Welcome to the 2025 nine 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 nine months ended 30 September 2025 can be found. In. The press release published earlier today and available on the Hong Kong stock exchanges and Budweiser APAC's websites. Before proceeding, let me remind you that some of the information provided during this 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 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 18 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 a 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 nine 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 a soft economic cycle, which has been even more pronounced in our footprint and a 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 strive every day for operational excellence with our customers and consumers. We have been working in China to right-size 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 nine months and the third quarter for 2025. Thank you.
Thank you, YJ, and good morning, everyone. In the first nine 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 nine 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: 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 nine 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 L 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 non-financial information. In the first nine 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 nine 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 increasing by 46 basis points in the third quarter. Volumes in South Korea were flattish as we continued 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 non-alcoholic beer, to emphasize a 4-0 concept of zero alcohol, zero sugar, zero calories, and zero gluten. With that, YJ and I are here to answer any questions that you may have.
Thank you. Ladies and gentlemen, the floor is now open for questions. Please press star one to ask a question. If you wish to cancel your request, please press star two. In the interest of time, we ask participants to limit themselves to two questions and please ask one question at a time. Our first question is coming from Lillian Lou from Morgan Stanley. Please go ahead.
Thank you. Can you hear me?
Yes, very well Lou. Thank you.
Thank you. Thank you YJ and Iggy. I have two questions. One is about China. In particular, you mentioned in-home mix has been increasing, but underlying, I would like to get more color about the brand performance. In particular, the major mega brands' performance relative to the Easter quarter, and also what's the latest trend for Budweiser, higher, being super premium segments. That's my first question. I will ask the second one. After that. Thank you.
Okay, this is YJ , Lillian, thanks for your question. Good morning everyone. In terms of brand performance, let's talk about by channel. By channel, on-premise got impacted by the industry in the past few years' weakness. We also get impacted as well. Also, the new trend for the channel, which is in-home O2O, there'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 links to the brand portfolio we have. The brand portfolio we have, which the consumer knows and loves. We have a rich portfolio. We also focus on the innovation to meet the consumer need by channels. For example, Budweiser fits the in-home channel. We create a 740 ml big can, which is quite good performance in the whole in the in-home channel.
Also, in terms of O2O, we also create a bottle Magnum 1 L can to fill the gap and insert the channel O2O. For the super premium, we see the O2O trend, the performance quite good. We have a rich portfolio for super premium. As a company, we are, and give example, Corona. We also develop a full open can, not only bottle with lime but also able to allow the consumer to drink Corona with lime in a full open can. Those are, you know, talk about brand link to the channel with the innovation. See the gap we have, see the soft weakness we have in the on-premise. 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.
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 superiority linked to the innovation. There's a big innovation, big best practice we're going to apply and learn within the APAC. I try to break this by channel, link to the innovation and the gap. We have the action we take, invest, we take practice. We learned from Korea to be able to answer 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 the weather and Cass are gaining market. Share. Trying to understand what is the latest demand trending into the fourth quarter and next year, and reacting to that with the competition dynamic shift too. Thank you.
No, thank you for the question and I'll take that one on Korea. 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 stabilize. Inflation has stabilized and consumer sentiment actually has been improving sequentially over the past few months. However, by the same token, the savings rate 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. 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.
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 that you often see from lower priced alternatives such as Soju into beer, which has been long standing in Korea. Even within this context, you. Still see.
Pockets of growth within Korea. We see non-alcoholic beer growing, we see flavored beer growing, we see RTDs outperforming. These are also gaining popularity as they are in other developed markets or more developed markets, which presents, of course, opportunities for us as well. From a competition perspective, the way I would look at it is the summer and the Chuseok selling periods are usually the most active 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, this soft industry, this soft demand, as we just discussed.
