Budweiser Brewing Company APAC Limited (1876) Earnings Call Transcript & Summary

Welcome to the Budweiser Brewing Company APAC Full Year 2020 Results Call. Hosting the call today from Budweiser APAC is Mr. Jan Craps, Co-Chair of the Board and Chief Executive Officer; and Mr. Gui Castellan, Chief Financial Officer. Results of full year 2020 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 management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. It is possible that Budweiser APAC actual results and financial condition may differ, possibly materially, from the anticipated results and 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 discussion of some of the risks and important factors that could affect Budweiser APAC future results, see risk factors in the company's prospectus filed with the Hong Kong Stock Exchange on the 18th of September 2019, the 2019 annual report published and any other documents that Budweiser APAC has made public. I would also like to remind everyone that 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 2019. 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 normal activities. As normalized figures are non-GAAP measures, the company discloses the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release. Further details after full year 2020 results can be found in the press release published earlier today. It's now my pleasure to turn the conference over to Mr. Jan Craps. Sir, you may begin.

Thank you, Jason. Good morning, good afternoon, everyone. Thank you for joining our earnings call. I hope you are safe and well. I'll talk about our commercial highlights and ESG updates first. Then turn it over to Gui to go over our financial results before we open for Q&A. In a year of turbulence and uncertainties, I'm extremely proud of our colleagues who have been embracing challenges with resilience and agility. Our commercial performance has been impacted by the COVID-19 related restrictions on the sales channels, especially the premium on-premise channel, where we have a strong position in our key markets. In China, with the exception of losses in February through April 2020, mainly due to the COVID-19 impact on the on-premise channel, our full year volumes, revenues and market share grew year-on-year. In the fourth quarter, we realized an estimated share gain of 140 bps despite channel inventory reduction due to a later CNY in '21. As a result, we significantly reduced the full year share loss to 55 bps. Once again, we grew market share in the important in-home and e-commerce channels for full year '20, according to Nielsen. Premiumization continues to be a key driver of growth, and our Premium and Super Premium portfolio grew by mid-single digits in the fourth quarter, led by Budweiser. During CNY 2021, people were encouraged to stay where they live, instead of traveling back to their hometowns as they traditionally do. We adapted our commercial investments accordingly and delivered a successful CNY campaign as a solid start of the year. Our volumes to date are in line with our expectations with healthy brand mix. In South Korea, we estimate that our total market share declined by approximately 220 bps in full year '20, more than half of which was driven by channel mix shifts, mainly resulting from the COVID-19 pandemic. We have adapted our commercial actions and invested in our innovations. As a result, in the growing in-home channel, we grew share year-on-year in full year '20 according to Nielsen. In the on-premise channel, while we estimate that we lost share for the full year, our share improved throughout the year with a share gain in the fourth quarter, driven by the increasing momentum of costs. While we're cautiously optimistic about overall market conditions, we're excited about our national launch of HANMAC and continued innovation with costs to accelerate the recovery of the industry and our business in the country. In India, although the impact of COVID-19 pandemic was significant for the full year 2020, our volumes improved consistently quarter-over-quarter after the second quarter. Budweiser became our biggest brands and grew market share for the year by our estimates. We've also activated additional strategic initiatives to fuel the growth of our super premium brands and non-alcoholic products. Even amidst the COVID-19 pandemic, we continue to invest in the growth engines of our business across APAC. In China, we focus on premiumization, commercial expansion and digital. First, for premiumization, we have 3 strong pillars for growth: super premium, premium and adjacencies. In super premium, we'll continue to scale up our 3 champion brands, Corona, Blue Girl and Hoegaarden, which already have a meaningful base. We are also accelerating the growth of our craft and specialties brands such as Goose Island and Stella Artois. In premium, for Budweiser, we will invest in line extensions to expand its reach to even more consumers on different occasions. In adjacencies, we are piloting various innovations, such as Mike's Hard Lemonade, to set a stage for further premiumization. Secondly, in terms of commercial expansion, we continue to deploy our China expansion model to grow in select strategic cities. We are also investing to expand in the in-home channel and continue leading e-commerce. Last but not least, digital transformation remains a strong focus for us, is still relevant with our consumers and expand our competitive advantage in the fast-growing digital space. For example, we launched BUD SPACE, our omni-channel digital consumer loyalty program as one of our strategic initiatives to build even stronger connections with consumers directly, already reaching 13 million Budweiser fans by the end of last year. DraftLine, our in-house marketing agency, analyze consumer sentiment and identify consumer trends in each market. This analysis has enabled us to be more agile, relevant and cost-effective with our marketing campaigns, even with the fluid market conditions during COVID-19 pandemic. In South Korea, we remain focused on our market share recovery in the near-term while investing behind our brands, innovations and outer market for sustainable long-term growth. In India, Vietnam and Southeast Asia, it is our strategic priority to grow for premiumization and value-accretive geographic expansion. Now I would like to take a moment to give you an update on ESG before turning it over to Gui for the financial results. Our commitment to the communities where we operate and the ESG topics that support them is stronger than ever. In 2020, we look for ways to contribute to our communities during the COVID-19 pandemic, while making significant progress on our long-term commitments. We have several highlights I would like to share. Regarding climate action, we've contracted to purchase 100% renewable electricity for the Ziyang brewery, the first in the Chinese beer industry to accomplish this important milestone and set a benchmark for future breweries to follow. In terms of water stewardship, we are actively involved in building water storage structures such as check dams and have created approximately 10 million hectoliter of groundwater recharge at high-risk water shed sites in India. We also launched a Diversity & Inclusion council that is co-chaired by myself and our Chief People Officer. This council provides a centralized platform to champion D&I initiatives throughout our company while providing practical training and knowledge sharing sessions to our colleagues. Additional details of our ESG goals and progress can be found in our press release and ESG reports to be published shortly. We are dedicated in building a company with sustainable, long-term growth that positively impacts our communities. I'll now pass it to Gui to take you through our financial results for the fourth quarter and full year 2020. Over to you, Gui.

