Ladies and gentlemen, welcome to Carlsberg Q3 2026 trading statement conference call. I am Healy, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Jacob Aarup-Andersen, CEO. Please go ahead.
Thank you very much, operator, and good morning, everyone, and welcome to Carlsberg's Q3 2026 conference call. As said, my name is Jacob Aarup-Andersen, and I have with me our CFO, Ulrica Fearn, and our Vice President, Investor Relations, Peter Kondrup. As always, let me just start with a couple of headlines for the quarter. First and foremost, we delivered robust revenue growth. Our growth categories continued to outperform, and we expanded our partnership with PepsiCo into additional markets.
We confirm our earnings guidance for the year. I am going to provide the key group headlines for the quarter, and then Ulrica will take you through the regions and the full-year outlook. Let us turn to slide number three and look at the Q3 figures for the group. Volumes increased slightly in the quarter, driven by a 5% increase for our growth categories, in particular soft drinks in the U.K., soft drinks in Kazakhstan, and strong growth in beer in South Asia and Laos, partly offset by lower beer volumes in China and the U.K.
The continued progress in the growth categories led to their share of total volumes increasing to 52% year- to- date September, compared with 51% for full year 2025. Mainstream beer in Western Europe, where the category faces particular pressure, now only accounts for 12% of our total volumes. In line with our commitment to drive sustainable, profitable growth, revenue per hectolitre increased by 3%. All three regions contributed to this positive value-driven development, balancing volume and value in all markets. Together, this resulted in organic revenue growth of 3%.
Currency movements had a positive impact in all three regions, contributing 1.8% overall, and that means our reported revenue grew by 4.9%. Turning to slide four, let me give you a few more details on our growth categories and our international brands. Soft drinks grew strongly. Volumes were up 9%. Growth came from the U.K., the Nordics, and Laos, as well as the continued ramp-up of the Pepsi business in Kazakhstan. Premium beer saw broad-based growth in Western Europe and CEEI, while volumes in Asia were impacted by bad weather and continued subdued consumer sentiment in China.
Excluding China, premium volumes grew by mid-single digits compared with a 3% decline overall. Total alcohol-free brews grew strongly by 11%, with volumes in Western Europe up 15% and mid-single digits in CEEI. We are very pleased to see the resilience of AFB. The category is becoming firmly established in more markets, and we saw volume growth in almost all markets in the two regions. Beyond Beer grew by 3%, driven by another quarter of double-digit growth for Garage in Poland and Kazakhstan. Then turning to our international brands.
Pepsi volumes grew by 18%. Alongside the ramp-up in Kazakhstan, we saw very good growth in the U.K., Ireland, Sweden, and Laos. Carlsberg volumes grew by 3%. Premium Carlsberg volumes increased by 20%, thanks to the very strong growth in South Asia and in China. While mainstream Carlsberg volumes were impacted by tough competition in the low ABV mainstream segment in the U.K. Tuborg volumes were flat overall. Excluding China, volumes increased by 4%, with very strong growth in South Asia. 1664 Blanc volumes grew in many markets across Western and Central and Eastern Europe.
However, lower volumes in China and certain export and license markets weighed on the total volumes. Please turn to slide number five. We continue to expand our PepsiCo partnership, strengthening our soft drinks exposure and multi-beverage portfolio. With the agreements signed over the past two years or so, our PepsiCo bottling footprint will expand to 17 markets by January 1st, 2029, compared with five markets in 2024. That is a significant expansion, creating a multi-beverage resilience and consistent growth in our total portfolio. Let me give you more color on Kazakhstan and the agreements which we have entered into this year.
In Kazakhstan, the new soft drinks facility is now up and running. We expect to complete the insourcing of all the Pepsi volumes by the end of the year, and as a result, we expect a solid profit improvement in 2027. In the Nordics and Baltics, we will create a full Nordic hub from January 1st, 2029, when we add Denmark, Finland, and the three Baltic states to our existing Pepsi businesses in Norway and Sweden. We are also creating a South Caucasus hub, taking over the Pepsi license in Azerbaijan from January 1st, 2027 and acquiring the bottling businesses in Georgia and Armenia. Those two markets will join our footprint upon deal completion. Now over to Ulrica for the regional performance and earnings guidance.
Thank you, Jacob, and good morning, everyone. Please turn to slide six and Western Europe, where total volumes grew organically and in reported terms by 0.3%. While we had good weather, there was limited year-on-year impact from this, as weather was also good last year. We saw good progress from growth categories, which were up 4%, and all growth categories contributed to this increase, which more than offset lower mainstream beer volumes. The mainstream beer decline reflected soft development, particularly in the U.K., Poland, and Germany. Revenue per hectoliter increased by 2%, supported by a positive category and country mix.
Organic revenue grew by 2.5%, and reported revenue growth was 3.7%, and this was due to positive currency impact of 1.2%, mainly related to the British and Norwegian currencies. Now looking at the markets, the U.K. delivered solid volume growth, supported by mid-single digit growth in soft drinks and market share gains in both volume and value. The Pepsi franchise performed very well, particularly Pepsi Max and 7UP. We are extremely satisfied that Pepsi Max is now the largest cola variant in the U.K. market.