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. In the last couple of years in core specifically, of course, we've continued to increase consumer participation in the category via non-alcoholic beer, flavored beer, and several other liquid innovations, including Cass All Zero, of course, that I discussed in my comments earlier, and then different variants, of course, of the Cass Lemon Squeeze as well, not to mention, of course, Hanmac 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 index in Korea relative to other more developed markets. 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. I hope that answers your question. Thank you so much, Lillian.
Yeah, thanks. Definitely. Thanks again. Iggy and YJ.
Our next question is coming from Wenbo Chen from CICC. Please go ahead.
Hi YJ. Hi Iggy. Thanks for taking my questions. I may have two questions. I think the first is about channel eventually. 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 coming year, and do we expect a rebound in the selling performance?
Hi Wenbo, thank you for the question. I mean, you're correct. We've been proactively taking steps to adjust or manage our inventory in the current business environment. That's with the intent, of course, of ensuring the health of our route-to-market. 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 2025, are now actually lower than they would have been in the same period of last year. That's both in terms of absolute inventory and days of inventory. We would expect this, of course, to be lower than the industry average. We've made good progress, I think, on the inventory front thus far. Going forward, we'll continue to manage our inventory very attentively.
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. There will be adjustments, of course, based on sellout 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. I hope that answers your question, Wenbo.
Okay, thank you. 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 three quarters, and also what are the plans for further expansion in the fourth quarter and next year?
First, thank you for the kind words. We've been working very hard, as YJ also mentioned, on making progress in the in-home, which is a big priority for us. 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. 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 of penetration on the current level of the off-trade or in-home channel in China, it's directionally 60%+ of the industry. However, it only accounts for a little bit more than 50% of our channel mix.
We still have a big opportunity to expand our presence closer to the industry average. We know that the in-home will continue to grow its share of industry, as I mentioned, as the market continues to mature. We'll hopefully catch both, close the percentage mix here, and its weight will increase rather over time. From a brand and portfolio perspective, and YJ was alluding to this earlier in retail, it's essential to have a full portfolio. You need to have various packages at each critical price point to fulfill different consumer demands. We're very fortunate 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. We know that it offers the potential to drive far more penetration than 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 continue to make progress on the right packs. It's important to have the right assortment as we were discussing at the. Point.
Of sale and to have key price points covered. The biggest remaining opportunity, as we've shared before and Yanjun Cheng mentioned earlier on the call, is really on Core+, which is particularly relevant in the in-home channel. From a route-to-market perspective, the key to successful in-home expansion is really to expand a 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. 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 to ensure that you have the right picture of success in every in-home point of sale. The teams are very encouraged with the progress here.
Maybe two 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. That focus is driving us in the right direction. 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. We're seeing the in-home channel premiumize as the teams exert their energy and their efforts there. I would echo YJ 's points. 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. Now there's just a lot of work to do, a lot of work to be done to scale this with consistent execution in the quarters to come. Thank you so much for the question, Wenbo.
Thank you. Our next question is [audio distortion] from Bank of America. Please go ahead.
Hi YJ and Iggy. I've got two questions, both of them are on China. The first question is about our branding strategy. Earlier this year we heard about our commitment to developing the Harbin brand nationwide. Most recently, channel text seems 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? This is our stronghold province. 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 northeastern China?
Are we going to develop some regional brands to bond with local consumers given the success of Sedrin Shijin in Fujian province? I will stop here. Later, I will ask my second question. Thank you.
No, thank you for the question. Maybe let me start here. I think if we didn't have confidence in Harbin, we wouldn't have prioritized it for our first offering in the core in the RMB 8 price point. If you think about it, Harbin has been a national brand for years and has a broad presence nationwide across different channels. Given the amount of time the brand has existed, 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 ICGD 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. We're of course bullish on Harbin overall and ICGD in particular based on that starting point from a brand power perspective. 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, one that should outperform other offerings in the market at the price point at which it's being offered. We know we have a strong horse in the race from that perspective.