Thank you, Jan, and good morning, good afternoon, everyone. Our results in the fourth quarter vary by countries, there are different stages of the COVID-19 pandemic. Our volumes decreased by 2.6% in the quarter, as growth in China was offset by the continuing impact from the pandemic in South Korea and India. Full year volume declined by 12.1%. In Q4 2020, revenue declined by 1.6%, while revenue per hectoliter grew by 1.1%, driven by revenue per hectoliter growth across our key markets, partially offset by country mix. For the full year, revenue declined by 12.4%, with revenue per hectoliter declining slightly by 0.3%, mainly driven by the COVID-19 impact of the premium on-premise channels in China earlier in the year. Cost of sales in the quarter decreased by 2.5% and remained stable on a hectoliter basis. For the full year 2020, cost of sales decreased by 10.1%, but increased by 2.3% on a hectoliter basis, mainly due to loss of operating efficiencies related to the COVID-19 pandemic across the region. SG&A decreased in the fourth quarter as the higher commercial investments in China was more than offset by savings in South Korea and India. Savings in SG&A for the full year was a result of additional cost efficiencies in the throughout the year. Other operating income decreased significantly by 35.7% for the full year and 23.9% in Q4, mainly driven by lower asset divestments. Normalized EBITDA for full year 2020 decreased by 23.7%. In Q4, the normalized EBITDA decline of 3.6% for the group was mainly driven by the significantly higher comparable of other operating income in APAC West, while APAC East grew its normalized EBITDA in the quarter by 11.7%. Amidst a difficult year of 2020, I appreciate our teams for the strong discipline in cash management. Our net cash position increased by $387 million as compared to the end of 2019 to approximately $1.3 billion at the end of 2020. Our recommended dividend per share increased from $0.0263 in 2019 to $0.0283 in 2020, given our strong track record in cash generation and the recent momentum of our business, while we continue to invest in our growth initiatives. So with that, Jan and I are here to answer any questions you may have.

[Operator Instructions] Our first question is coming from Lillian Lou from Morgan Stanley.

I have 2 questions, 1 on China, 1 on Korea. So for China, yes, obviously, the premiumization trend continues. In particular, for 2021, Jan discussed a lot about the high level strategy. And we are seeing all the major brands are investing higher in the premium category. So how do we see we're going to do in 2021 as a strategy for premiumization and also how to balance volume growth and margin if compared to 2019's level. That's assuming for 2019 is more kind of a normal level. So that's for China. And the second, for South Korea, we saw cash had better momentum in fourth quarter. What's the plan to keep it up in 2021? And also for the whole market, it has been under some pressure for -- in the past 2 years. So how do we see the premiumization trend in the market? And what's our pricing strategy in South Korea for 2021?