The poppi launch has exceeded our expectations and landing very well in the market. In world beer, we saw good growth, particularly for Poretti and successful launches of Mythos and Sapporo, while the Carlsberg brand declined in the mainstream category, and that remains under pressure. Total volumes in Nordics grew. We saw particularly good growth for the growth categories in Sweden and Denmark. Volumes in France were slightly up, that was driven by high teens growth for AFB and growth for brands such as 1664, Brooklyn, and Anosteké.
The volume decline in Poland moderated in Q3, that was supported by easy comparables. In line with our value strategy in Poland, we saw strong growth in the AFB and Beyond Beer portfolios, as well as growth in premium beer. Now turning to Asia on Slide seven. Total volumes and our growth categories were impacted by the weak Chinese market and destocking following severe rainfalls during the peak season. Excluding China, regional volumes grew by 1%. Revenue per hectoliter was up 2%, benefiting from price increases, category and country mix, and consequently, organic revenue declined by 4.6%.
Thanks to a positive currency impact, mainly from China, reported revenue grew by 1%. A few words on China. Year- to- date, our volumes were down by 5%, in line with the market. As already said, volumes in Q3 were weak and declined almost 10%, reflecting a continued subdued consumer sentiment, bad weather in July and August, and subsequent destocking. The on-trade remains soft while we continue to see growth in other channels such as e-commerce, modern off-trade, and with particularly strong growth in our 1 L cans.
The key growth drivers, big cities and premium beer, continued to outperform strongholds and mainstream. We saw particularly good performance of the Carlsberg brand, which grew by 15%. In Laos, our volumes grew by high single digits. Growth was particularly strong for soft drinks, being in the low teens, whilst beer volume growth was low single digits. Our business in Vietnam delivered mid-single digit growth, supported by an increase in export volume, and we estimate that our market share was flat.
Now slide eight and CEEI, which delivered another strong set of figures in Q3. Volumes grew organically by 7.5%, with our growth categories up 22%. Revenue per hectoliter increased by 4%, bringing organic revenue growth to 11.7%, and reported revenue grew by 12%. Revenue per hectoliter was positively impacted by price increases and a positive mix in beer, then partly offset by category mix due to the strong growth of soft drinks in Kazakhstan. In South Asia, volumes grew strongly in the mid-20s, driven by very strong progress for Carlsberg and Tuborg and the local power brand Gorkha in Nepal. Revenue per hectoliter increased due to premium growth and a positive geographical mix.
In Kazakhstan, volumes almost doubled, supported by the addition of the Pepsi business. We opened a new soft drinks facility in early October and are now ramping up our production. This is the group's first greenfield CSD facility, built in record time, just 15 months from project start to completion. We expect to produce all Pepsi volumes in-house by the end of the year. We also saw good growth for alcohol-free brews led by Žatecký and Carlsberg and for Garage in the Beyond Beer segment. Our business in Ukraine delivered only modest decline in Q3 on the back of easy comps. Our colleagues there are operating in an extremely difficult environment, and their safety, of course, remains our first priority.
Now please go to slide nine and the earnings outlook for the year. Overall, the development in Q3 was largely in line with our expectations, and for the remainder of the year, we are not assuming any material changes to the external environment or consumer sentiment. In August, we updated our full-year earnings expectations to the upper end of the previous range. Based on the Q3 performance, we maintain the outlook of organic growth in operating profit CPM of 4%-6%. Based on yesterday's spot rates, we now assume a positive FX impact on operating profit of DKK 100 million.
This compares with the previous expectation in August of no impact. All other assumptions are unchanged. Net financial expenses, excluding FX, are expected at DKK 1.8 billion, reported tax rate at 23%, and CapEx of DKK 6 billion-DKK 7 billion. Before handing back to Jacob, let me provide some color on our leverage reduction and our refinancing needs. As said at the time of the Britvic acquisition, we target a net debt to EBITDA below 2.5x before the end of 2027.
Also, as reported in half one, we took significant steps towards this in the first six months. We expect the Sapporo transaction to close in Q4 and along with solid cash flow delivery in half two, we will be close to our leverage target already by the end of 2026. This is excluding any proceeds from other large structural changes, such as the potential India IPO. An updated draft red herring prospectus was filed with the Securities and Exchange Board of India on October 28, and it is available on their website and on Carlsberg's India website. This is, of course, part of the ongoing IPO process.
At this point, we are, though, unable to comment further on the outcome or timing on such a potential IPO, and this is due to regulatory requirements. However, as it is customary in such a process, we are now engaging follow-on activities, including setting up interactions with potential investors. Turning to our refinancing needs, which were very modest until 2029, following the issuance of the hybrid bonds in May and the subsequent bond repurchases. The hybrid bonds have not only supported our de-leveraging, the timing was also good. Given the recent increase in interest rates, refinancing with senior bonds today would come at almost the same price. With that, over to you, Jacob.
Thank you very much, and let's turn to slide number 10. It's now time for Q&A, but before opening up for that, let me just summarize the key messages from this call. First and foremost, we delivered robust revenue growth. Our growth categories continued to outperform, and we expanded our partnership with PepsiCo into additional markets. Then, as Ulrica just said, we confirm our earnings guidance firmly for the year. Now, over to Q&A, and as always, please note that we will limit the number of questions to two per person to ensure that as many of you as possible get a chance to get through. So you are, of course, always welcome to rejoin the queue. With that, we are ready to take questions. Over to you, operator.
