabilizing volumes and market share, right?

And then we have probably after this, a second phase, hopefully, sooner rather than later that we can focus on reigniting growth and bringing back margins and profitability. So in this phase that we are, of course, we continue to have the positive brand mix effect, but we are also investing behind our brands and innovations. We are investing to protect our wholesalers. We are investing behind the growing channels like in-home and O2O. So these things offset each other. That's why you see like a net revenue per hectoliter that is flattish, some quarters, a little bit up, a little bit down, but around that.

So I expect this strategy to continue in the short term until we can stabilize share and we can go back to growth and hopefully recover some of the lost margins in the future. So I think this is how probably we -- the easiest way to explain how we are thinking about it. So we will continue to be disciplined with our revenue management initiatives, and we will continue to invest behind our brands to bring this stabilization in market share and volume.

My second question is about -- also about China, but on margins. Could you help us break down the drivers of the margin decline in the third quarter, including premium mix and packaging costs, higher -- maybe higher discounts in sales and marketing and lower government incentives? More importantly, if we look beyond third quarter, what level of China margin should we view as a sustainable level once the channel transition matures? [Foreign Language].

Thank you, Jessie. I think it's seems like people always ask me as a CFO, what is the most important line of the P&L? And my answer is, of course, all the lines are important because you need to drive volume growth to make all the P&L work. You need to bring profitability. It's important to bring cash flow.

But I think at the end, with YJ here and the China team, strategy is always about choosing a period of time, what's the most important line. It doesn't mean that the other ones are not important. And again, if we divide, as I was saying before, our strategy at this phase of the company, the priority is to stabilize volumes, right? And that means, yes, that we are investing more behind our brands, that we are investing for the future to protect our wholesalers because we want to be in China for the long term, right?

And what does it mean? It means that when you have an industry decline, with high single digits, where we are still like recovering. So it means that we are still losing some share, and we are investing, right, together with some cost headwinds. It's not -- creates an operational deleverage that is difficult to adjust in the short term.

So that's why you see some of the pressure on margins in the short term. Now does it mean that it will continue in the long term? No, no, we want to stabilize, so we can go back to our, let's say, Phase 2 of the strategy that is reigniting the growth in APAC, right? So -- when that happens, we'll have more flexibility, right, to align maybe the cost structure we have in the company to the scale of the business we have today, and we can bring back some of the lost margin.

So again, I would think, as I'm saying, the strategy in 2 parts. Of course, always the question is when the second part of the strategy, when the second phase will start, and we don't know. But we are working hard to try to solve some of the issues we have in the short term, so we can quickly go to the second phase.

So I hope I can clarify some of these questions without sharing a lot of particular numbers. But this is how we are thinking as a management about how to prioritize and what will happen with margins in the short term and in the medium to long term. So thank you, Jessie.

Our next question is from Anne Ling of Jefferies.

Can you hear me?

Yes.

So my question -- 2 questions is on South Korea. Let me ask in English and then translate it. So in South Korea, what is your expectation for the beer industry volume in year 2027? And do you see sufficient innovation and market share gain to offset continued weakness in the underlying category? [Foreign Language].

Thank you, Anne. Nice to hear from you, too. Good to talk about South Korea, a little bit too, of course. Maybe I can divide the answer in 2 parts, right, the industry and our performance.

So industry in Korea, yes, has been declining slightly, let's say, low single digits in the first half. Q3, the industry was a little bit weaker. I do think that it's mostly explained by some phasing because of the Chuseok Mid-Autumn Festival between Q3 and Q4. So I'm not worried if you ask me about the expectations, I still expect industry in Korea to be slightly negative, low single digits in the future, right? Of course, we cannot foresee what's going to happen, but it has been like that in the past, and that's what we expect.

Having said that, when we go to our performance, we have been able to outperform the industry. And different to China, we have a very good commercial momentum and gaining market share both in in-home and out-of-home. And the reason, I think, of our commercial momentum is, of course, we have a very good route to market in Korea. We have strong brands. Cass is doing very well. And I think one of the highlights also has been our ability to innovate in the nonalcohol ready-to-drink category and even further, right?