The sales volume of Harbin ICGD zero sugar, we also actually tested with consumers where the volume would come from. Most of that volume is either sourced from existing consumers trading up within our portfolio, moving up from RMB 6 such as Harbin Ice into RMB 8, or also successful conversions from other local competitor brands. The fact that it has both a functional benefit and a specific partnership behind it. Right.
With the MBA. So Zero Sugar plus the MBA 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 ICGD 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. 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. 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. 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 industry. And.
The enhancement of our trade execution, I think, the better those two things are done, the more we will get out of the portfolio that I just mentioned. There is 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. I hope that answers your first question.
Thank you, 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? Thank you.
Thank you for the question. I think there's a couple of things. It's more 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 as this is still a critical place to do brand building, to have effective innovation launches, et cetera. It's very important for the health of many of our wholesalers. It'll be very important for us to continue to invest here, particularly for when the on trade begins to recover as well. In the interim, we're focusing on the factors that are more inside of our control. We're.
Closely working with the distributors to optimize packaging assortment. 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. 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. You're right in terms of emerging channels. 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 to our in-home premiumization efforts, and we benefit from having a full portfolio there. Of course, the contribution of O2O to our in-home sales mix is also increasing.
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. 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, Ochin. I don't know if you could hear us saying thank you for the question. Very much appreciate it.
Thank you. Thanks a lot. That's all. My question.
Wonderful.
Our next question is coming from Mavis Hui from DBS. Please go ahead.
Hi YJ and Iggy. Thanks for taking my questions. 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 or the targets on the proportion of our sales coming from light beers or alcohol free products in 5 years' time? Thank you.
Thank you for the question, Mavis. Yeah, so where I would start is 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. We're seeing non-alcoholic and low alcohol beers gaining popularity in many markets. If you look at APAC overall, the development of both non-alcoholic and low alcohol is actually quite different by market. Maybe I'll cover it by country. I think if you go to China, non-alcoholic and low alcohol beer is still a niche market today, right? Consumers have many different non-alcoholic options which can serve as great alternatives in non-alcohol appropriate occasions. However, when consumers drink beer, they generally still prefer to consume alcohol. We're here present with Budweiser 0.0 with Corona 0.0 as well here in China.
It's more with the intent of growing the non-alcoholic 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? Non-alcoholic beer is gaining popularity, and we expect that momentum to continue there. We have several non-alcoholic product innovations behind Cass, right? We have Cass 0.0. We have the all new Cass All Zero, which we mentioned earlier. We have flavored variants, like the Cass Lemon Squeeze 0.0 as well. We're seeing success with different offerings there. All of these offerings are actually quite helpful because in both the non-alcoholic and low alcoholic space, they're increasing consumer participation in the category. They're providing incremental volumes to the team there. They're helping us to offset some of that industry softness we discussed before. They're actually also incremental to our profitability as well.
It kind of serves all three purposes. If we move to India, the beer market has been traditionally dominated by hard liquor and very high alcohol percentages, right? So 40%+ ABV products. Beer is growing in India, and strong beers, so think 6%- 8% ABV, are a big part of the India beer market today. However, there's a growing trend towards lower alcohol products, which favors the growth of the beer category overall in India. Within this context, non-alcohol beers have a role to play. They'll help to provide consumers in India more choices to match their needs and their lifestyles. Our leading non-alcoholic offerings in India today include Budweiser 0.0, Budweiser which is green apple, and Hoegaarden 0.0. Each of the markets is in a different place. We haven't shared targets at a 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. We lead the development of the non-alcohol segment as well. Thank you for the question, Mavis.
Thanks, Iggy. My second question is about India. 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? Where do we see the most untapped growth opportunities in the market over the next one to two years? Thank you.
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. Of course we wanted to translate both to bottom line and cash flow growth as well. In India we have strong growth momentum. The premium and super premium revenue, which is roughly two thirds of our business in India today, grew by double digits both in the quarter and year to date. Right? First nine months of the year. The Budweiser brand of course continues to grow ahead of the industry. Premiumization continues to be the most critical driver of EBITDA performance as well. You know, we delivered strong results with double digit revenue growth and significant EBITDA margin improvement which you would have seen in our, in our APAC West results.