We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questions on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Edward Mundy from Jefferies. Please go ahead.
Morning, everyone. My first question is, Ulrica, are you able to give us any early steer on the commodity picture for next year, given some of the recent spot moves? As part of that same question, maybe for Jacob, could you perhaps comment on your confidence in the ability to take price, given both the benefits of multi-beverage and the broader health of the portfolio? In particular, are there any further best practice sharing on revenue growth management that you are getting from the soft drinks business coming into beer? That's my first question. My second question is on China. Obviously, close to - 10% in the quarter. Could you perhaps talk about the exit rate in September and also the inventory position? Thanks.
Thank you, Ed. Ulrica will start on the cost. You even handed out the questions to different people.
That is nice.
We will follow your guidance. Ulrica will start.
Yes, will do. Maybe looking at COGS and maybe a comment on logistics as well for 2027. Starting on COGS, as you know, we are hedged 12- 18 months forward, and we are already hedged for the majority of the raw and pack material for 2027. Because of the Middle East impact and the impact particularly on energy and commodities, we do, when we look into that, see COGS inflation for 2027. We have mentioned this before, but the inflation will basically impact us for aluminum and energy, and it will be both our own energy and impact from energy, of course, indirectly in packaging, like glass bottles.
Other inputs have, and I have mentioned this before as well, still a little bit favorable, so barley and sugar. So a little bit of an offset there. We do still see an increase into 2027. It will be higher than 2026. It will be lower than it was back in the COVID years, 2022, 2023. I will also mention that we do still have some unhedged positions, of course. Back to your comment there, the current volatility, that can still make a change as to our underlying assumptions, given the big and extreme risk around the volatility there.
Maybe a comment on logistics as well. They will also increase in 2027, and this is mainly, of course, due to higher fuel prices. Again, we are doing as much hedging, and we have been doing, as we can there. The diesel spot price for this year and where we are right now is probably a little bit misleading, as we have already hedged some for 2027 earlier. But there is also unhedged exposure, and with the fuel prices moving as they do, it's very hard to put a number on it, but it will be increasing versus 2026.
Thanks, Ulrica. Let me then answer on price. As you can hear from Ulrica, yes, we do see some higher costs next year. I think that's not rocket science. Everyone is seeing it from what's going on. It's not as dramatic as what we saw back in 2022, 2023, but there is cost increases coming through. And of course, we need to handle that. You asked about price, but if we just take one step back. The way we always at Carlsberg handle this is we start by delivering on our well-known muscle, which is performance management and efficiency.
That is, as you would also expect, fully in play right now. We're driving good efficiencies going into 2027, and that's, of course, always a key focus. When you look at it post efficiencies, we will always drive value management. And of course, part of value management is we drive price. We have a very firm view, you know that, you know us very well, and that is that when we see a cost inflation coming through the base, we will cover that with price. We need to maintain our margins and our profitability. That's very simple. So we are value driven, as always.
When you look at the portfolio today versus some years back, there's no doubt we have a stronger portfolio. The multi-beverage structure gives us much more resilience, gives us much more relevance with major retailers, and it gives us an opportunity because this is not a battle, this is a shared journey with retailers to create more value for everyone, for the consumer, for the retailer, for us. And we can do that with a bigger multi-beverage portfolio and of course, also the quite sophisticated value management skills that comes out of the RGM frameworks, both from soft drinks, but also, as you know, we've invested quite heavily in Gen AI value management, Gen AI RGM tools, and they also come into play.
So we are confident that we, as always, will deliver around covering the cost in a mix of efficiencies and value management initiatives. And as you look across our entire portfolio, of course, we cannot talk about specific markets, but generally, I think we are very constructive around how we will deal with it. We made that very clear to you that we will continue to drive the earnings growth that our investors would expect. Then you asked about China, and a little bit sneaky there, Ed, because it is technically three questions there, but we will do it anyway.
On the China side, you asked about exit rate and you asked about stock levels. If you start with or inventory. If we start with inventory, at the end of Q3, we were approximately where we were a year ago, at the end of Q3 last year. I think that is a very clear statement. That is one. Then you ask about exit rates. Of course, it makes it a little bit hard to talk about exit rates in China given weather, timing of promotions, inventory being brought down through the distribution chains, et c. What is an underlying exit rate is a good question.
But as you know, volumes, the sell-in volumes in Q3 were soft in all the months due to the bad weather and destocking. Of course, as you would also expect, September was better than July and August, with sell-out estimated to be better than sell-in, of course. We do not give an exit rate. But clearly things improved towards the end of the quarter, as you would expect. We do remind you that Q4 is a small quarter in China, and therefore it becomes less relevant from a group perspective, and therefore smaller moves can, of course, move the needle. But exit rate, of course, improved at the end of the quarter, and our inventory was down to last year's level at the end of the quarter. I will leave it at that.
Thank you so much.
We now have a question from the line of Simon Hales from Citi. Please go ahead.