I think we just announced recently that we are launching soju brand named Chalrang, it has zero sugar, low alcohol soju that's around 15% ABV that comes from Jeju Island, right? So it's made with volcanic bedrock water and lava seawater salt, so all typical ingredients. We just launched in some regions in South Korea, and we plan to expand. And these are the ways that we are working always to try to offset this slight negative industry in South Korea.

So we will continue to invest behind innovations. We will continue to invest behind our brands to be able to sustain this momentum. And hopefully, by bringing beer and new products to different occasions, trying to offset this different -- this slightly negative industry we see in Korea. I hope this answers your questions. Thank you.

Yes, yes. And my second question is on the pricing. So should investors expect -- expecting some price hike in South Korea in year 2027, particularly if aluminum logistic costs and also raw material costs remain elevated? [Foreign Language].

I think, Anne, here, the answer is maybe in part, similar to China, in part a little bit different. So similar to China, we also have some commodity cost pressures in South Korea because the hedging policy is the same, right? So everything I said about the cost of aluminum, the packaging in aluminum and our aluminum is relevant. It's also very important in Korea.

And we have the same 12-month hedging policy, which means that now Q4 and next year, we'll have some cost headwinds in South Korea, too, right? Regarding the pricing, we did a price increase last year. We haven't done any price increase this year in South Korea. And we don't have at this moment anything to announce regarding pricing. But also, we are working on revenue management initiatives like we have this year, right, to drive premiumization.

Some of the innovations we are launching always help with that. We are also doing some nonalcohol beer that help with margins, too. So as a whole, we are still working on revenue management initiatives. The supply team also is working very hard to offset some of these cost pressures that we have.

And then if you're thinking about like margins, I think Korea is a more stable market, right, when you think China under pressure, India improving, Korea more stable. But having said that, we still see opportunities to slowly improve in the future doing some initiatives. But again, I want to be clear that, yes, from the cost perspective, next year, we are going to have some headwinds on the commodity side. Thank you for your question, Anne.

Our next question is from [Carol Shah] of Daiwa.

So my 2 questions are all about China. Firstly, on China investment. I think maybe it's a little bit early to talk about 2027. But right now, like could you please share, if any initial thoughts on next year, which channels do you think that you will step up investments relative to the other channels? And then where do you think you can continue to save some costs?

I can take this one, too. I think -- I don't think it's too early to start talking about 2027. We are in the process of as every company at this part of the year of reviewing what are the things that are working, what are the things we need to improve. And our view on always about what to invest in the future is to, of course, keep investing on the things that we are working, right? Again, strategy in China is to stabilize volumes and share, which means to keep increasing investments in spite of the situation.

You will see this year, we are increasing our commercial investment as a percentage of net revenue. And the way we are doing and we are thinking about not only for this year, but for the future, is to invest on the things that are growing, right? So we are prioritizing segments that are growing like Core+ -- we are -- in Premium. We are prioritizing channels that are growing -- that are growing like O2O, and we are prioritizing consumer occasions where we see that things and that consumers are moving, particularly towards this in-home part, right?

Another way to answer is our investment in innovation. Maybe I can highlight a few, right, on the Core+, [Harbin 1900]. We have a bet on this -- that is the first brew in China, a classic lager that we are very excited about the launch that we did this year. Bud Magnum, another innovation is on the packaging side that is doing very well. It's our 740 ml mega can for Budweiser. The Corona open lid is another example. And I think all these are investments that we plan to continue doing because they are working. This is -- the part more maybe theoretical of the answer is how we think about resource allocation.

So we are always trying to look at the ROI of the investments. And we've seen this year that some of them are working, and we're investing. Some of them were not bringing the ROI that we wanted, and we are deprioritizing a bit. But again, as a whole, going back to the strategy, stabilizing share and stabilizing volume and increasing investments overall, of course, maintaining discipline on the allocation of resources. Thank you Carol.

