Operator: Welcome to the 2026 nine months results announcements 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 for the board, and Mr. Bernardo Novick, Chief Financial Officer. The results for the nine months ended 30 September 2026 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange and Budweiser APAC websites. Before proceeding, let me remind you that some of the information provided during this results call, including our answers to your questions on this call, may contain statements of future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties, and other factors beyond our control.
Operator: It is possible that Budweiser APAC 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 the new information, future events, or otherwise. For 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, the 2025 annual report published and any other documents that Budweiser APAC has made public. I would also like to remind everyone that the financial figures discussed today are provided in USD, unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalizing nature, and unless otherwise stated.
Operator: Percentage changes refer to comparisons with the same periods in 2025. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities. As normalized the figures and non-GAAP measures, the company disclosed the consolidated profit, EPS, EBIT, and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2026 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.
YJ Cheng: Thank you, and good morning, everyone. Thank you for joining today's call. Our business in China continues to facing challenges, while our overall results remain below our potential. We saw progress in area of strategic focus, and we are taking actions to support our future volume recovery by strengthening execution, evolving our channel mix towards in-home and digital channels, and continue to invest behind our mega brand and innovations. Beyond China, we continue to see positive commercial momentum in South Korea and a strong volume growth in India, reflecting the strength and resilience of our geographic footprint. Specifically, in Q3, our business in China faced a challenging industry environment, which was impacted by abnormal weather and ongoing weakness in their on-premise channels. In South Korea, continued market share gains in both on-premise and in-home channels helped partially offset industry softness.
YJ Cheng: In India, industry growth, market share gains, and the continued momentum of our premium and above portfolio drove double-digit volume growth. I will now hand it over to Novick to discuss our performance in more details. Thank you.
Bernardo Novick: Thank you, YJ, and good morning, everyone. In the first nine months of 2026, total volumes decreased by 4.9%. Revenue decreased by 3.7%, while revenue per hectoliter increased by 1.2%. Our normalized EBITDA decreased by 13.2%, while our normalized EBITDA margin contracted by 297 basis points. Further, our profits attributable to equity holders of Bud APAC decreased from $594 million in the first nine months of 2025 to $565 million in the first nine months this year, as we were impacted by a $52 million non-underlying income tax charge from an internal restructuring in China and a $30 million receivables provisions related to the supply of products in India. In the Q3, total volumes decreased by 10.1%, impacted by our performance in China and partially offset by growth in India. Revenue decreased by 8.4%, while revenue per hectoliter increased by 1.9%, benefiting from a positive country mix.
Bernardo Novick: Our normalized EBITDA decreased by 22.9%, impacted by our top-line performance in China, cost escalation, operational deleverage, and reduced other operating income. Now, let me cover some highlights from each of our major markets. In China, volumes in the Q3 decreased by 16.8% as we faced a challenging industry decline of our high single digits, which was impacted by adverse weather and continuous weakness in the on-premise channel. Revenue decreased by 16.9%, while revenue per hectoliter was flat, with a positive brand mix offset by promotional investments in the in-home channel. Normalized EBITDA decreased by 30.2%, impacted by our top-line performance, operational deleverage, and reduced other operating income. In the first nine months, both volumes and revenue decreased by 9.7%, while revenue per hectoliter was flat. We continued executing our channel expansion strategy, focusing on premiumizing the in-home and expanding our penetration in O2O.
Bernardo Novick: We delivered strong double-digit growth in the channel in both the Q3 and the first nine months of 2026, supported by package innovations and brands. We also continue strengthening the brand power of our portfolio as we invest behind our mega brands and innovations and focus on connecting with consumers across multiple occasions and increase sales momentum, particularly in the in-home channel. In South Korea, volumes in the Q3 decreased by low single digits, outperforming a soft industry. Revenue per hectoliter decreased slightly, impacted by a negative packaging mix, partially offset by a premium brand mix. Normalized EBITDA decreased by low double digits, impacted by weaker volumes and commodity headwinds. In the first nine months, we outperformed the industry with market share gains in both on-premise and in-home channels. Normalized EBITDA decreased by low single digits, with stable margins supported by revenue management initiatives and positive brand mix.