Thanks. Morning, Jacob. Morning, Ulrica. Morning, Peter. My first question is just on the U.K. business and particularly the soft drinks performance in the quarter. Clearly, there is very strong momentum there. I know, Ulrica, you mentioned there was not really much weather benefit in Europe overall, but I wonder whether in the soft drinks business, certainly you saw some benefit of weather in Q3, particularly in the U.K. I wonder if you could just maybe talk to that when we think about comping that next year and also perhaps flag a little bit more detail on the real drivers of that strong performance in Q3.
You called out Pepsi Max and the poppi launch. Were there other brands within the soft drinks business in the U.K. that really saw good momentum? The second question is just on Kazakhstan. Jacob, you said obviously expect to move to profitability in 2027. New plant opened at the beginning of October. Could we see any move towards profitability at the back end of the year, or are we really just in a transition phase in Q4 of shifting that volume production in-house?
Thanks, Simon. Why don't I do U.K. and then Ulrica can do Kazakhstan? First of all, if you look at our soft drinks business in the U.K., specifically strong growth. But as you've also seen quarter- after- quarter, we've had strong growth, so it's not a one-off quarter. The team continues to perform very well. We've taken good market share across a number of the key categories within soft drinks. So the team keeps on performing. Of course, there was a positive tailwind from weather, but let's not overdo it. We also had good weather a year ago in the U.K.
But the brand that benefits the most from good weather in our U.K. soft drinks portfolio is Robinsons. And we did see good growth in Robinsons, which we attribute partly to the weather. Across the rest, you can say Pepsi, of course, is the biggest brand in that portfolio. And Pepsi took share again in this quarter, and we saw what is important for us is we saw value growth well ahead of volume growth in Pepsi. So that says something around the strength of the brand. Pepsi Max is now the biggest standalone cola brand in the U.K. It took that position at the end of Q2, and it continued that in Q3 as it continued to grow share.
So there is a continued strong performance of the brands here. So we don't attribute this. We don't have a significant weather impact when we look at our numbers. There is a slightly positive one, especially around brands like Robinsons, but it's not, of course, a big brand for us. That's also why you look at comp next year. We're not going to use that as an excuse when you come into next year. We think the soft drinks business will continue to show healthy growth also in 2027. A lot of the brands have good momentum, and we're seeing also, you can say early, the early success of brands like poppi you mentioned.
We're only scratching the surface in terms of the distribution of poppi, so it's had a great start. So poppi, Pepsi, J2O are all the brands. 7UP also showing strong performance. And Tango, after a weak start, is starting to strengthen over the summer. So also seeing Tango coming back. So very pleased with the soft drinks portfolio and the strength and resilience of that portfolio. So I'll leave it at that. Ulrica, on Kazakhstan?
Yeah. I think you had two questions in there in the sense that what is happening by the end of the year. We are still in a transition period, and there will be a very small help towards the end of the year, but clearly the full year is still where we said it will not add any profit in the full 2026. What it will do is it will set us up for strong growth into 2027, when we then have fully in-sourced and consequently have much better set up, and we expect to operate smoothly and flexibly and really driving forward in the way that it was meant to be and expect a step up in the profits when that production is fully in-sourced by the end of the year.
Brilliant. Thanks ever so much.
The next question comes from the line of Andrea Pistacchi from Bank of America. Please go ahead.
Yes. Good morning. I also have two, please. We have just talked about soft drinks in Western Europe. I wanted to touch base on beer, which had another difficult quarter. Maybe you could recap on the three main headwinds, which I think are U.K. mainstream, Poland, and Germany. What is the situation in each? How do you expect performance to evolve here over the quarters, particularly as you probably begin to lap some of the headwinds like the Foster's and Carling price rebasing in the U.K.?
My second question is on the balance sheet. You said earlier that you are progressing faster than expected on the leverage, likely getting close to 2.5x even without the potential in the IPO. Maybe you could frame how you are thinking of timing of potential cash returns going forward as we enter 2027. Thank you.
Thanks, Andrea. I will do Western Europe, and Ulrica will do the balance sheets. Yes, thanks for highlighting those three beer markets, as we also called them out in the release. If we just take them in reverse order. Germany, do remember Germany is a small market for us. The mainstream beer in Germany is quite insignificant in the grander scheme of things for the group. That does not mean we do not want it to perform, but overall, when you look at the German market, the market is down mid-single digit.
We are seeing some mainstream brands in line with the markets and then better growth from our alcohol-free beer and our Beyond Beer, especially the Somersby brand. But overall, the German market has been quite subdued. It is, as you know, a small component of our overall portfolio. We are not going to call Germany to suddenly improve from here, but we do not see any deterioration as such. When you look at the two others on Poland, listen, it has been a tough year for everyone in the Polish market on mainstream. We saw the volume decline moderate in Q3, just to be clear, versus Q1 and Q2.
What we have been doing is from the beginning is we pursue a value strategy in Poland. We stay away from deep discounting in a market that is heavily impacted by deep promotions from competition. We clearly have another perspective on value versus volume than the rest of the market has had so far. When you look at it, we have had strong growth in alcohol-free beer, we have had strong growth in our Beyond Beer portfolios, and we also have strong growth in our premium beer portfolio.