And the second question, if I may, on China O2O channel in particular. So can you please give us an update on the O2O channel given that it's growing faster than others? And then how is the product mix trending in this channel and also other -- if any margin implication on that? [Foreign Language]

Here, O2O, I think it is one of these areas what I was speaking before that we believe not only are growing, but we believe that are expected to keep growing, and it's very in line with this consumer behavior and in-home trend. So regarding O2O, I would say 2 things. People ask me about margins. So if you look at the same product maybe in O2O versus in another channel, yes, because of the last-mile delivery and other things, it's a little more expensive.

But on the other hand, it's a channel that continues to drive premium and super premium mix. So I think as a company here, when we think about this channel as a channel of growth in the future, I think Budweiser APAC is very well positioned because of our premium and super premium portfolio.

One of the reasons our super premium portfolio is in positive growth in spite of a very weak industry in China is because of O2O. So I think this is going to -- this is helping us offset some of the negative cost mix of the channel. When I look at the long term, I think we know, of course, we need to have -- keep working on having the right portfolio for this channel with the right packaging that goes to the right occasions, maybe bigger packs, different packs more tailored to what the consumer wants for this channel.

And then also, we'll be working on improving the margins of the channel. I think that as the channel consolidates, as we can improve some of the efficiencies of how we deliver to the channel, we can see some opportunities to improve our margins in the channel. But we are not waiting to solve these issues to embrace the channel. We are embracing it. We are using it to innovate, and we believe that we can see a lot of growth for our Premium and Super Premium brands in the O2O in the next years. Thank you again for the question, [Carol].

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

So I've got 2 questions. The first one is on India. So what is the latest status of the overdue receivables collection from the Telangana State Government? Have any bad debt provisions have been recognized further? And has the issue impacted your shipment allocation or growth strategy in Southern India? [Foreign Language]. This is the first question.

Thank you, Leaf, for the question. I think it's an important topic. That's why we made the announcement to the market earlier this month. Maybe I give you a little bit more context of this issue, right? As you know, India is a very complex market. Every state is different, has different rules, different ways, different taxation, different ways for us to deliver, different route to market.

In the State of Telangana, how the route to market works is that we deliver to -- through a state-owned corporation, right, basically to the government that distributes to the retailers. The total receivables amount from the state has actually been quite stable during the year. But some of the old dues and outstanding has become aged. And we have a very disciplined approach to overdue in Bud APAC and as a multinational company that I think gives also comfort to investors that we're very disciplined.

So following the internal rules we have, we decided to recognize this provision of $30 million regarding the aged receivables from the state. Having said that, we are, of course, working in our best efforts to recover this outstanding amount and take all the necessary actions we can to protect, of course, the interest of the shareholders. We don't expect -- there's always another question about one-offs that I receive. We don't expect further meaningful one-offs from this situation in the future. Of course, things can change. But at this point, the big provision was already made in this quarter. Thank you for the question.

Then my second question. [Foreign Language] So my second question is about the industry outlook for next year for China. So while the seasonal factors, extreme weathers and some local catering consumption cycles impacted China beer sales performance this year, what is our industry view for China beer industry next year in terms of volume, premiumization trend and competition landscape?

[Foreign Language].

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

Thank you. We are taking targeted action to stabilize volume, rebuild market share momentum in China and bring our performance back in line with our long-term potential. We will continue investing behind our mega brands and innovations, strengthen execution and expand our in-home channel presence as we navigate a challenging industry environment. We remain confident in our strategy and most importantly, in our people. Thank you all for joining us today, and I'm looking forward to speaking to you soon.

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

And welcome to the 2026 First Half results announcement conference call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. Y.J. Cheng, Chief Executive Officer and Co-Chair for the Board; and Mr. Bernardo Novick, Chief Financial Officer.

The results for the 6 months ended 30th June 2026 can be found in the press release published earlier today and available on the Hong Kong Stock Exchanges and Budweiser APAC website.

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 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 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 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 same periods in 2025. 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 half results can also be found in the press release.

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

Thank you, Ray, and good morning, everyone. Thank you for joining today's call. In the first half of 2026, our business in China continued to be impacted by a slower-than-expected recovery. However, we continue to rebuild momentum across South Korea and India where a strong commercial execution and power of our brand supported continued market share gains.