Admittedly this was on a softer base in the second quarter last year. However, we still see the benefit of strong premium growth in our, 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 recall, India has very low per capita consumption. 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. 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. I mean, we're encouraged by a few things we've seen in the last few quarters. Right? 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 they're allowed to sell beer. 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. 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. In Maharashtra, we've also actually seen positive changes for both excise as well as how beer distribution can be done. We see some signs in different places that help to advance the industry moving forward. 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.
Our 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. We see very good progress on these initiatives. They're helping us to accelerate profitability. It's a bit of these different buckets, but hopefully that answers your question as well. Mavis, thank you so much.
I see. Very helpful. Thank you so much. That's all for me.
Our next question is coming from Anne Ling from Jefferies. Please go ahead.
Thank you. Hi management team. Thank you very much for taking my question. I have two questions, one for China and one for Korea and Taiwan. First, on the China side, on the commercial investment, how do you allocate resources between the on trade and off trade currently? Management mentioned previously that mega platform investment in third quarter 2025. Would you share with us what is the ROE when you compare to some of the previous initiatives? 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. Let me maybe try and break it down into components. I think the first piece on mega platforms, I think we're very fortunate to have access to the mega platforms. That's one of the big benefits that we have. These of course would not necessarily make sense to pursue on an individual country basis. We're very lucky that they're relevant with consumers in many markets. We benefit from two things where we benefit from, of course, a more manageable cost by taking on these mega platforms at a global level than if we undertook them ourselves for one or two markets, but then we also get the opportunity to activate them with different brands in different markets based on consumer preferences and needs. That's helped a lot to make the mega platforms high ROI initiatives in general.
Good examples of that would be things like FIFA, the Olympic Partnership, and many music platforms, a good example being Tomorrowland, which we'll be doing in Shanghai later in November. In terms of commercial investments by channel and how we think about them, going back to maybe the question earlier, 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. Despite 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, especially as YJ was saying before, the emerging sub-channels, so O2O instant retail, e-commerce.
As in-home occasions continue to develop, we're putting a larger proportion of our spend in that direction and then, given the market has been shifting quite a bit, we look to continue to remain agile in the context of that macro environment. As channels recover, etc., we're actually in quite an easy position to increase or adjust our spend accordingly. In terms of marketing spend or marketing investment specifically, the brand power of our portfolio is the critical element for driving premiumization. That's our reference for market share growth potential. From that perspective, we look to continue to give differentiated offerings to our consumers and drive more value for our premium brands with unique experiences. In the nine months of 2025, our investment as a percent of net revenue increased, and that was driven mainly by marketing investment on our mega brands and behind our mega platforms, right?
There is the FIFA focus 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 trend-setting experiences. These need to be rooted, of course, on consumer passion points. The second piece has been around innovations, right? Launches like the Budweiser Magnum 1 L, that YJ mentioned, the Corona full open lid can as well, which give us a chance to increase category participation and develop new consumption occasions as well, right? If you think about the Corona full open, it allows consumers to have the lime experience in a can and in-home setting, which is something that, of course, is a much nicer experience than without it. And.
The third area of focus is increasing direct consumer communication, right? With different social 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, we'll continue to invest in diverse marketing campaigns and innovations. 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 their sales momentum as we move forward. Thank you for the question.
Got it, got it. Thank you. My second question is on Korea and also the Taiwan customs update. Would you give us an update on the status on these two recent events? Number one is the Korean customs tax dispute, first reported in February 2024, and then in June you also have an update on that. We'd like to get an update on the Korean dispute. The second is the impact from the anti-dumping duties in Taiwan for the four months from July. We understand that both are small events, but we'd love to hear some comments from you. That's all my questions. Thank you.