This is Gui. I'm going to take your first question on China, and then I'm going to pass to Jan, so he can talk more about Korea, if that's okay. But yes, I think you saw in the press release, I think we are -- we experienced good business momentum in China in Q4. We finished the quarter with positive volume, even though, again, we had basically a December with much lower inventories compared to the previous years due to the later CNY of 2021, right? But even though, again, we finished with good momentum, good premiumization, good brand health, and of course, good volume growth, even though, again, we have tough comps in the last time, the last year, right, but given the CNY. We continue to see the momentum in the first 2 months of the year, as we also said. And of course, we have basically great commercial plans and ambitions for 2021, right? We'll continue to invest, right, in the premiumization, which for us is key, and we have been vocal about that. Price premium, we have to invest ahead of the curve. We have to continue to maintain the right route to market, right, the right wholesaler base. Execution is key. So we'll continue to invest in that priority with Budweiser in the premium segment, and of course, with our super premium portfolio, right? But also, as we also said as the business regain momentum, we will continue to invest in the commercial expansion and digital transformation initiatives that we believe that will fuel the growth of our business in the upcoming years. So with that, I think, again, we are quite optimistic about our commercial plans this year. We're happy with our portfolio of brands. And of course, to make sure that we continue to win in the import premium, super premium segment, we'll continue to invest in our brands to make sure that not only we extend and gain share of segment with our portfolio, but also we expand to other provinces and regions in China. Also in 2020, just FYI, we had a good year for innovation across different price segments and styles, as you probably saw. So we launched 2 important innovations in the summer. First, we launched Bud Light in Guangdong, right, with a differentiated proposition than our Bud Red, right, and Budweiser brand and that will help us to further grow our leading position in the premium segment in the south. And in the Core+ as well, we launched Beck's Light in the summer, which, again, will add to our having, have increased the portfolio, being an important innovation for the future as well, right? So again, I think in a nutshell, right, our priority is, of course, to continue to show sustainable long-term growth. We'll continue to invest in our brands in the upcoming years and 2021, especially as the business returned to normal levels after the restrictions of COVID-19 pandemic, of course, there again, which is basically what we're experiencing in most of China today. At the same time, of course, as we always have mentioned, we'll continue to apply our cost connect win mindset to reduce indirect overhead costs and to continue to source from that to invest in our brand, to invest in our go-to-market and in our commercial priorities. So with that, I'm going to pass to Jan, so he can talk about for Korea.

South Korea, you're right, we have seen better momentum behind costs in the fourth quarter. As you know, Cass our #1 priority, right, in South Korea, and it was as you probably know, as a business, we've been gaining share in 2020 in the in-home channel, but we estimate that we lost market share full year in the on-premise. However, every quarter-after-quarter, we strengthened our position. And it has been great to see in the fourth quarter that we gained market share in the on-premise, driven by the cost performance. We also have some quite strong commercial plans that were supporting that. We had a campaign with EXO-SC. She is one of the K-pop bands from Korea, really investing in our brands and targeting the young adults. And we also launched the family of Cass with new variants like Cass 0.0 in the in-home channel. Also in e-commerce, which is a first so that we can expand costs into new occasions. On pricing, what is interesting to see is that we are launching a pack price strategy in South Korea. You probably know that in South Korea, channel mix is actually positive when the in-home grows. So we are focused a lot on pack differentiation in-home channel in retail. And specifically behind cans, we already did some innovations recently in the market there. You should expect to see more because we want to expand the reach of Cass in different occasions using different pack types and pack sizes. And we believe there will be a significant support for our revenue management strategy in South Korea for the years to come.

And also, I want to take the chance to thank Gui for the past 2 years help and also best wishes to your new tasks.

Our next question is coming from Lincoln Kong from Goldman Sachs.

So 2 questions. First one is on China. I think we're talking about the Chinese New Year trend is in line with our expectations with favorable brand mix. But actually, I just want to clarify, so what is our expectation for 2021? For Chinese New Year, how does it compare versus 2019 level? And is there any difference in terms of the different channel? So for full year '21, are we expecting our -- should we expect that the overall profit level for China to recover to the pre-pandemic, i.e., 2019 level? That's the first question. Second one, in terms of our general motivation for our internal team and the management and sales team. I think in 2020, we have a pretty a difficult year because of the COVID. So obviously, for '21, we are prepared for a strong rebound. And how are we internally more motivate our team? I understand we have some key personnel changes early this year. Are we expecting more for our middle level China management? And what are the key different approach we think for '21?