In the second quarter, we underperformed a soft industry in China, which was impacted by a wise weather and continued weakness in on-premise channels, bringing down both our top and bottom-line result. This was partially offset by continued momentum in South Korea where we gained market share and in India where favorable industry momentum and strong growth in Premium and Super Premium portfolio contributed double-digit volume growth.

I will now hand it over to Novick to discuss our performance in more detail. Thank you.

Thank you, Y.J., and good morning, everyone. In the first half of 2026, total APAC volumes decreased by 2.2%. Revenue decreased by 1.4%, while revenue per hectoliter increased by 0.8%. Our normalized EBITDA decreased by 8.9%, while our normalized EBITDA margin contracted by 236 basis points.

In the second quarter, total volumes decreased by 4.1%, impacted by performance in China, partially offset by growth in South Korea and in India. Revenue decreased by 2.1%, while revenue per hectoliter increased by 2.1%, benefiting from a positive country mix and brand mix in China. Our normalized EBITDA decreased by 9.7%, impacted by our topline performance in China, increased marketing investments and reduced operating income.

In the first half of 2026, our profit attributable to equity holders of Bud APAC increased by 15.6%, lapping one of the one-offs or, say, nonrecurring items in 2025 and also benefited by tax phasing between second quarter and the third quarter.

Now let me cover some of the highlights from each of our major markets. In China, volumes decreased by 9.7% in the second quarter. Revenue decreased by 8.6% while revenue per hectoliter increased by 1.2%, driven by positive brand mix. Normalized EBITDA decreased by 16.9%, increased by our topline performance and reduced other operating income.

We made further progress in our channel expansion strategy, focusing on premiumizing the in-home channel and expanding our penetration in the O2O channel. We delivered strong double-digit growth in the O2O in both the second quarter and in the first half, supported by brand and package innovations.

South Korea. In South Korea, volumes in the second quarter increased by low teens, cycling an easier comparable caused by shipment phasing ahead of our price increase that happened in April 2025. Revenue per hectoliter decreased by low-single-digits, impacted by negative packaging mix.

Normalized EBITDA increased by strong double-digits with our normalized EBITDA margin expanding substantially by 400 basis points, supported by our strong topline performance and operational leverage. Given this shipment phasing, it's important to look at the first half to get a more normalized view of our South Korea performance.

In the first half overall, volumes were flat with continued market share gains in both on-premise and in-home channels. Revenue per hectoliter increased by low-single-digits, driven by revenue management initiatives. Normalized EBITDA increased by mid-single-digits with our normalized EBITDA margin expanding substantially.

And then finally, India. We continue to invest in India to accelerate growth across our portfolio. We delivered double-digit revenue growth in both the second quarter and the first half of the year, while gaining market share in the states we operate, supported by share gains in Premium and above segments.

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

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

I have 2 questions. First one is regarding the weather in China, whether there's any impact. Have the recent floods in the Northeast China as well as Guangxi and the heavy rainfall across like East and Southern China. Do you have -- does it have any, like, noticeable impact on the sales volume in June and July? If so, would you help quantify the extent of the disruption and indicate whether demand has normalized in the affected regions subsequently? That's my first question. And should I continue with my second one or...

One question at a time, please.

Okay. [Foreign Language]

Anne, thank you for your question. So if you don't mind, I'm going to answer in Chinese. [Foreign Language]

[Foreign Language] Regarding the China's on-trade volume trend, would you comment on the volume trajectory across channels? Has the on-trade volume decline begun to stabilize?

And are you seeing any signs of recovery in the on-trade channel, in particular the Chinese restaurant segment? Given the easier comparison in second half '26, do you expect the on-trade volume to return to a positive growth at some point during second half '26?

[Foreign Language]

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

I have 2 questions as well. I will start the first one on China first. It is actually a follow-up question regarding the volume trend, in particular into third quarter and fourth quarter. What's the status of the sell-in and the sell-out situation?

Because if I remember correctly, last year's second Q, we started to apply the lean model with the distribution with our distributor wholesalers. So that means actually running into third quarter and fourth quarter, we are more on the same comp base. So how do we see this volume year-on-year trend? Maybe it's whether our chance to be bottoming out on the year-on-year basis? [Foreign Language]

I'll hand over to Novick to answer this question.

