Ladies and gentlemen, good day, and welcome to the United Breweries Limited Q3 and FY 2026 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Jorn Kersten. Thank you, and over to you, sir.
Yes, thank you very much. Good afternoon, everyone. Thank you for joining the call for our update on the previous quarter, Q4 , 2025. Vivek and I are happy to give you an overview of the performance, as well as answer some of the questions that you may have. As a few introductory remarks this quarter, United Breweries, we delivered resilience and agility with improved margins, and we continued our premium growth, while in the industry we still need to navigate some headwinds related to both weather as well as challenges in affordability. And I think we'll speak some more about that later as well.
For the quarter, we did see net sales growing at 4%, largely driven by price increases in key states like, for instance, early in the year, Telangana, Rajasthan, as well as Uttar Pradesh, as well as the impact from localization of premium supplies, a source mix, and a favorable state mix, where we saw some more profitable states ahead in, in terms of volume development. All this, together with operational efficiencies that we've been able to materialize, allow us to achieve a margin of 45.3%, which marks, more than 220 basis points improvement over the previous year. And you can imagine, this is, quite a nice green shoot, as it's the highest gross margin performance that we've delivered over the past three years.
That also supported the interquarter EBIT growth of 86%, in Q3, which is also a pretty good recovery from the quarter before. Now, earlier this year, we launched our productivity and cost effectiveness programs, which includes strategic initiatives around reorganizing our key business functions, optimizing our brewery presence, localizing and further simplify, simplifying our portfolio, as well as driving other cost efficiencies. In the margin expansion, we see some of the early benefits of these initiatives translate into the P&L and the margin expansion. Now, for the longer term, we still believe that sustained investments in brands are essential to building the brand equity and shaping the category in India.
So we will continue to invest in our brands, and a testament to this is that the UBL portfolio brand power has been the highest in three years' time, on the numbers reported over the last quarter. Also, we want to accelerate innovation, and our newest offering, Kingfisher Smooth, launched in January 2026, and is really set up to support category growth and expand our presence in the strong beer segment. We currently launched it in Rajasthan and Karnataka, and excited about the prospects that we see in the first few weeks of this innovation. With these investments, innovations, as well as our commitment to invest some of the savings and efficiencies into our brands, into our portfolio, we are very much committed to continuing our journey as the beer category maker in India.
On the regulatory front, linked to that, it remains a very mixed landscape while we see some positive developments in Maharashtra as well as in Madhya, which support beer affordability, changes in pricing and duty structure. Other states continue to have their own challenges. So that remains a mixed bag. Now, if we look ahead, we will, as always, remain focused on building and shaping the category. We continue to drive premiumization, as we've done in 2025, and looking forward to strengthening our brand portfolio, as well as advocating for equitable taxation of beer. With the programs underway, we continue to manage our costs proactively, including optimization of our network, and we also, as we've been repeatedly mentioning here as well, continue to invest in the capabilities to make sure that UBL is positioned for sustainable long-term growth.
I'm sure there's a few questions before we move to the Q&A part. I'd like to hand over to Vivek for some introductory remarks from his side.
Hello. Thanks, Jorn, and thank you everyone for joining. As Jorn said, it was a very resilient and agile quarter. I think for me, the most important is the directions in the numbers more than the quantum of the numbers, because this is a reflection of all the hard work which is happening over the last few quarters and the structural interventions we were making on the business in which we are all nicely coming together. You know, we talked in the past about we are localizing our premium business, and we, if you remember, I mentioned that by September, we would be done in almost eight more breweries of localization. That impact has started hitting, coming nicely on the margins. We have also looked at, you know, better return bottles, the operational work which we did on that.
There's a lot of work happening on organization design, on, on productivity, on sourcing, on making sure our network design priorities are, are coming together. We've also, you know, we were caught bit in the middle of last quarter, especially with the rain, especially at that time and all. And we had already made investments which we didn't want to pull, which in the hindsight was the right call, because our brand power is the highest in the last three years. And we did, took some strategic calls in the last quarter, knowing where the category is getting impacted and affordability issues are not going away, to, to repurpose our investments in, in both the state mix and all. Our number one priority remains to drive category growth. I'm very proud of the organization because we accelerated, you know, many things.