Bernardo Novick: Partially offset by negative channel and packaging mix. We continue to invest behind innovations tailored to consumer preference in South Korea. in September, we launched Charlang, a zero-sugar soju featuring Jeju volcanic bedrock water and lava seawater salt as ingredients. The product is positioned as a differentiated offering within the soju category. And finally, in India, industry momentum continued and consistent execution of our strategy drove further market share gains. Increased commercial investments support accelerated growth across our portfolio, with a premium and above segment delivering double-digit growth in both Q3 and in the first nine months of the year. The Budweiser brand continued to outperform the industry, with India now ranking among the brand's top 3 markets globally. And with that, YJ and I are here to answer any questions that you might have. Thank you.
Operator: Thank you. So, ladies and gentlemen, the floor is now open for questions. Please press star 1 to ask a question. If you wish to cancel a request, please press star 2. In the interest of time, we ask participants to limit themselves to 2 questions. Please ask 1 question at a time in both English and Mandarin. Our first question is coming from Linda Huang of Macquarie. Please go ahead.
Linda Huang: 非常感谢管理层，我这边准备了两个问题，第一个问题应该是给YJ的。第二个问题我想问一下关于行业，因为其实尤其是在中国，我们也知道宏观其实是比较艰辛的，尤其是啤酒的终端渠道也面临很多的问题，所以就导致于中国的整个行业的调整其实是比我们想的还要来得久。我就想问一下，我们有没有一些公司可以做的特定的一些策略，能够让我们尽早看到我们自己公司的业务有一个比较大的改善、进步。My first question is for YJ. This is regarding the overall beer market. Because it seems to us that China business adjustment is longer than the market expectation, it could be the macro issue, could be the industry issue. So I just want to know, is there any of the company's specific strategy that we can see the business to turn around?
YJ Cheng: 好，谢谢Linda。你这个问题问得还是比较精准和全面的。就像你说的，中国啤酒行业调整期或是成熟期，比大家期待的还是时间比较长，也正像我们公司恢复计划一样，也是比原来想象的时间长一些。中国啤酒市场应该是比较成熟起来了，量比较大，也比较成熟，不管是消费者还是经济，还是消费趋势。作为百威亚太始终坚持着一个方向，在中国是一个长远的存在和投入，伴随着中国经济的发展和消费者的需求。所以首先说的一点，不管中国的市场在发展过程当中，还是在调整过程当中，百威亚太始终是一个参与者，而且是一个同行者。所以在中国的这种事业和存在是一个长远的打算，长远的计划和安排，这是想表达的一个意思。第二个，就像你说的，我们的相对的战略，去年我们谈过，是比较清晰的，而且是一致性的，包括三个方面：一个方面是在我们的品牌上，我们作为全球的公司，我们有比较丰富的品牌；第二个方面，我们在渠道上，过去是比较聚焦于现场消费，现在家庭消费等等这些也是一个我们需要调整的，这是我们第二个战略；第三个战略就是有了这些品牌，有了这些渠道，这些战略关键是怎么把它执行好，根据形势的变化，消费趋势的变化，怎么样抓落实，抓执行，能够把策略做得比计划的还好。所以策略是清晰的，而且聚焦的，也是一致的。我们在中国是我们亚太的重中之重，而且我们的目标很明确，首先要把我们的业务稳定下来，不要出现波动。那怎么样在量上，如果行业出现了变化以后，我们怎么会在市场份额上能够保持稳定？所以要聚焦、清晰，而且一致。目标非常聚焦，就是在我们的份额和量上，不管行业怎么变化，我们在份额上要做我们可以控制的事情，大环境我们可能左右不了，但是我们要做得比自己好。比昨天好，同时要做到能够和行业共同进步和发展。所以这是第二个想表达的意思。中国实际上虽然是在调整过程当中，但是是一个在向高端化走的这样一个市场。随着消费水平的提高，随着销售收入的提高，大家对美好生活的这种追求，实际上虽然喝的不会很多，但是要喝得好一些。高端化这正是我们公司的一个长处。作为一个全球化公司，有这么多的品牌，可以满足不同消费者对各种产品的需求，以及这种高端化，品牌的丰富度，以及大家对百威、哈尔滨我们这些品牌的品牌力，这都是我们一个非常大的优势。那我们怎么样能够结合着消费者的家庭消费，以及喝得更好一些，以及在不同的体验，对产品的不同的体验，以及不同的消费场景，这种产品的线的满足消费的这种需求。我觉得这除了我们的优势，也正是消费的一种趋势。所以这两个是能够联系在一起的。家庭消费的这种趋势，我们产品线的这种丰富，产品力的这种强大，如何和消费者的体验、参与度以及场景结合起来。所以这些都是我们现在设定的策略，怎么样把它串在一起，能够连成一个环来往前推进。所以我们的策略是和中国的这种调整是相结合的，而且比较清晰，比较聚焦，而且是在于它的一致性，加上我们现在的这些优势，又是和消费者这种趋势的变化能够吻合，那我们怎么样能够把执行做好，保持一个很好的这么一种趋势和势头，这都是我们目前正在做的一些事情。希望我能把这些放在一起，能够给您一个大的picture，能够回答你的问题。谢谢Linda。
Linda Huang: 谢谢 YJ. 那 也 非 常 期 待 我 们 能 够 早 日 看 到 这 个 结 果. My second question is for Bernardo. Hi, good morning, Bernardo. So, in consumer space, right? Lately I found that many investors, they care a dividend, especially the sustainable dividend is more important than anything else now. Given that operation is quite tough, right? So will management change the dividend policy? Is there any long-term dividend guidance?