Okay. Great. Lillian, nice to hear from you. Thank you for the question.

So maybe recapping a little bit on the industry. So we saw a slightly positive industry in Q1. We saw a negative, at least from our side, industry in Q2, the main 2 drivers being macro environment and bad weather.

Regarding channels, we continue to see weakness in on-premise. We haven't seen any recovery so far in Q2. And regarding your question about moving forward, in July we still see weakness in the market. So we remain cautious. At this point, it's difficult to foresee improvement in Q3 in top and bottom line.

But look, the priority continues to be to stabilize volumes in China. And we believe the right thing to do is to continue investing behind our brands to recover in the medium term. But thanks for the question.

My second question is on overall EBITDA margin. So can you actually give us a little bit more detail in terms of how to project the second half EBITDA margin because of a few variables based on what we already achieved in second Q. One is the China pressure that could be some still lingering deleveraging effect and commercial investment as well as the Korea volume recovery and Indian growth. Are these negative, positive? How it worked out in terms of the EBITDA margin outlook in the second half? And also whether we can see a bit of EBITDA margin improvement toward the year-end or 2027. [Foreign Language]

Thank you, Lillian. You're right. I mean, I think it's important to mention that we are still in investment mode in China. Our priority continues to be stabilizing volumes. When we look at APAC, first, overall, I mean the 3 reasons or drivers for our EBITDA performance are, of course, number one, China topline; number two, what the increased investments. And then number three, other operating income that has been negative, but offset, of course, by strong topline in Korea and India.

So maybe speaking a little bit about each. In Korea, we have a good second quarter. So as I mentioned earlier in the call, for Korea, it's very important that we look at the first half overall because there is a little bit of phasing between Q1 and Q2. When you look at first half overall, we had flattish volume in a negative industry, which means that we continue to have good commercial performance and we see some margin expansion. Looking forward, we start to have some higher cost because of our hedging for H2 and probably '27.

India continues to surprise us in positive ways: strong double-digit topline growth and EBITDA also improving. So it's small, but starting to make a bigger difference for us. And China, as I was saying before, priority continues to be to stabilize volumes. We continue to invest in our brands and we expect this investment to continue in the second half, okay? So yes, margins might continue under pressure for a bit in China because the priority is now to invest in our brands, which we believe is the right thing for the long term. Thank you for the question.

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

Y.J. and Novick, this is Chen from BofA. I've got 2 questions. First, I will start with the margin side. So if I'm right, I think we have a 1-year cost hedging policy. And given the rising cost pressure into '26, are we actually seeing a delayed GP margin pressure into '27? And if that is correct, are we going to focus on SG&A control or continue with commercial investment to revive the topline growth going forward? [Foreign Language]

Thank you, Chen Luo. You're completely correct. We have a 12-month hedging policy, which means that the recent increase in commodity prices has a delayed impact for us. When you look, for example, at aluminum, right, the current prices has increase 10%, 20%, depending which period you're comparing. We are going to start to have those effects in the second half and some of those effects for 2027.

On the other hand, we have some good news on barley, which helps offset, but not totally, the increases. So you're right also that we are trying to have initiatives to offset. I think the supply team in the company has done a very good job trying to bring efficiencies to offset some of these impacts.

And to the question about whether that is going to stop us from making investments in the market, the answer is no. We believe the right thing to do now is to keep investing behind our brands and to recover the volumes in China. Thanks for the question.

Okay. That's very helpful. So my second question is on dividend. So given the fact that China has seen volume decline for almost 3 years and we have also seen several years of earnings decline, will there be any implication to our dividend policy as I understand that our dividend has been largely fixed for quite a few years despite the earnings volatility? [Foreign Language]

Yes. I mean it's taking us longer than we expected to recover. I think it's -- I always repeat this part about that the capital allocation priorities remain the same for us. And our number one priority is organic growth. So that's why we believe that we need to keep investing in our business. It's the priority number one.