That means we have been transforming our portfolio towards more of a premium alcohol-free beer, flavored beer portfolio. That means our revenue per hectoliter improved again in Q3, and it remains significantly above our competitors. So Poland, it is very much a lower mainstream problem for the market. We have seen an improvement in Q3, as I say, and as you say, we will start lapping easier comps as a market and also as Carlsberg. So I guess we can be cautiously optimistic that we may have seen the worst of the Polish decline. When you then look at the U.K., of course, everyone has an opinion on the U.K. beer market.
You asked specifically about the Standard Lager and Carlsberg. If you take the other brands, we are holding or taking share beyond the Carlsberg discussion. If you look at the 1664 and Poretti, good growth here in the two great brands. We are seeing Sapporo coming in now, which will definitely support growth. We saw a great launch of Mythos, our Greek beer in the summer, which we will build out distribution on, and we are super excited about what Mythos can do in the world beer segment.
So all of that is great. The decline we have seen is in Standard Lager, where, as you know, the whole category has been declining for a while now, and then we saw some quite aggressive price competition from Heineken-owned Foster's, lowering ABV and prices. We, at the same time as we saw that price action, we shifted towards more value versus volume on the Carlsberg brand.
So the combination of that did lead to some volume loss in Standard Lager. But as always, we are here to drive value for our shareholders and not drive empty volume, and we will continue to do that, of course. I think this is a specific subcategory issue in the U.K., and we will, of course, assess what our response will be on that. But we are not fundamentally worried. We think the overall U.K. portfolio is very strong for us.
Very clear.
Oh, sorry. There was a deleveraging question. Sorry. I cut Ulrica off. Over to you, Ulrica.
Important point. Thank you, Andrea. I guess I should start by stating our financial policy is the same as it has been for many, many years, which basically means that once we are below the leverage and we have made the necessary investments, handing back capital to the shareholders via share buybacks is part of the policy. As you heard, we are targeting to be below the 2.5x as fast as possible. I will say that assuming we close Sapporo, which is expected in Q4, we will be close to that by the end of 2026, and that is almost a year ahead of schedule in that case.
Then any other structure like Indian IPO, if that happens, will come on top of that. So when we get there, we will, of course, start considering share buybacks. But we will not automatically as we hit 2.5x, the moment we hit that, start handing back cash because that will then increase the leverage above 2.5x times again. So we need to then consider carefully the timing of share buybacks, and we will, of course, then look at leverage. We will look at the expected operational cash flow, any other structural changes, as I mentioned, and if there is any cash needed for expansions, CapEx, Pepsi investments, any other opportunities.
And then seasonality, and that is quite important because we usually have quite high cash flows into end of half one and half two, and dividend payments, which we pay in March. So due to this seasonality and dividend payments in March, we are, of course, therefore unlikely to announce something already in the full year announcement, but it is something we are looking very closely into during the year, and it is likely to be a topic in half two.
Thanks, Ulrica. Over to you, operator.
The next question comes from the line of Laurence Whyatt from Barclays. Please go ahead.
Morning, Jacob, Ulrica, Peter. Thanks so much for the questions. Also two from me, please. Firstly, Jacob, it has been a while since you acquired Britvic, and now we have got some more Pepsi contracts coming in. I was wondering if you could give us an update on where you see top-line synergies coming in, where you have both a beer business and a soft drinks business of large size in the market together. I remember when you bought Britvic, it was still a big question as to whether those top-line synergies would come through, but now you have owned the business for a while.
I was wondering if you could just give us an update of what you would normally expect when you start putting those sort of businesses together. Then secondly, to Ulrica, on the leverage target of 2.5x. Of course, when you changed the target, I think it was 2x before it was moved up to 2.5x . I think it is reasonable to suggest that the EBITDA that is now coming in to Carlsberg, especially once you close the Sapporo deal, is now offset by a bit more of a higher minorities line.
Of course, that could also increase further once you have done the Indian business and the hybrid deal also has, whilst it is only treated as half debt, it still has commitments on your side on the equity component of that. So in light of the sort of changes to the EBITDA that is coming in and whether it is entirely consolidated EBITDA, albeit with higher minorities, does that change your view at all on that sort of 2.5x target? Thank you.
Thanks, Laurence. I will start on your question on top-line synergies. So yeah, so we are seeing it starting to come through, which is, of course, not a massive surprise given that, as you know, when we had conversations around it, when we did Britvic, it was not a theoretical exercise for us. We have been running fully integrated multi-bev businesses in the four Nordic countries for almost 30 years. Therefore, we have quite a distinct model around how we drive revenue synergies in our value management work in those markets. That is the playbook that we are utilizing, now as we move from five to 17 markets.
If you look at the U.K., which of course is a big case in point given the size of this acquisition and the breadth of the businesses being combined, we spent the first year making sure we did not disturb the underlying momentum. We invested more into our sales force. We built the right incentives, and we built, of course, also structured integrated business plans for our people, but also with the major retailers. What we are seeing is, we are seeing a different type of strength of our beer business. So for the U.K., it is clear that one, we have seen an accelerated momentum of our soft drinks business.
If you look at the former Britvic business versus how the Britvic business is performing now as part of the integrated business, it is taking share faster. So we are growing share faster. The soft drinks business is clearly benefiting from the increased scale and distribution. At the same time, we are seeing a beer business that had been struggling to hold share for a while. We are seeing that now be much better able to hold share and grow share. Of course, we just talked to Andrea around the specific issue around Carlsberg Pilsner, the brand in the U.K. But beyond that, we are really seeing our brands get better traction, more shelf space, and also more promo space than we saw in the past.