Thank you for the question. On the Korea tax side, the dispute is ongoing. What I can share is what we shared via the press release, which is obviously in 2023. During the year ending 2023, Oriental Brewery, which is a wholly owned subsidiary in South Korea, recorded a $66 million non-underlying charge. That related to a customs audit claim, which was recorded in our financial statements that year, during the third quarter of this year. Here.
Right. The period ending 30th of September , 2025, will be recorded as an $18 million non-underlying charge, and that was related to these same customs audit claims but for the remaining audit periods. Accordingly, the aggregate amount of non-underlying charges that are related to such claims is now $84 million. We share 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 multi-year process. We remain committed to upholding the highest standards of compliance across all our operations as well. On Taiwan specifically, there was a provisional tariff, 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.
Of course, we're closely following the situation and continue to monitor for. Further. 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 consumer and our customers have full access, right, without any disruption to our portfolio of beers, the full portfolio of beers, right, they choose from. We continue to carefully assess actions to support our wholesalers and local consumers with that perspective in mind. I think that's all I have for those two topics then.
Got it. Thank you very much.
You're most welcome. Thank you for the questions.
Our next question is coming from Leaf Liu from Goldman Sachs. Please go ahead. Hi Leaf, your line is open. Please unmute and go ahead with the questions. Thank you.
Hello, can you hear me?
Yes, very well Leaf. How are you today?
Thank you. Thanks a lot. Good. How are you? Thanks YJ and Iggy for taking my questions. I also have two questions. The first one is on the product innovations in Korea. We indeed deliver quite strong results in Korea, especially with ASP up 5%. I want to discuss how to look at your future premiumization strategy in Korea. Also, adding specific color on the performance of all the great new products launched in the recent two years. As you mentioned, Cass All Zero and Cass Lemon Squeeze 0.0. Also, will we continue to see strength in ASP and product mix in Korea going ahead? Thank you so much.
Thank you for the question, Leaf. South Korea, as we've discussed previously, is one of the more mature markets we have in Asia. The premium segment is still quite underdeveloped versus other similar markets. The price and margin ladders in Korea are historically much more compressed than in other countries. Consumers have been less aware of the reasons to pay a premium price for premium products. This of course means that the premium mix growth in the past was not as pronounced as it could be. We've been making an extensive effort 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. The rest of the premium portfolio has been helping there too. You've probably seen the perfect serve program that the teams have been executing with Stella Draft.
The toolkits that we provide there to bars and restaurants make the consumption experience far more elevated than historically would be the case. They strengthen our premium brand equity and they allow consumers to pay more. In the on-premise channel, the weight of premium beer has increased as a result. More recently, Stella Artois has taken the number one position in Premium Draft as well, which the team is very proud of there. In the past three 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.
In terms of innovation or new products, 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. We continue to expand its presence in bars and restaurants. In the third quarter, 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, the non-alcoholic beer and some of the other flavored innovations, so Cass All Zero and the different variants of Cass Lemon Squeeze are doing very well there too. We're very pleased with the healthy brand portfolio, the strong route-to-market and the people capabilities we have there.
We're excited to continue to lead the beer industry growth in Korea moving forward. Thanks for the question, Leaf.
Thanks a lot. That's very clear. My second question is on group level cost. How to look at any potential cost benefits into next year with our 12-month rolling hedging scheme?
I mean through the first nine 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%. We've been taking advantage of commodity tailwinds this year, which is a product of 2024 hedged pricing versus 2023, as well as the efficiency improvements that you count on us to do. That's been partially offset by country mix, with Korea and India outperforming relative to China. We've not really made any changes to our commodity hedging strategy. You can still think directionally speaking of raw and packaging material cost trends in the context of a roughly 12-month hedging policy. If you look at spot pricing for the last few months, barley has continued to decline or been softer than the previous year, even if at a more muted rate. 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. That one presents a bit of a headwind. It's now sitting in the high $2,000s USD per ton, whereas it was more low to mid $2,000s. At kind of bottom, energy's a bit harder to predict and to hedge, but it's been mostly neutral thus far. We don't really give a guidance. 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 in commodity pricing as of course given we're already late in 2025, we would be mostly hedged for next year.