We accelerated our, I would say, the blockbuster innovation of Kingfisher Strong Smooth, which is the innovation on the mainstream and first major innovation on the mainstream, which will drive the category growth, which will drive, which is at a better margin versus Kingfisher Strong for us, both in terms of pricing and, and overall value. We think it will not only improve our structure profitability, but also drive straight up and get new users, designed for the young consumers who are looking for less bitter. We accelerated that innovation to two states, you know, with a very, very complete asset. The product is winner versus, you know, the competition, but also has a very high, high trial power.
The other thing, what we have done is we have done a lot of organization capability work to streamline things like, for example, customer service, logistics, making sure, we significantly improve consistency of beer. We improve the storage. We, we're investing in the season on the preparation of supplies. You know, despite having land shortages, we, we work very actively. The category has two challenges. I think number one challenge continues to be the affordability. I think beer in the key states, like in Karnataka, the category declined 17%, in Rajasthan declined 5%, in Telangana declined double digits, West Bengal declined. I, I think we're continuously working to Brewers Association of India and with the regulators to show them the data.
And we are seeing some green shoots with couple of state governments coming with a policy and not taking taxation on beer, but there's a lot more to be done there. The second challenge, of course, you know, is weather, and we are hoping that the summers are near us, and we'll see how those impact happen. We are going through an inflationary environment as well, especially on aluminum prices, which will impact cans and, you know, barley prices will also be there. So we are also very conscious that cost of sales will increase. So our productivity program could not have come at the right time, and it is a... It's not one-time activity, it is a routine excellence, what we are trying to do in our sourcing, in our processes, in inefficiencies, in our wastage.
And I think we were very glad as a management team, as a company, to see some of those efforts coming in the financials. So I'm not too... I don't want you guys to get too excited by the absolute numbers and the extent of the change, but what we are saying is directionally we are in the right direction, which is we'll grow the category, improve the margins, and we will fund the growth, and we'll be very aggressive. And many of you would have seen our execution in Women's Premier League, where for the first time we become market sponsor and we, you know, the Kingfisher brand really great. And at the same time, our premium portfolio, Heineken, Heineken Silver, Amstel brand, Ultra, Ultra Max, continue to have the momentum, and the strong brands that we need.
Happy to answer any questions at this point of time.
Sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks. My first question is on the margin surprise, and congrats for that. And you have also done a non-core asset monetization of land also. So I wanted to understand what will be the competitive intensity, given Bira kind of player clearly in terms of presence has gone down significantly. Do you see that as a, that as a cost advantage in terms of advertising spend?
Oh, actually, we are seeing the competitive intensity quite high, because, you know, when volume, the category is not growing volume, it's a tough time. Everyone wants a pie on a high fixed cost business. So I think, as I said, that, you know, many times that our focus is on category growth. Actually, we feel that, you know, more spend in the category will actually help to drive category growth, because the number one thing we need is to get back to growth on volumes in the category. We are seeing a lot of competitive intensity from the local players, some of the other global competitors. You know, in some cases, you know, we are seeing some spend from the competitors, which are basically buying volumes and other things, but we don't want to get into that trap.
But having said that, I think it is very competitive, but we really hope that this drives into category growth. You know, I don't mind us losing shares if the category is going up, but, you know, it's not a healthy sign if the category is declining. And I think the category must bounce back from this quarter, and that is why I think the intensity is there. On Bira, if you actually see, the Bira share is only 0.1, and it has never been a significant share. It was big in couple of states, but we don't see much impact because of Bira intensity coming down.
Yeah. I had a question on the specific states. So Maharashtra, you have done quite well this quarter. My question is now that Maharashtra-made liquor is ramping up and that's more affordable to customer, so do you see that beer growth rate will go down in Maharashtra? And the laggard states like Karnataka and Bengal, soon we will see the favorable base lapping up. So do you expect a strong FY 27, assuming season is normal? Because no one can predict season, but just because of the, these two states, how do you see?
Yeah, no, I think we want to continue to see the momentum in Maharashtra, because as I said, the category growth opportunity is huge in Maharashtra. While MML, in fact, we have to still see, because it has come in and, you know, it's very early days, but we see a lot of opportunity. In Maharashtra, we'll be cycling back. I think Karnataka, as you said, has been the, the capital of beer or, the capital state of beer. It, it has to bounce back in, in Karnataka, and that's why we are, we are also confident and betting on our biggest innovation with Kingfisher Strong Smooth. We accelerated in Karnataka to help drive category growth. We also have Heineken Silver, Amstel Grande. We have a full portfolio in Karnataka.