We are clearly seeing revenue synergies coming through. The way we measure it is if you look at an underlying, what would be the underlying fair development versus how we grow, and we can see there is a clear positive delta in the U.K. We expect that to come through in the other markets as well, no doubt about it. In the U.K. was very much a soft drinks business that was three times bigger than the beer business. In most markets, it is the beer business being bigger than the soft drinks business, and there, the revenue synergies come more on the soft drinks side.
As an example, January 1, 2027, we will be taking over Pepsi in Azerbaijan. We have 70% market share in Azerbaijan on beer. Pepsi is low teens, and therefore we would expect the revenue synergies here to pertain more to the soft drinks portfolio in the coming years. Hopefully, that adds a little bit of color. Ulrica, over to you on the leverage.
Yes. Hi, Laurence. A good question, and the short answer is that we do believe that 2.5x is also fit for the future business, even after these changes that you are outlining. Why do I say that? I say that because the reason we moved to 2.5x is because if we look at the total portfolio now, geographically, with the mix we got between Europe and Asia, it is a lot more geographically diverse when it comes to hard and soft currency, and that will remain so as we go through into the future. We also have, since we went to 2.5x as a policy, we have also moved and diversified our categories further, which also brings resilience and less volatility to our portfolio.
Those two things were the main drivers, and we have increased one ever since. Even these structural changes going forward will basically be just taken into account and still 2.5x will be the right place to be. I will say as well that the 2x where we were before was probably quite low. This is more moving in line with our competitors who sit at the 2.5x and a little bit higher. We will stay there.
That is really clear. Thank you very much.
Thank you, Laurence.
The next question comes from the line of Trevor Stirling from Bernstein. Please go ahead.
Good morning, Jacob and Ulrica. Sorry to dwell on the U.K., but I want maybe just a little bit more color, Jacob, in terms of what percentage of volumes is Carlsberg Pilsner in the U.K.? I suppose given where it is declining, is there a natural point when you say the business tips into growth because your strong growth on the premium portfolio outweighs the decline, the likely continued decline, I would say, in that segment of the market?
Thank you, Trevor, and you actually kept yourself to one question, which your colleagues could of course be inspired by as well. When we look at the U.K., we do not give the specific number, but of course, the Carlsberg Pilsner from a volume perspective is still a significant proportion of our beer volumes. It has come down, for obvious reasons, as we just discussed, in terms of the share of the overall mix. As we move, it is probably around, I would guess, around 40% right now of the total volume in the U.K. It is coming down quite significantly, as you said, and on the beer side, of course.
Sorry, someone is looking at me like I just said that 40% of our U.K. business is Carlsberg Pilsner. It is not. It is the beer business we are talking about. Given the decline we have seen and how that category is developing, it is going to lose its relative share of our beer portfolio for obvious reasons, as we see good growth in 1664, Poretti, Sapporo, Brooklyn, Mythos, you name it. That also means that yes, you are getting closer to that tipping point where it matters less in terms of the overall portfolio mix and where the rest of the portfolio will pull the combined portfolio into a positive growth.
We also do think that what we have just seen in the last couple of quarters is not a reflection of how we expect Carlsberg Pilsner to perform. You can say we just had a quarter, as I said to Andrea, where you both had one competitor going quite aggressive on price one way and us being focused on value, and the combination of that, of course, gave a bit of an outsized move. We do not expect that to continue in the same way. I think as the decline of Carlsberg within that category improves, at the same time as we continue the good growth of the rest of our World Beer portfolio, then you will get to that inflection point there quite soon, as you say.
Super. Thank you, Jacob.
Thanks, Trevor.
We now have a question from Søren Samsøe, from SEB. Please go ahead.
Yes, good morning. Just two questions, one on Vietnam, where you had the flat market shares in a market growing mid-single digit. You have done quite a lot of investments in sales and distribution over the last few years. Just your thoughts on how you see this develop going forward. I also understand you are looking into doing some CapEx investments in the coming years there. The second question is on the Nordic markets, just if you can comment on your market share development in soft drink and beer in each of the Nordic markets. Thanks.
Thanks, Søren. On Vietnam, if you look at that market, yeah, we had another quarter of good growth. As you say, we see market shares relatively stable. It has been a good year for the Vietnamese business, returning to good growth after a year where we spent being quite internally focused in terms of retaking our distribution, both the breadth and the scale of our distribution network. Fewer partners, but higher share of those partners, and then also refocusing some of our resources more to more central versus south. That is basically there now in terms of how we want to be structured here for the next while. We are seeing that play out quite nicely.
We have seen increased market shares in key strongholds like the Hue region in central Vietnam. After the, you can say, rebalancing, we are starting to see some good growth in the south as well. A good combination, and we also expect Q4 to be strong in Vietnam for our business. When you look at that, the investments and the retake has played out the way we wanted it to. We will end this year with quite a solid growth, double-digit growth. When we look at next year, we see the momentum continue. Yes, we have announced some investments. It is part of our ongoing investment program in CapEx and supply chain.