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 these types of changes. Given commodity escalations are fairly moderated, it wouldn't be a stretch for us to ask operations to do their best to offset as much of the impact of commodities moving forward. If everything goes this way, that should leave us with premiumization as ideally the most meaningful driver or variable for cost of goods escalation as we move forward and look into 2026. Thank you for the question, Leaf, thanks a lot.
Very clear. Thank you.
In the interest of time, our final questions will come from Linda Huang from Macquarie. Please go ahead.
Thank you. YJ , I have two questions regarding China. The first one is regarding the net revenue per hectoliter because during the third quarter we found that it's under pressure compared to the first half. Can you give us some context on what is driving this and how do you see this trend going forward?
Thank you for the question. In the third quarter, our net revenue per activity decreased approximately 4%, 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 because we managed inventories as well. We remain very agile in our investments, and within the context of the current consumption environment, that means you know where, how, and how much we invest. If we look at the third quarter specifically, a greater proportion of our investments actually went 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 a route-to-market in that regard as well. 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. 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, contribution actually of our premium and super premium segments to our total revenue continued to increase in the quarter. Equally important, I mean, we continue to maintain pricing discipline while investing, right.
We will look to lead and grow the category and drive value for our consumers in a disciplined way. 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.
The second one is regarding industry because I also noticed that the private label trend is taking off in China, and many retailers right now also have their own beer brands. Does the company have any plan to work as an OEM with those retailers?
Yeah. Linda, this is YJ . Let me take this question. In terms of OER, I think the major thing that I link to the people like to have a retail, like to have OEM, is once a consumer wants to have a different of the beer, and second one is with the current industry, the extra capacity and efficiency in the breweries. Thank you for everybody visiting our Fujian market and brewery back in the week of September 15th. You already see we are the company, how a rich portfolio can provide consumer the deflation of the brand and package. We have a big advantage in terms of different consumers' needs. The second one is the capability in the brewery and the efficiency we have in Fujian, and also link to the new technology to link to the high quality gross.
We do have this kind of advantage in terms of different. Of the. Brand and also efficiency improvement, the excellent program and high technology knowledge we have. That's all advantage we have to make this happen. Let me summarize what we just talked about. First, in terms of brand portfolio, we have reached, we got to strengthen this further to the consumer and our route market, not only on premise but also the new trend of E-com and O2O that are going to invest and build a platform. Third one is most important for us. After we have a plan, we have an initiative, the case execution. The execution I'm talking about is three R: responsibility, resources, and recognition. We are 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 resources, we're going to further invest, channel, and also the brand.
We're going to use an excellent program to develop the best practice and the toolkit to help people to be able to implement their target they have. 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. Those are the three I talk about. We also develop a platform we call one bot platform between commercial and supply chain to work together to make this happen. We are on the stage to build a one year plan for next year. Our direction is quite clear. Keep the momentum and see the gap we have, build a plan and the portfolio, the route market execution, and to have next quarter as a bridge to bring our performance to be stabilized and further get improved time by time.
I want to use this opportunity to thank the analysis investor, pay attention our performance. We're going to speed up the speed, focus, and discipline on the execution. Thank you.
Thank you. Thank you, YJ, your detailed answer.
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 focusing on strengthening our key portfolio offerings, scaling. Our. In-home route-to-market and enhance our execution to capture future growth opportunities in China. We are pleased with the result of. Our. Business outside of China and looking forward to continue their momentum as we improve our result to be more in line with the potential of our business. Thank you all for joining us today, and I look forward to speaking to you again soon.
This concludes today's results call. Please disconnect your lines. Thank you.