You know, this, at least in January, the operational issues which were there last year on label registration and all were not there. So those are the positive signs in Karnataka. And at the same time, we are working with a lot of other governments. I think the West Bengal policy was positive. In December, where there was a relative taxation of beer were better, so we hoping better. We're hoping that Telangana, Odisha, Rajasthan, some of the other states also address the affordability issues and the relative pricing. So I think there will be ups and downs. You know, Jharkhand has been a good positive based on their policy on privatization.
So we should have to see, but yes, you know, you know, as I said, we are, we are positive, but we have to see how much it bounce back, because affordability is still a real issue. Like, relatively it will improve, but if, if the price is remains where it is, so we have to just see that. But you're right, there, there are going to be plus and minus on this. But there are green shoots on category growth in January. We are already seeing, you know, category coming back to 4-5% level in January, so that's a positive sign.
Last quick question. So you spoke about the aluminum can inflation, but gross profit still is up versus the overall sales, so there is a gross margin expansion. So what has helped here? And do you see this turning a bit more under pressure, given the aluminum inflation? Second is, other expenses are up 4%. So anything sustainable in that line item?
Sorry, the second-last, second question, your voice was breaking.
Other expenses are up 4%.
Other expenses. Other expense?
Sorry, the voice was breaking, but let me answer the first question. Abneesh, I think, you know, aluminum cans is a watch-out, but if you see for United Breweries, that stands with bottles. And we actually work a significant amount of work we are doing to return bottles, and that has really helped us on the gross margin expansion. The other thing is the state mix, and where we produce and what we do on that. So we are building the can cycling and the imports we have to do into our plan, but these will be the headwinds, which may not lead to, you know, this level of margin expansion.
In our own estimate, like, you know, we got 220 basis points of gross margin expansion, we think 50% of this could be structural, and we should continue to lean on that, and many of these will have working on it. We also taken pricing and plans in the selective market, wherever we can take, because, you know, pricing is a lot of it's firm and given. So there's a plan, we are working on it.
Thank you. The next question is from Harit Kapoor, from Investec. Please go ahead.
Yeah, hi, Graham. Yeah, hi, Graham. Yeah, so the first question was on the revenue bit. So, you know, you've seen almost a 5% realization improvement this quarter. How much of this is the pricing that you spoke about, where you've been able to get some incremental pricing? And how much of it is mix-led, because markets like, you know, West India, specifically Maharashtra, did well. Just give us a sense of, you know, what proportion of this is mix, what proportion of this is price?
I'm sorry, Harit, could you please repeat the question?
Yeah. My question's on realization growth, which is almost 5% this quarter. How much of this was price, and how much of this was mix? Just some sense will help there. Thank you. That's my first question.
Yeah, Harit, thanks for the question. It's approximately 50/50 between price and mix, where we see in pricing, we see in some of the big volume states, like Telangana and Rajasthan, we have pricing from earlier in the year. On the state mix, we see that Maharashtra and Karnataka mainly were ahead of the pack in terms of volume growth. So it's a combination which pans out in approximately 50/50 split.
You know, if you look at, you know, the earlier participant asked about gross margins. So, I understand that part of it again is mix-led, given that, you know, you know, markets in the west have done well, and Telangana, Rajasthan, not so much. But, how much of this would you really attribute again to state mix? You know, this sharp improvement of 220 basis points. Because, you know, once some of these other markets start to, you know, lap the decline and start to grow, we should see a more normalized gross margin. So I just was coming from that angle.
Yeah. So it's a, it's a combination of things. Look, I think, like Vivek mentioned, we're very happy with the direction this has gone, because we see in the margin extension that we recorded in the quarter, we see that part of it is also showing the green shoots of the initiatives that we did and the good performance as well on, for instance, the bottle returns. If we look at... Sorry, are you still there?... Hey, can you hear us?
Yes, sir, we can hear you.
Yeah. Okay. Great. Yeah, so on the, if we look at the total of 220 basis points, we think that roughly 50% is underlying performance improvement, which is a combination of better return bottles, the local sourcing that we have in Andhra Pradesh, and as well, the favorable state mix. So in that mix, I do think you could say that there's a part also driven by the favorable savings. Obviously, we also try to drive that in terms of how do we push for our business to, of course, accelerate in the regions where it's more profitable versus others. But that remains a bit of a volatile thing.