It is not a significant step up as such, so I would not make a big thing out of it. But it is just continued focus on Vietnam as a key growth market for the coming years. We see both a market that is growing, and we see a relevance and strength of our brands, especially Huda, which is very much, especially in central Vietnam, viewed as the local power brand that the Vietnamese consumers are increasingly turning to. So very pleased with that. I think you asked about the Nordic markets as well. If you look at the Nordic markets, little bit of tale of two, if I can use that term.
So you had Denmark and Sweden, where we saw strong growth. Denmark, good mid-single digit volume growth, driven by good growth in all of our growth categories. Slightly lower mainstream beer volumes there. Overall, quite pleased with how we performed on market shares across the key categories. We saw soft drinks and premium beer, high single-digit growth. We saw alcohol-free beer, mid-single-digit growth and Beyond Beer and double-digit growth. So pleased with that.
Taking share in a number of the key categories. Mainstream beer losing a little bit, but that is more to economy brands than anything else. On Sweden, another strong quarter, mid-single digit total volume growth in all portfolio categories. So both the growth categories and mainstream beer. Market share gains especially in beer. I have to say the brands that really grew there was Eriksberg, Tuborg, Pripps, and Pepsi. Just continued strong performance from the Swedish business. Norway and Finland, more subdued.
I think Norway, good growth for our own beer brands such as mainstream Frydenlund, Premium Schous, and also the AFB propositions, especially Munkholm and Frydenlund. And also our own energy brand Battery did well. Otherwise, a bit of a difficult quarter impacted by bad weather in July that came just after World Cup fever, if I can call it that, in Norway. Then you know we have also been adjusting our new distribution model. So we lost some share in Norway on the back of that adjustment to the distribution model. We expect Norway to come back strongly, of course, but for the quarter, they lost a bit of share.
Finland, overall market and volumes, they were impacted by bad weather and weak consumer confidence. So of the four Nordic markets, Finland is the one that had a subdued market in the quarter. We also saw the overall soft drinks market being negatively impacted by sugar taxes from April 1st. So I will say Finland overall market subdued. We are holding share. Norway is the one where we lost a bit of share, and Denmark and Sweden, very, very pleased with the performance. Overall, the Nordic region as a region delivered very well again in the quarter, but with the nuances I just gave you there.
Thanks for detailed answer.
We now have a question from the line of Sanjeet Aujla from UBS. Please go ahead.
Yeah. Hi, morning. My first question is just coming back to China. The -10% volume you saw in Q3, would you point all of that to weather and destocking? Or do you think there's also been a deterioration in the consumer in Q3? I guess I'm just trying to understand the extent to which China might be an easy basis of comparison looking into next year if it's just all weather and destocking.
My second question is just on CEEI. I think you've called out Kazakhstan accelerating. India looks like it's accelerated as well. Ukraine is weak, but doesn't feel like it's worse than Q2. I'm just trying to understand why we haven't seen more of an acceleration in CEEI in Q3 versus Q2. What are the headwinds there holding the segment back from improving further?
All right. Thank you, Sanjeet. Let's go back to China. You are asking us to separate hot and cold water in the bathtub here, which is a little bit difficult. We will not try to split the - 10% into weather destocking and underlying consumer. The gist of your question, as you also said yourself, is basically, is there a further deterioration in the consumer in China? The answer is no. We do not see a step change in the consumer in China. We have seen a weak consumer now for, I am getting into years now. We have seen several years of a weak consumer.
You couple that with the weather over the summer, and therefore the needed destocking was a negative cocktail, which we just all had to deal with, and you have seen the numbers from our competitors as well. Unfortunately, we had to do that. We do not see a further deterioration in the consumer. Your math around that, meaning that could be easier comps for next year. Of course it is correct that this will provide an easier comparable for next year. When we look into 2027, our expectation is that the whole industry will be destocked to the right level. As I said before in one of the earlier questions, we are basically back at the levels we were last year.
I think we will, as an industry, start quite cleanly into 2027. We do not expect anyone to go and do premature sell-in for Chinese New Year, either here in Q4. I think we start at the right inventory levels as an industry, and then 2027 will be a new baseline. We do not see the kind of drop we have seen this year. We do not foresee that in 2027. We expect more of a normalization back to what is that subdued environment, and you hear that from all consumer goods. We are not suddenly calling the Chinese consumer up, but your question was whether we were calling them further down, and we are not doing that.
Your question on CEEI. A very strong performing region. That was probably not an expectation I had. I not expected that question. Listen, if you look at it, yes, good growth in Kazakhstan, good growth in South Asia. We also, as you know, if I look at the overall CEEI in total, the growth rates are basically the same in Q2 and Q3. What we are seeing is, of course, you mentioned yourself, Ukraine. Ukraine continues to be difficult, and I do not think I have to explain anyone on the call why.
I just have to give a direct shout-out to our Ukrainian teams, 1,400 colleagues who on a daily basis do an absolutely phenomenal job at delivering, first and foremost, the health and safety of themselves and their colleagues and the greater society. They keep on delivering for us as a business as well. I am just incredibly proud to be the colleague of these amazing people, so I will just make that statement. Ukraine, of course, is a negative driver and continues to be a negative driver as we see declining top line on the back of everything that is going on.