Linda Huang: 我的第二条问题是给这个CFO Bernardo的，现在大家投资人都很关心可持续性的分红。所以我就想问一下，现在情况这么艰辛，公司会不会改变他们的分红政策？有没有一个比较长期的dividend的指引？
Bernardo Novick: Hi, Linda. Thank you. Nice to hear from you. You are right. I mean, we fully recognize how important is our dividends for our shareholders. But in my answer, I will have probably to be consistent with what I have shared with all of you on the last quarter. And our capital allocation strategy doesn't change. The first priority is always to focus on organic growth and allocate resources to strengthen our business, and that's what we have been doing. The second one is inorganic opportunities that haven't appeared yet. And the third one is return capital to shareholder, which is what we have been doing consistently in the past. Then the question about the future, I repeat the same.
Bernardo Novick: I think it is, yes, it is fair to assume that if results remain challenging and do not improve, it of course, becomes increasingly difficult to maintain the same dividend. But having said that, there hasn't been any decision yet. But I want to say again that we understand the importance of the dividends for our shareholders, but of course, ultimately, it is about business performance, right? And our priority in order to achieve that is work on stabilize our China business so we can improve our profitability. Thank you for the question.
Linda Huang: Thank you very much.
Operator: Thank you. Our next question is from Lillian Lou of Morgan Stanley. Please go ahead.
Lillian Lou: Thank you for the chance to ask the question。我也有两个问题，都是关于中国的业务。第一个问题是比较近期一点，想问一下我们在三季度后看一下整个趋势，特别是整体的通销的一些情况，我们有没有看到一些早期的平稳下来，或者说有一些复苏的迹象？那么还是我们现在看，不管是从需求还是从竞争，以及我们自己做的一些渠道的一些调整上面，压力可能还会再持续一段时间。
Lillian Lou: My first question is about China latest trend on volume and demand. Any update on the latest sell-out situation, any sign of recovery or we still expect some pressure to continue? Over to you.
Bernardo Novick: Hi, Lillian. Thank you for the question. Look, I think that Q3 was very challenging. I think you are hearing from many in the beer industry. The industry was worse than we expected, around a high single-digit decline. That was worse than it was at Q1 and worse than Q2. We believe the main two reasons are both weather and also continued softness in the consumer environment and macroeconomics. We saw, particularly, softness in the on-premise channels that impact our volume and our profitability usually more than that. We continue to lose share. This is clear in the volumes we shared, but at least we saw some positive pockets of good news. Like for example, in the in-home, our trend of share versus last year is better. Our innovations continue to grow. O2O continues to grow, although, not as much as Q2.
Bernardo Novick: Our super premium portfolio, it is in the positive side, even in a tough quarter. So those are the good things. October so far, it is too early to tell for Q4, but seems to remain challenging. But let us see how the rest of the quarter goes. But I think, the important message is, in spite of a challenging environment in the industry, we continue to invest behind our brands, because once the industry recovers, we want to be ready. We want to get our market share back, and continue to strengthen our brands and our capabilities to wait for when the recovery comes. But thank you for the question.