Selective M&A is number two, if it comes. And then number three is return the money to our shareholders. But I think you're right. It's fair to assume that if resume -- if results don't improve, if they end up being below our expectations, it's going to be difficult to maintain the dividends at the levels that we have. Having said that, it's too early. We are still, like, half the year. And we'll keep working hard to try to improve the performance. Thanks for the question.

Our next question is coming from Xiaopo Wei from Citi.

[Foreign Language] This question is related to earlier commentaries about the commercial investment on branding. We have noticed many successful FIFA World Cup campaign advertisements. Is there any visible impact on the volume in the short term? We understand that investment is for long-term brand equity. So if it's not, there's no short-term volume positive impact. Then how long do you think it will be monetized in the volume operation?

Xiaopo, sometimes these investments take a little bit longer to see the benefits, but these are the right long-term investments for the brands. We're very proud of our partnership with FIFA. I think it was an amazing workup. I personally had the luck to go to one of the games with my kids and they really enjoyed it. I think it was a great way to show soccer overall and to showcase the partnership that Budweiser, the big brand that it is in China and globally, has been partnering with FIFA for 40 years. So it's 11 different editions. We have actually seen packaging featuring the 11 different editions of the Budweiser can. That was -- that is still in the market in many places in China.

We also took advantage of the opportunity to do a partnership with Erling Haaland. I don't know how many of you know him. He's a Norwegian striker that had a very good World Cup. And he's helping us with the launch and the rollout more than the launch of Budweiser Magnum. That is one of our biggest bets in Premium in China. And this partnership has been very successful so far.

Again, the main objective for this and particularly for China, right, that is not in the same time zone, more than volumes, it strengthened our brand equity. Our results overall in our brands, despite the negative volumes and the share loss, were good in this first half in terms of brand and brand equity. And we are committed. We are here for the long term. And we'll continue to invest behind our brands that at the end are the most important assets for our company. Thank you for the question.

And I have a follow-up question to you, Bernardo. Since you are very new to the CFO chair, we have to ask this question to you. So since the IPO of the company, we have seen great, great growth about India. And it is, in our view, a validation of the competitive model in the non-China, non-Korea APAC market. So will you slightly pivot towards inorganic growth opportunity in the region after seeing the Indian high growth and also the China weakness? [Foreign Language]

Thanks for the question. I think that the growth in India and Southeast Asia overall highlights one of the advantages I see for our company, which is our geographic footprint. I think we have, in a way, a competitive advantage versus our regional competitors of our exposure to some of these growth areas.

And having said that, that doesn't change our capital allocation priorities. Again, I will repeat them. Number one is still organic growth. And that's why we keep investing in our business to recover. But yes, number two continues to be inorganic. And you know how it is with inorganic possibilities. They might appear at some point. They not only depend on whoever is interested in buying, but whoever is interested in selling.

So we are still engaged in having conversations. And we will be in the table in case an opportunity comes. But there is no big shift in priorities regarding the importance of inorganic. Of course, we don't have anything to announce at the moment. And if something arrives, we'll let you guys know. But yes, thank you for the question.

Our next question is coming from Euan McLeish from Bernstein.

So yes, Bernardo, you've been really clear that China volume growth is your top priority. Like historically, your main driver of the topline was this geographic route-to-market expansion strategy. And then probably, I don't know, 18 months ago or so, you sort of pivoted to much more about the in-home channel route-to-market expansion. Was this a good choice for you? And how do you think about the relative attractiveness of the 2 growth strategies as we go forward?

Thank you, Euan, for the question. You are correct. I think if you look back in our history, right, a lot of our growth, particularly for Budweiser in the early years was, of course, growing the brand where we were, but a lot of geographical expansion. Of course, the more you grow, that expansion growth is lower. And -- but doesn't mean that we don't have opportunities.

And I think regarding the market, our expansion strategy was always starting more with the high end, more in the nightlife and out-of-home. And as the market is shifting and now it's going more to the O2O, we are trying to see different ways to penetrate new markets. So we are shifting a little bit the strategy there.