So when you look at our China business, obviously, the situation remains fluid, right? We are happy with the momentum we have seen in the business. We have seen strong progress in our performance, and we finished the year on a significant market share growth of 140 bps. And we've seen that momentum carry forward into the new year, right? So we are -- we're pleased with the CNY campaign and the results that we see on a year-to-date basis. And of course, we're almost at the end of the first 2 months, right? So we have a pretty good visibility on where we're at. So when we look at 2020, really, we have seen an increasing momentum since April already, right? So after April, essentially, our business has progressed significantly. And really, when you look at last year, if you combine Feb, March and April, it explains more than 100% of the drop that we had in 2020, meaning that all the other months combined, the business was growing healthily. When you look at our volumes to date, they're in line with our expectations. So it's a healthy brand mix. And you see that our commercial actions have really worked very well as we looked at the change of the travel trends between the different provinces. Comparing to 2019, you would have seen that, as usual, we don't give specific guidance on the volumes but it's quite clear that we are excited with the momentum we've seen at the end of last year and the beginning of this year, and we will continue to invest behind our brands, in line with our growth expectations. Of course, 2021, it continues to present uncertainties, right? So it's -- I mean, we've seen in the last 2, 3 months, even in a country like China that is very well in control of the pandemic, generally speaking. There were... [Technical Difficulty]

Ladies and gentlemen, please stay on the line. Your conference will resume shortly. Ladies and gentlemen the conference has resumed. Presenters, please continue.

Sorry, everybody, for the technical hiccup. So let me cover the second question of Lincoln. And part of that, of course, comes back a little bit on China, and then I'll add on South Korea. So on the China business, we are very excited with the business prospects that we see. We've seen an increasing momentum since April 2020 and a strong CNY campaign in 2021. So we see market share growth in Q4. We see the first 2 months of the year, in line with our growth expectations. And we see a positive brand mix. We see the premium segment back to mid-single-digit growth. We're quite excited with the prospects for our business in China. We also believe that for further premiumization, we have the right portfolio and assortments to win. And as we know, the premiumization has a long runway to go in China. Budweiser, of course, is our main brand, but we have a full portfolio in the super premium and specialties brands that we expect to continue to drive further premiumization in the country. We brought some changes in line with our succession planning in the China business. I think you were referring to that Lincoln in your question. So we promoted Luke to be the Chief Sales Officer for China. Luke is Chinese, and he's been with our company for 12 years. He used to be, amongst others, the President for Guangdong and then the VP Commercial for the China business. So plenty of experience, and we're very excited to have Luke as a Chinese to run our biggest business within Budweiser APAC. And we promoted John to be the President for the High End Ventures. And John Hsu has been 11 years with our business. He used to be to be President for the north of China. But then interestingly enough, he used to run the High End Company. So the reason we separated this sales responsibility in two, is that we wanted to have a specific focus on all the growth parts of our assortments, so the super-premium craft and specialties, adjacencies, they are all under John with a full dedication on the growth of this part of the assortment and the acceleration and the step-up of the growth. And of course, John, with his experience in the High End Company, is perfectly placed to focus on the high end company, but also on the smaller craft and specialty brands. And on the adjacencies, there we are piloting since 2020 to widen the occasions in our portfolio. Next to that, we invest in expansion. Geographic expansion still has a lot of opportunity to go and expansion in our -- in the growth channels, especially in-home and e-commerce. And then the whole digital agenda we are doing a significant step-up there because it's very strategic for us. It's the first time we reported on the first-party consumer data that we are capturing. Budweiser is only one of the brands that we have this strategy behind. And we already reported 13 million first-party consumer data in our internal data sets, and we expect it to grow significantly in the future. In South Korea, we're cautiously optimistic on the recovery for the overall economy. Because, of course, there, South Korea has had a more difficult last quarter where actually the biggest wave of COVID pandemic happened in the last quarter of last year. And actually, the restrictions have been quite big in terms of specially Seoul, where Seoul went to a Level 2.5 of the restrictions, while the rest of the country stated Level 2. But it essentially meant in Seoul that after 9:00 p.m., all restaurants were closed and groups were not allowed to gather beyond 4 people in 1 single group. We are pleased to see that, fortunately, the number of cases has been trending downwards. And the government has eased the restrictions in the second part of February of this month. And actually Seoul went back to Level 2, rest of Korea, back to Level 1.5. So we see progress there, and we're hoping that this will continue in the next coming months. We have very strong commercial plans for 2021 in South Korea. We've seen that Q4 has been a big progress versus the other quarters in the year. We've seen a consistent improvement in our market share performance in the on-premise. In retail, we already gained in the in-home channel across the whole year. But now in the on-premise to get to positive share was actually great to see driven by costs. And as you know, we have launched the national launch of HANMAC. HANMAC literally stands for HAN means Korean, MAC means beer. So it's a Korean beer. This product that we have just launched a couple of weeks ago has been piloted in some parts of the country successfully last year. And essentially, the ambition of HANMAC is to make a special beer for Korean taste, and we use 100% homegrown Korean rice as an ingredient for this new innovation. First reaction has been very strong by Korean consumers and our wholesaler partners. So we're quite optimistic about the potential of this lounge. It tested very positively with consumers, and the first reactions in the market have been strong as well. So we believe that continued innovation behind costs. We already launched a number of new line extensions. There is more to follow. But a combination of HANMAC and the cost innovations, we believe, will give us a much better performance and an incentive for recovery of both the industry and our business.