Lillian Lou: Thanks a lot, Bernardo. My second question is also related to that, the inventory situation. If we look back in Q3, it was still a de-stocking quarter. So how did sell-in compare with the sell-out? What is the inventory level on quarter end versus quarter beginning, after our so-called efforts to really readjust the business models? When should we see sell-in begin to track more closely to the underlying demand? Whether 2027, we will see de-stocking to continue or actually we are going to build out a new norm and starting to see a more normalized trend. Thank you, Linda. Lillian, sorry. Inventory has always come up in some of these questions. I think the first point I want to make is that we have been working to improve inventory, so it is not new. However, we are still not yet where we want to be.
Bernardo Novick: There is still more work to do. We are working on improving visibility, particularly on the different tiers of the market. In China, we have different tiers, and we still believe that we have more than what we need to have, and we need to keep managing to keep our beer fresh. So we have plans in place and we expect to keep working on this. So we expect still some impact, at least in the short term, but we are moving in the right direction. Thank you for the question. Thanks a lot, Bernardo.
Operator: Thank you. Our next question is from Chen Luo of Bank of America. Please go ahead.
Chen Luo: Hi, YJ and Novick. I have got two questions. Both of them are focusing on the cost side. My first question is actually our outlook for how much aluminum and barley cost will go up in the coming 12 months compared with the cost that we have locked in previously. What is our assumption of the unit cost increase in 2027? This is my first question. I will ask my second question later. Thank you.
Bernardo Novick: Thank you, Chen Luo. You are right. Commodities and our costs are going to start facing some pressure, because of the commodity increase, particularly now, Q4 and next year. The main reason is, as you were saying, aluminum. You know that packaging represents a meaningful part of our cost base in beer. Aluminum, within packaging, it is also a growing part and a very relevant part. Because to have aluminum, you need a lot of energy and oil prices increase, you see now price of aluminum reaching $3,000 per ton. This is approximately 10% year to date, or even 20% if you compare to last year. We have, as you all are aware, a 12-month hedging policy.
Bernardo Novick: What you probably need to do is to go back to last year and make these comparisons to kind of have an idea of what is the impact in our costs, but it is definitely a negative impact from the commodity side. It does not mean that we are not doing anything to offset this. It is clearly going to be difficult to offset the whole impact, but the supply chain team, if it is something in our company has been working very well in the past few years, it is our supply chain. They work on productivity, on efficiencies, to try to offset some of these cost increases. Again, the only thing I can say is that, yes, there are some cost headwinds that we will have next quarter, this quarter and next year.
Bernardo Novick: You can count that the whole team is working to drive productivity and efficiencies to try to offset, at least partially, this negative impact.
Chen Luo: Thank you. My second question is on the pricing part. Given the cost escalation, do we have any plan for price increase in China either in Q4 or sometime next year? What if competitor raise prices, are we going to follow? That is my second question. Thank you.
Bernardo Novick: It is a good question, Zhou. I like to always start the answers reminding the strategy, particularly the strategy that we have in this phase that we are right now in the China business. What we have been saying many times is that the priority right now is to stabilize volumes. Stabilizing share as a first step in order to do that. When we think about pricing in India, a significant part of our net revenue per hectoliter increase in the past has always been driven with premiumization. We expect this part to continue, even though, of course, in the now, we are investing a little bit more to solve some of the problems that we have.
Bernardo Novick: What I can say to you about next year is that we will, of course, always monitor, not only the input costs, but the consumer dynamics, what everybody is doing. We will always look to that to make a decision. There is nothing that we can communicate right now regarding potential price increases in the China market. But thank you for the question.
Chen Luo: Okay. Thank you, Novick, and also thank you, YJ.
Operator: Thank you. Our next question is from Jessie Xu of JPMorgan. Please go ahead.
Jessie Xu: Hi. YJ, Bernardo, this is Jessie Xu from JPMorgan. Thanks for taking my questions. My first question is about the pricing trend in China. We have noticed that promotions in the in-home and also O2O channels appear to have increased in Q3, while if we look at ASP, it remains largely stable year on year, right? So how should we think about this and the trade-off between defending market share and pricing as of now? Are current promotions more tactical and temporary, or do they point to a more structural reset in pricing? Thank you.