But we still see opportunities to cover spaces where we are not. Although, of course, it's not at the same rate as it was in the past. But we do see opportunities. And we keep working on trying to fight for new growth opportunities in China.

Okay. It seems that the margin declines in China kind of accelerated when you made the shift to the in-home expansion strategy. Is this more about kind of temporary step-up costs and just trying to build your platform in that channel that will then -- and these investments will then be leveraged and the margins will start to drop through? Or is it just inherently a higher cost of doing business in the in-home channel, so we should expect permanently lower margins because of this strategic choice?

Euan, I think it's probably a little bit of both. I think as I've been mentioning, we are increasing investments as a percentage of net revenue in China to get to these priorities that we have. Of course, when you do that, the ROI of the investments are lower, right, because volumes are decreasing as you see. But we still believe it's the right thing to do. We need to be patient and the results will come.

But on the other hand, on the O2O expansion, the margins are lower. We have been able to offset some of those -- the extra cost of operating O2O by premiumizing. I think the O2O as a channel is a more premium channel than the in-home overall. So that offsets. And we have an advantage there versus the competition because we have a more premium average portfolio to play and Super Premium, by the way, that helps in the O2O.

But I think when you look at the margins, the answer is both. Some of the things we are doing or the things that are happening are structural and some are investments that we are doing now to try to recover.

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

Y.J., Novick, I have 2 questions. I will ask one by one. So the first one is on China about the channel inventory. So what are the channel inventory levels right now in terms of days and turnover do you maintain across China's distribution network? And how does this compare to the ideal level? Also, will we still continue to focus on a lower, healthier channel inventory into the second half in order for a longer term, more healthy volume recovery? Or we are already like at the ideal level right now? I will also translate into Chinese. [Foreign Language]

Thank you, Liu. Yes, we have been taking steps to adjust our inventory. Our inventory today is lower than it was at the same time last year. Having said that, we are not yet at what you're asking if we are in the ideal level. I don't think we are yet. I think we are still a little bit -- we still have some room to improve in both Tier 1 and Tier 2 inventories.

So we -- going forward, we remain charged, but we look at inventories and there might be a little bit more adjustments in the second half. But we are getting close to what we think is the ideal level for inventories. Thank you for the question.

That's very clear. The second question is about Korea's consumer environment. So how do we look at this consumption environment in Korea given the volatility in the equity market? Also any benefits to local beer consumption increase or beer consumption upgrade from the equity market wealth effect? And how would we look at into the second half? [Foreign Language]

Thank you, Liu. Again, in Korea, it's important that we look at the first half overall, reminding you that our volumes were flat but our estimate is that the industry actually declined low-single-digits. Overall, the economy is doing well. Consumer confidence is up. Of course, the stock market was really up in the recent days, not so much. But overall, this positive economic sentiment that we were seeing in the first half of the year has not translated yet into overall recovery in alcohol consumption.

On the positive side for us in beer, beer is gaining share throughout in the first half versus soju. And we believe this is some of the more beer-friendly occasions are gaining some traction, which is good for us. We also see in a declining industry some pockets of growth, particularly around nonalcohol, flavored beer, RTD. This is gaining popularity and this is helping us.

Again, it's important to mention that we have positive momentum. And we are outperforming the industry in both the in-home and out-of-home, and that we remain focused on our strategy of innovating. I think as market leaders, we need to lead and lead with innovation with balanced choices that is the future in a market like Korea and developing new occasions, particularly on the occasions that are growing and are helping us on the share of growth side.

Our next question is coming from Jessie Xu from JPMorgan.

Bernardo, Y.J., Jessie Xu from JPMorgan. My first question is a follow-up on South Korea and nonalcohol categories. We know that South Korea has often been an early mover in Asia, leading other countries across different consumer trends. So could you share the latest developments you are seeing in nonalcohol beer and the broader beyond beer category in South Korea, particularly in terms of consumer behavior, adoption and key consumption occasions? And how are you positioning your portfolio there, including the key investment priorities in Korea to capture that growth? [Foreign Language]

Thank you, Jessie. I think one of the advantages of being a global company is that we can see and compare situations that we see in Korea and other developed markets. And in mature markets, it's important to lead with innovation, particularly on what we call balanced choices. And there are a lot of pockets of growth that are important and growing like nonalcoholic, flavor and RTD.