We have seen in Eastern Europe some markets being under pressure from a mix of mixed weather, but also weaker consumer driven by affordability. I think you can call out a classic market for this would be something like Bulgaria, where we have seen quite a tough consumer environment. Some of our classic Eastern European countries, Bulgaria being an example, and then Ukraine, are elements that are pulling down. We have to say it's a very strong performance from the CEEI region, and it's always swings and roundabouts when you look at a broader region. Overall, a very strong performance from the region. We do not see that changing in the coming quarters.
That's very helpful. Thanks.
Thank you.
We now have a question from the line of Chris Pitcher from Rothschild & Co. Please go ahead.
Thanks very much. I am mindful of the number of the questions we are allowed to ask, but first one is a clarification. The fact that you haven't given any specific comments on India. Did I miss it? Is that because the IPO process is live? If not, could you give a bit more color on the growth rates in India? On another question, on the PepsiCo synergies, you've talked about the synergies between beer and soft drinks.
Are there synergies to be gained from being an even bigger bottler by being big in Europe, being big in Central Asia, or are those two very separate business units? The reason I ask that is there are other assets around there potentially. I mean, Uzbekistan, I don't know if you can talk about whether you've got the right to buy back your beer business there or not, but I am just wondering whether just by being a bigger bottler, you can extract synergies.
Thanks, Chris. The first one I can be very fast on, unfortunately for you, because I fully understand your desire for more color there. You have not missed anything. As you know, we are looking at a prospective IPO in India, and that also constrains us in terms of how we can comment on the business. The comments Ulrica made in the opening speech is basically what we can say. We cannot comment specifically on India's performance. That's a regulatory requirement. I think as Ulrica also said, the IPO is progressing. Ulrica also mentioned that we are now calling meetings with potential investors, et c, and that's the best color we can give you on it.
We cannot comment on or draw comparisons with competitors on performance in India. But of course, you can look at our competitors' public statements to get a view on how the Indian market is doing. That's the closest I can get to our performance. I don't want to end in jail, and I don't want to disrupt a potential prospective IPO process. That's what we can say. On the cost synergies, Chris, you are of course, spot on. We are getting now to the point where it gets quite interesting, beyond the revenue and traditional cost synergies, because we are now getting to the point where we are creating some major clusters.
We will soon have a Nordic and Baltic cluster of seven markets that are geographically very close, very similar consumers, et c. Which will give us what we expect to be significant synergies in terms of our supply chain. Our logistics, but especially our brewing networks across seven markets, we can utilize that much more efficiently. Also around innovation, given consumer cohorts in those seven markets are very similar. We can launch innovations at the same time in all of those markets. Of course, both on the innovation side, on the supply chain side, we see significant opportunities.
There is a reason why we are not just doing Azerbaijan, which is our biggest market in South Caucasus, but we are also doing Georgia and Armenia. Again, we are creating a South Caucasus cluster. You will see that is part of the mindset of the build-out we are doing here. It gives us significant resilience, of course, also on the supply chain, but it also gives us a next leg of efficiency. You can speculate that some of our markets, as you can see, are growing very fast on volumes with soft drinks.
A good example is Sweden that has been taking market share for years and growing their Pepsi portfolio very strongly. Instead of them expanding more capacity in a couple of years, we can now utilize a broader Nordic cluster brewery network. As an example there, it gives us a significant CapEx saving. There are real synergies coming out of these clusters now. I am being told that we will have the last question now.
The last question comes from the line of Nicolaï Olivier from GS. Please go ahead.
Hi, good morning. It is Olivier Nicolaï from Goldman Sachs. Two questions, please, to finish this call. First, in Kazakhstan, once you have insourced production, how will it compare in term of profitability to the rest of the region? Secondly, a bit more short term, but maybe I just ask if you expect any negative impact in Q4 in Western Europe from the various protests we have seen in France or in Italy. Thank you.
Thanks, Olivier. On Kazakhstan, as Ulrica said earlier, we will see a significant profit delta from 2026 into 2027. That is clear. We have said that over time, and usually when we take something on like this, that is a three year period. It needs to be at a profitability level that matches the rest of the region. That is exactly what we expect to see here as well. We see a significant delta next year. I think there is another leg up in 2028, because in 2027, we will still be only one year into the entire logistics and distribution, and we still have a lot of optimization to do.
We also expect, in 2027, significant growth in the Pepsi portfolio. The teams have done incredibly well. We are basically close to 100% up in Q3 on that portfolio, and we expect in 2027 it is a significant growth number again. Of course, during 2027, you are going to see even better capacity utilization as the year goes on, which means 2028, you are going to see again a margin and profitability uplift from that capacity utilization. It will continue to improve also in 2028 on 2027, but there is a significant step up in 2027. It is a very simple answer on the other question.
No, we do not expect any impact from these unfortunate events in some of the major capitals. It can look dramatic on TV and on media, but overall it has very limited impact. No. It is also happening at a time of the season where on-trade is very small and subdued. No, we are not seeing any impact. As we said on this call, we are firmly committing to our guidance for this year, and feel very comfortable to deliver the guidance for you.
Thank you.
On that note, thanks, Olivier. That was the final question for today. As always, thank you for listening in, and thank you for your questions. We look forward to meeting some of you during the coming days and weeks, and until then, have a good day.