Bernardo Novick: Thank you, Jessie. I think probably the easiest way to explain some of these questions about profitability and investments is always think maybe in our strategy, like in two phases, right? We have the phase we are right now in the strategy is focusing on stabilizing volumes and market share, right? And then we have probably after this, a second phase, hopefully sooner rather than later, that we can focus on reigniting growth and bringing back margins and profitability. So in this phase that we are, of course we continue to have the positive brand mix effect, but we are also investing behind our brands and innovations. We are investing to protect our wholesalers. We are investing behind the growing channels like in-home O2O. So these things offset each other. That is why you see a net revenue per hectoliter that is flattish.
Bernardo Novick: Some quarters a little bit up, a little bit down, but around that. I expect this strategy to continue in the short term until we can stabilize share and we can go back to growth and hopefully recover some of the lost margins in the future. I think this is probably the easiest way to explain how we are thinking about it. We will continue to be disciplined with our revenue management initiatives, and we will continue to invest behind our brands to bring this stabilization in market share and volume. Thank you.
Jessie Xu: Thanks for the color, Bernardo. My second question is also about China, but on margins. Could you help us break down the drivers of the margin decline in Q3, including premium mix and packaging costs, maybe higher discounts in sales and marketing, and lower government incentives? More importantly, if we look beyond Q3, what level of China margins should we view as a sustainable level once the channel transition matures?
Bernardo Novick: Thank you, Jessie. I think it is similar. People always ask me, as a CFO, what is the most important line of the P&L? My answer is, of course, all the lines are important because you need to drive volume growth to make all the P&L work. We need to bring profitability. It is important to bring cash flow. But I think at the end, with YJ here and the China team, strategy is always about choosing at a period of time, what is the most important line. It does not mean that the other ones are not important. Again, if we divide, as I was saying before, our strategy at this phase of the company, the priority is to stabilize volumes, right?
Bernardo Novick: That means, yes, that we are investing more behind our brands, that we are investing for the future to protect our wholesalers, because we want to be in China for the long term, right? What does it mean? It means that, when you have an industry decline with high single digits, where we are still recovering. It means that we are still losing some share, and we are investing, right? Together with some cost headwinds, it creates an operational deleverage that is difficult to adjust in the short term. That is why you see some of the pressure margins in the short term. Now, does it mean that it will continue in the long term? No. We want to stabilize so we can go back to our, let us say, phase 2 of the strategy, that is reigniting the growth in APAC.
Bernardo Novick: When that happens, we will have more flexibility, right, to align maybe the cost structure we have in the company to the scale of the business we have today, and we can bring back some of the lost margins. Again, I would think, as I am saying, a strategy in two parts. Of course, always the question is when the second part of the strategy, when the second phase will start, and we do not know, but we are working hard to try to solve some of the issues we have in the short term so we can quickly go to the second phase. I hope I can clarify some of these questions without sharing a lot of particular numbers.
Bernardo Novick: This is how we are thinking as a management about how to prioritize and what will happen with margins in the short term and in the medium to long term. Thank you, Jessie.
Jessie Xu: Thank you.
Operator: Thank you. Our next question is from Anne Ling of Jefferies. Please go ahead.
Anne Ling: Hey. Hi. Can you hear me?
Bernardo Novick: Yes.
YJ Cheng: Yes.
Anne Ling: Hi. Thank you, YJ and Bernardo. My two questions are on South Korea. Let me ask in English, and then translate it. In South Korea, what is your expectation for the beer industry volume in 2027? Do you see sufficient innovation and market share gain to offset continued weakness in the underlying category?
Bernardo Novick: Thank you, Anne. Nice to hear from you, too. Good to talk about South Korea a little bit too, of course. Maybe I can divide the answer in two parts, the industry and our performance. Industry in Korea, yes, has been declining slightly. Let's say low single digits in H1. Q3, the industry was a little bit weaker. I do think that it's mostly explained by some phasing because of the Chuseok Mid-Autumn Festival and between Q3 and Q4. I am not worried. If you ask me about the expectations, I still expect industry in Korea to be slightly negative, low single digits in the future. Of course, we cannot foresee what is going to happen, but it has been like that in the past, and that is what we expect. Having said that, when we go to our performance, we have been able to outperform the industry.