Yeah, of course. And the return on the bottle kind of mix, if maybe you could give a sense of, say, YTD, what that number is versus what it was last year? Any kind of direction that you have in terms of... Just wanted to map your improvement, how it is kind of panned out.
Yeah. So year to date, we are at 36.7 new bottle infusion, and it's been a continuous growth story. So this is, top of my head, I would say, the sixth or seventh quarter in a row that we're improving on, on bottle returns. So lowering the impact of new bottle infusion, despite the fact that we also continue to grow, especially on the premium side. And we've mentioned that before on these calls, that with premium growth, accelerating, we also need to get to significant share of premium in order to see the, the bottle returns also helping for premium to become value accretive. We start seeing in some selective pockets in the markets, we start seeing some of these improvements coming through to the P&L. So I think that's something, that adds to what Vivek is saying on direction.
We're very happy with how this is going, 'cause it means that structurally we're improving the business. However, this is still very selective. But overall, on bottle returns, I think we've done really good work and we continue to see the improvement, and that also, of course, reflects in our ability to have return bottles on the premium segment.
Great. And just the last bit was, you know, as the earlier participant asked, you know, Karnataka comes into the base from January, you know, the data is now visible. You know, even Rajasthan, Telangana, the impacts were started to play out in Q1 , Q2 . So you're lapping some of those kind of lowish bases as well. Vivek, do you believe that, you know, this 6%-7% industry volume growth trajectories, you know, is a reasonable ask going into FY 2027 after a fairly challenging year?
I think on the longer term, yes, we still very much believe that that's where the industry is heading. And we do expect some acceleration, both cycling some of these items that you mentioned, as well as last year, where we see the benefits of pricing in Telangana and Rajasthan, but it has an impact on industry volume in these particular states as well as across other states. So that continues to be a bit of up and down, but in a longer term, we still see that number. Short term, we still see headwinds, cycling that pricing, so that will take a few months, as well as preparing for the season. We did well last year, so on the shorter term, yeah, we see green shoots.
We're not there yet from a category point of view in that mid-single digits, sort of area of growth. But, for longer term, we still believe that's where we need to be.
Thank you. Before we take the next question, a reminder to participants that you may press Star and One to join the question queue. The next question is from Krishnan Sambamoorthy from Nirmal Bang Institutional Equities. Please go ahead.
Yeah, hi. My first question is regarding visi-coolers. What are the discernible benefits that you have witnessed so far in the areas where you rolled this?
Yeah, I think, you know, good question. I think, as you said, we are consistently increasing our investment in the visi-coolers. I would say versus 2014, we have actually almost 2.5 times more visi-coolers in the market. And we are seeing almost, you know, not only a category growth in those stores, but also share growth for us in those stores. And I think there's a lot of opportunity because the category, you know, the beer is sold cold, and we have to continuously drive it, but we are absolutely seeing a positive momentum on, on the category and our shares in the stores where we are doing the visi-coolers, and we are measuring it.
Of course, there is an impact of weather and affordability and, you know, so we'll have to see the data over a longer period of time, but directionally, you know, we are investing more this year versus last year based on the positivity we are seeing on this.
Thanks, Vivek. How many stores do you have visi-coolers now in terms of number at the end of December?
Yeah, we have in more than 35,000 stores, we have visi-coolers.
Okay. My second question is regarding barley, inflation. In the last quarter, you had mentioned that you were expecting high single-digit inflation. What is the latest view that you have here?
Yeah, no, no real change on the barley. I think the barley remains one of the input materials where we're seeing some higher inflation. On the other input materials, actually, we see pretty good developments. We feel good about the bottles. Like Vivek mentioned, we need to watch out for aluminum. I think over the past couple of weeks, the global price for aluminum we had quite a bit of an increase, so that's something that we watch. I think we're covered for the first couple of months, and specifically, maybe on both cans as well on barley, a big part of our focus is on localizing supply.
So for cans, we still are looking at some imports for the year, which we can hopefully cover with the help of partners in the years after. For barley, we've managed to completely localize the supply to India versus previous years, where we also had to do imports, which of course come at a price.