Maybe I can share with you all like 2 examples that I think are important to share in South Korea. One is Cass Zero that we relaunched as Cass 0.00. And in this case, we are using a new technology that helps with the alcohol removal. And it's bringing like a new Cass that is closer in original flavor and a crispy texture and is now the #1 nonalcoholic segment in the segment. So I think we are happy to see that. This is also an advantage of being a global company and having some of these technologies that are like very advanced.

Another example, and it's also an advantage of being a global company, is the launch that we just did of Nutrl, in July. Nutrl, I feel close to it because it's one of the brands that I was responsible when we acquired them in North America. It's a Canadian vodka soda that we acquired in Canada and then we launched in the U.S. and is doing very well in both cases. And we brought it to Korea, we just launched it.

The team was very creative and we launched it with a partnership with the 2 of the Seventeen K-pop group there. It's targeted, of course, to LDA, but younger consumers. It's a lemon flavor vodka sparkling beverage with zero sugar. And it's into this ready-to-drink category that is growing. And I think the advantage that we have in Korea is having these global brands and having a strong route to market that can allow us to keep innovating.

It's why we are managing to have stable volumes even in a soft industry, right? So we believe that this RTD represents a very good opportunity for the future. And the team is actively working and talking with consumers to see how else can we develop new products for new occasions in South Korea. Thank you for the question, Jessie.

That's very helpful. And then my second question is on China and pricing. Well, cost inflation started to come through from the second quarter and into the third quarter, while the overall demand is fairly still weak in China. But given some competitors already took price up in April, how are you thinking about your pricing strategy as of now? Do you anticipate taking any pricing actions soon? And if so, would they be broad-based or more targeted by market, by channel or brand tier? Or put it differently, how are you balancing protecting volume or share versus protecting margins into the second half? And what would be the key triggers for acting on price? [Foreign Language]

Maybe to answer, I think it's always good to start with the strategy, right? So our priority in China continues to be to stabilize volumes. And as you can see in our results because of the soft industry and our underperformance in share, we still like focus on trying to stabilize volumes. So yes, we are aware of some competitive reactions in some regions, in some packs. We continue to monitor. But at this point, we don't have any news to share about price increases.

In the first half, we invested in some areas. We had a positive mix, but we have some investments, particularly to support our wholesalers that, of course, are like us under pressure given this volume decline. We are also investing behind our brands. We are also investing behind the growth in O2O. Some of these things take a while to see effects, but we believe are the right movements for the long term.

So I think the message to you about pricing is that at this point, we continue to have a focus on stabilizing volumes and we expect to continue investing in the second half.

In the interest of time, our final questions will come from Christine Peng from UBS.

So I also have 2 questions. So one is about China. So I appreciate management's earlier commentary in terms of the China strategy. You talked about channel expansion. You also talked about portfolio diversification. But on the other hand, the timeline in terms of volume recovery and margin seems uncertain.

So given the external environment, especially considering volumes still declining, industry competition is still very fierce. So I'm just wondering whether the management will consider any strategic pivots beyond these measures you just talked about. And if that happens, what's going to be the financial impact on the company's revenue and EBITDA margin going forward?

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] So I have -- the second question is about Indian as well as Southeast Asian markets. So we all understand management is now prioritizing revenue over profitability for Indian markets. But I was just wondering whether there will be any pathway or timetable in terms of improving the Indian market profitability in the next 12 months. And also for Southeast Asia market, which we also understand is probably not making much money. So what's going to be the plan to improve that market's profitability in the next 12 months?

So you want to translate to Chinese or...

[Foreign Language]

[Foreign Language]

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

Thank you, Ray. Our priority in 2026 is still to stabilize volume and rebuild our market share momentum in China. We continue to invest behind our mega brand and innovations, strengthening execution and expanding our in-home channel presence.

Despite current performance softness, we remain confident in our people and we are focused on our strategy going forward. Thank you all for joining us today. And I'm looking forward to speaking to you soon.

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

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.