Bernardo Novick: Different to China, we have a very good commercial momentum and gaining market share both in in-home and out-of-home. The reason, I think, of our commercial momentum is, of course, we have a very good route to market in Korea. We have strong brands. Cass is doing very well. I think one of the highlights also has been our ability to innovate in the non-alcohol, ready-to-drink category and even further. I think we just announced recently that we are launching a soju brand named Charlang. It is a zero sugars, low alcohol soju, that is around 15% ABV, that comes from Jeju Island. It is made with volcanic bedrock water and lava seawater salt, so all typical ingredients. We just launched in some regions in South Korea, and we plan to expand.
Bernardo Novick: These are the ways that we are working always to try to offset this slight negative industry in South Korea. We will continue to invest behind innovations. We will continue to invest behind our brands to be able to sustain this momentum and hopefully, by bringing beer and new products to different occasions, trying to offset this slightly negative industry we see in Korea. I hope this answer your questions. Thank you.
Anne Ling: Yes, thank you. My second question is on the pricing. Should investor expecting some price hike in South Korea in 2027, particularly if aluminum, logistic cost, and also raw material cost remained elevated?
Bernardo Novick: I think, Anne, here the answer is maybe in part similar to China, in part a little bit different. Similar to China, we also have some commodity cost pressures in South Korea because the hedging policy is the same, right? Everything I said about the cost of aluminum, the packaging in aluminum and how aluminum is relevant, it is also very important in Korea. We have the same 12-month hedging policy, which means that Q4 and next year, we will have some cost headwinds in South Korea, too. Regarding the pricing, we did a price increase last year. We have not done any price increase this year in South Korea, and we do not have, at this moment, anything to announce regarding pricing. We are also working on revenue management initiatives like we are this year to drive premiumization.
Bernardo Novick: Some of the innovations we are launching always help with that. We are also doing some non-alcohol beer that help with margins, too. As a whole, we are still working on revenue management initiatives. The supply team also is working very hard to offset some of these cost pressures that we have. If you are thinking about margins, I think Korea is a more stable market. When we think China under pressure, India improving, Korea more stable. Having said that, we still see opportunities to slowly improve in the future, doing some initiatives. Again, I want to be clear that, yes, from the cost perspective, next year, we are going to have some headwinds on the commodity side. Thank you for the question, Anne.
Anne Ling: Got it. Thank you very much. Thank you.
Operator: Thank you. Our next question is from Carol Xia of Daiwa. Please go ahead.
Carol Xia: Thank you, YJ and Bernardo, for sharing. This is Carol Xia from Daiwa Capital Markets. My two questions are all about China. Firstly, on China investment, I think maybe it is a little bit early to talk about 2027, but right now, could you please share if any initial thoughts on next year, which channels do you think that you will step up investments relative to the other channels? And where do you think you can continue to save some costs?
Bernardo Novick: I can take this one, too. I don't think it is too early to start talking about 2027. We are in the process of, as every company at this part of the year, of reviewing what are the things that are working and what are the things we need to improve. Our view on always about what to invest in the future is to, of course, keep investing on the things that we are working. Again, strategy in China is to stabilize volumes and share, which means to keep increasing investments in spite of the situation. You will see this year we are increasing our commercial investment as a percentage of net revenue. The way we are doing, and we are thinking about not only for this year but for the future, is to invest on the things that are growing.
Bernardo Novick: We are prioritizing segments that are growing, like Core Plus. We are prioritizing premium. We are prioritizing channels that are growing, like O2O. We are prioritizing consumer occasions where we see that consumers are moving, particularly towards this in-home part. Another way to answer is our investments in innovation, maybe I can highlight a few. On the Core Plus, Harbin 1900, we have a bet on this, that is the first beer in China, a classic lager that we are very excited about the launch that we did this year. Bud Magnum. Another innovation is on the packaging side that is doing very well, is our 740ml mega can for Budweiser. The Corona Open Lid is another example. I think all these are investments that we plan to continue doing because are working.