What's the issue here on barley? From what I gathered, the barley sowing so far has been ahead of last year's levels. So what is causing this inflation?
It's the MSP increase, because as you know, the minimum support price in the key markets have gone up. To do that and to encourage farmers, we usually pay slightly higher, based on that. So I think, it's MSP and the inflationary increase which we are looking.
Okay. Thanks a lot.
Thank you. The next question is from Ajay Thakur, from Anand Rathi Securities. Please go ahead.
Hi. Thanks for taking my question. So I wanted to understand more on the market share trend, how it's been shaping up, especially for us, and in the key states like, you know, Maharashtra, Madhya Pradesh, or some of the other, you know, major states. If you can just throw some light on that part.
Yeah, I think on the full 2025, we actually grew almost 90 basis points of national market share. So... And not only that, we also grew, I think, around 180-200 basis points of premium market share. So our market share trends or the full year basis are there. There are going to be some fluctuations quarter by quarter because of the state mix, where we are developed. But overall, I think, you know, we are in the ballpark range of 48%-49% market share as a company. And as I said, our biggest priority is to drive category growth. Again, you know, we are actually not talking market share amongst us as much. The key priority, what Jorn said, we need to get long-term 6%-7% growth. Last year was tough because of the affordability and weather.
We need to see how the weather holds up and how much impacts. So I think that's where we are.
Understood. And second question was on the Telangana. What is the status of in terms of the receivables that we have over there? And, how much improvement are we seeing in terms of the receivable trends?
We continue to face challenges in Telangana as an industry. I think we have got some good improvement in the past overdues, which were there. I think, but also the new overdues have increased. I think it's a constant effort to work with the government and to bring the part, but I would say we are in a... It's a continuous range. So I won't say we are in a better position or there, but this is something we need to work, because the total exposure for us still remains the same.
Okay, quite helpful. Thanks.
Thank you. The next question is from Himanshu Shah, from Dolat Capital. Please go ahead.
Yeah, sir. Thanks. Thanks for the opportunity. Sir, I have a question on our cost and productivity effectiveness program. So the 3%-6% savings that we are highlighting, would this be the gross savings or net savings, net of reinvestment? Number one. And this will be on FY 25 revenue base. If you can just help clarify this particular thing.
Yeah. So we're talking gross savings here, that we aim to materialize over the next couple of periods. Yeah, so and the savings that we generate from these initiatives, we expect to partially flow through the P&L, and a significant portion is planned to be strategically reinvested, so that we're driving future growth, that we support the brands, that we support our organization efforts. So this will include a wide range of investments. Take, for instance, to impact affordability of beer and to make sure that we do the right brand-building activities, and putting money behind innovations like now, Kingfisher Smooth, enhancing competitive positioning, these type of things, across our key markets, to make sure that we continue to invest into long-term growth.
So first and foremost, we need this, you know, to be able to invest behind the growth, and then we'll see how well we do versus versus the initiatives. But I think that's the, the main driver for, from launching this, is making sure that, one, we become more resilient in a volatile environment, but two, that we really generate funds to invest behind long-term brand building.
Sure, sir. The savings should materialize over what period of time frame?
Between 2026 and 2028. So it's a long-term program, and you will hear us talk about this quite a bit, I think, in coming calls, because it's also about structurally improving the business. It's definitely not meant to be a short-term, knee-jerk exercise. It's really about long-term improving the business.
Sure. Thank you. That's it from my side, and all the best.
Thank you.
Thank you very much. That was the last question in queue. I would now like to hand the conference over to the management team for any closing comments.
So thanks, and thanks, everyone, for joining and asking questions. As you said, I think we are on a journey of being category maker. I think, what Jorn said, our focus is on structurally improving the health of the business, bringing real consumer innovation, retail excellence execution, leveraging our footprint of our breweries and our partnerships, and really creating the excitement of the category. Right now, the other big focus is to really advocate about differentiation of beer, why beer, beer is different from spirit, why beer needs equal taxation, why beer is, you know, is required in terms of the economic value it adds.
So there's a lot of work happening on the category, and as I said, we feel very positive about the structural improvement and the trends and the hard work of the organization coming together, and we feel buoyant about the prospect of the category in medium to long term. We'll continue to invest behind our brands and innovation. Thanks, everyone, for joining.
Thank you very much. On behalf of United Breweries Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.