Bernardo Novick: The part more maybe theoretical of the answer is how we think about resource allocation. We are always trying to look at the ROI of the investments. We have seen this year that some of them are working and we are investing, some of them were not bringing the ROI that we wanted, and we are deprioritizing a bit. But again, as a whole, going back to the strategy, stabilizing share and stabilizing volume and increasing investments overall, of course, maintaining discipline on the allocation of resources. Thank you, Carol.
Carol Xia: Yeah. Thank you, Bernardo. The second question, if I may, on China O2O channel in particular. Can you please give us an update on the O2O channel, given that it is growing faster than others? How is the product mix trending in this channel, and also other, if any, margin implication on that?
Bernardo Novick: Here, O2O, I think is one of these areas where I was speaking before that we believe, not only are growing, but we believe that are expected to keep growing, and it is very in line with this consumer behavior and in-home trend. Regarding O2O, I will say two things. People ask me about margins. If you look at the same product, maybe in O2O versus in another channel. Yes, because of the last mile delivery and other things, it is a little bit more expensive. But on the other hand, it is a channel that continues to drive premium and super-premium mix. I think as a company here, when we think about this channel as a channel of growth in the future, I think Budweiser APAC is very well-positioned because of our premium and super-premium portfolio.
Bernardo Novick: One of the reasons our super-premium portfolio is in positive growth in spite of a very weak industry in China, is because O2O. I think this is helping us offset some of these negative costs mix of the channel. When I look at the long term, I think we know, of course, we need to keep working on having the right portfolio for this channel with the right packaging that goes to the right locations, maybe bigger packs, different packs, more tailored to what the consumer wants for this channel. Then also we will be working on improving the margins of the channel. I think that as the channel consolidates, as we can improve some of the efficiencies of how we deliver to the channel, we can see some opportunities to improve our margins in the channel.
Bernardo Novick: But we are not waiting to solve these issues, to embrace the channel. We are embracing it. We are using it to innovate, and we believe that we can see a lot of growth for our premium and super-premium brands in the O2O in the next years. Thank you again for the question, Carol.
Carol Xia: Thank you so much, Bernardo. Thank you.
Operator: Thank you. In the interest of time, our final question will come from Leaf Xu of Goldman Sachs. Please go ahead.
Leaf Xu: Hi, YJ and Bernardo. Can you hear me?
YJ Cheng: Yes.
YJ Cheng: Yes.
Leaf Xu: Thanks for taking my questions. I have two questions. The first one is on India. What is the latest status of the overdue receivables collection from the Telangana State government? Have any bad debt provisions been recognized further, and has the issue impacted your shipment allocation or growth strategy in Southern India? It is the first question. Thanks.
Bernardo Novick: Thank you, Leaf, for the question. I think it is an important topic. That is why we made the announcement to the market earlier this month. Maybe I give you a little bit more context of this issue. As you know, India is a very complex market. Every state is different, has different rules, different ways, different taxation, different ways for us to deliver, different route to markets. In the state of Telangana, how the route to market works is that we deliver through a state-owned corporation. So basically to the government that distributes to the retailers. The total receivables amount from the state, it has actually been quite stable during the year. But, some of the old dues, and outstanding, have become aged.
Bernardo Novick: We have a very disciplined approach to overheads as in APAC and as a multinational company that I think gives also comfort to investors that we are very disciplined. Following the internal rules we have, we decided to recognize this provision of $30 million regarding the aged receivables from the state. Having said that, we are of course working and our best efforts to recover this outstanding amount and take all the necessary actions we can to protect, of course, the interest of the shareholders. There is always another question about one-offs that I receive. We do not expect further meaningful one-offs from this situation in the future. Of course, things can change, but at this point, the big provision was already made in this quarter. Thank you for the question, Liv.
Leaf Xu: Thanks a lot, Bernardo. Then comes my second question. 那 关 于 这 个 第 二 条 问 题 是 中 国 的 2027 年 行 业 展 望. 我 们 也 确 实 看 到 今 年 中 国 啤 酒 行 业 销 售 各 方 面 都 受 到 季 节 性 因 素 、 极 端 天 气 ， 包 括 今 年 餐 饮 的 消 费 周 期 的 一 些 影 响. 那 如 果 从 销 量 、 产 品 高 端 化 趋 势 以 及 竞 争 格 局 来 看 的 话 ， 我 们 如 何 看 待 2027 年 中 国 啤 酒 行 业 的 一 个 行 业 前 景？ My second question is about the industry outlook for next year for China. While the seasonal factors, extreme weather, and some local catering consumption cycles impacted China beer sales performance this year, what is our industry view for China beer industry next year in terms of volume, premium trend and competition landscape? This is the second question, thank you very much.
YJ Cheng: Liv，我来回答你这个问题吧。2027年虽然有很多不确定的因素，但是大的趋势我觉得不会有大的变化，不管是整个经济环境、消费的这种趋势，我觉得不会有很大的变化。作为百威亚太，尤其我们在中国，我们愿景是一个长期存在者，长期共同发展。所以这是我刚才也谈到过，因为中国的这种高端化销售、产品的这种升级、消费提升，以及这么大的容量，所以这个市场还是非常有吸引力的。所以这是讲的愿景，这个长期化。那第二方面，优先级。中国是我们的优先级，我们在短期要聚焦我们的量和我们的市场份额的稳定性。虽然外部环境有很多不可控的，但是我们要聚焦我们可控的东西，怎么样我们能够每天再进一步，同时我们怎么样能够和这个市场一起来进步。所以，我们的优先级是中国。第三，具体到策略，我刚才也讲过，我们的策略是清晰的、一致的、聚焦的，也就是我们有丰富的产品线，以及我们比较夯实的这种渠道。虽然渠道现在在现场消费逐渐向家庭消费这种转换，那我们怎么样去适应这种形式。第三，关键是怎么去把我们的策略执行好。那具体行动上，实际上我用了三个C。一个方面，就是和我们的商友，有我们的品牌的优势，我们这个品牌的投入是个长期的，虽然可能在短期见效不大，但是就像和我们刚才愿景联系，是一个长期的投入，长期的存在，对品牌的长期投入和我们丰富的这种产品线，这也是我们的一个优势。那另一个方面，就是我们的合作伙伴，如何减轻他们的负担。刚才你的问题也提到了一些去库存，怎么样保证我们的产品新鲜度，使我们这些合作伙伴能够减轻负担。虽然我们现在有一些短期的痛，我觉得这都是为了我们长远的发展。这个也是我们的行动计划，很重要的行动计划，怎么样能够减轻我们的合作伙伴的这种负担，使我们能够有一些短期的痛，能为长期的发展，使我们的合作伙伴能够带来价值。那么第三个方面，就是随着渠道的变化，我们怎么样给消费者带来他们所希望得到的产品，通过我们的一些创新，我们的多种的产品，来给消费者提供满足他们的一些需求。所以这是我们的一些行动计划。百威亚太除了在中国是我们的优先级以外，我们同时也有印度和韩国。那韩国刚才Novick也讲到了，我们在韩国是一个非常好的态势，不管是在市场份额，还是在我们的产品线，还是我们的创新能力，还是我们的市场份额，等等这些方面是非常好的一个势态。那么同时，印度是在双位数的增长，而且我们在印度的这种增长是好于行业的。印度的这种经济、人口发展的趋势也非常有潜力。我们在高端化，我们是有非常大的优势在印度，这也是我们很好的一个市场。所以这也是我们在整个亚太，除了中国以外，另一个大的优势。所以聚焦中国，长期投入，采取一些稳定的战略和切实可行的一些行动计划放眼亚太，我们会非常有期待，能够2027年有一个好的结果来交代给我们的投资者和我们的合作伙伴。好，谢谢大家。
Leaf Xu: 谢谢YJ的分享，谢谢Bernardo的回答。非常感谢。
Operator: Thank you. This concludes our Q&A session today. I would like to turn the conference back over to YJ for the closing remarks.
YJ Cheng: Thank you. We are taking targeted action to stabilize volume, rebuild market share momentum in China, and bring our performance back in line with our long-term potential. We will continue investing behind our mega brand and innovations, strengthening execution, and expand our in-home channel presence as we navigate a challenging industry environment. We remain confident in our strategies and, most importantly, in our people. Thank you all for joining us today, and I look forward to speaking to you soon.
Operator: This concludes today's conference call. Please disconnect your lines. Thank you.