Our next question is coming from Euan Mcleish from Bernstein.

So my first question related to the relative impact -- yes, my question relates to relative impact of China travel constraints and the geographic mix on the business. So obviously, there's a big segment mix and a big profitability delta between Guangdong and Fujian and places like the Northeast, up in Harbin, et cetera. So can you help us understand the magnitude of this delta in terms of profitability between these regions? And how geographic mix impacts your financial performance? What I'm really trying to get at is to understand the extent to which these travel constraints are a positive for your business in the short term, but on a longer-term basis, really, how important is superior growth in the south for driving your long-term growth aspirations?

During CNY and even before CNY, you would have seen that, indeed, the COVID-19 outbreak were mostly concentrated in the North, Hebei and Beijing, and then the Northeast regions, and then Jilin and Heilongjiang. And really it was in December and then January 2021. More recently, fortunately, we've seen actually the whole situation in China under control. It's now been more than a week, almost without any domestic case in China. Obviously, when we saw these outbreaks in North and Northeast, we adjusted our plans very quickly because what he meant is that in these places, we typically have a lot of the population migrating back to the center and the North Northeast of the country to celebrate CNY in their hometowns. Now what happened this year is that to control the different migrations the government has recommended people and encourage them to stay in the city where they work instead of traveling back. And indeed, that has meant that tens of millions of people have not traveled back to their hometowns like they would usually do, and instead stayed in there -- in the more coastal regions where they work. Now to your point, when you look at our business, it's actually quite impactful, right? So from a volume perspective, we are actually quite big in the Northeast, right, in especially Jilin, Heilongjiang, our provinces that we are a clear market leader. At the same time, the South and Southeast areas are also very important for our business, and these are indeed much more premium areas, right? Because typically, obviously, the migrant workers have found work in the more prosperous parts and the coastal areas in China, where there is also a much bigger premium segment. And obviously, given we lead the premium segment in China, these are the parts of the business that are very strong for our mix so when we look at provinces like Guangdong, they have had a significant positive impact of this changed travel trends. Then after that, I would say Zhejiang, Shanghai, these parts of China, the coastal areas, for sure, have benefited. When we go to Jilin, Heilongjiang, you should expect that there's been a negative volume trend there. So that's why when we say that the volume trends were in line with our expectation. Behind that, you should expect a negative impact in the Northeast and positive impact on the other coastal areas of the country. And then a healthy brand mix, you can read behind that. And obviously, the brand mix would be healthy because of these different migrations and a better premium mix in the provinces where the people stay. Obviously, we were able to adjust our commercial investments in a quite agile way. Normally, we invest more in the Northeast because that's where people travel back to. We reduced investments in the South, typically. We, of course, change that very quickly when we saw the outbreak and the trends of population shifts as a consequence. And that's why we were able to have a very successful CNY campaign and a very solid start of the year.

Okay. Fantastic. That's helpful. My second question relates to price mix in China. So obviously, you -- in Q4, you delivered some pretty solid premium volume growth, but the price mix was pretty soft in Q4, just about 0.4%. So what's driving this softness in price mix? What are you able to do to improve it? And what needs to happen over a longer-term for you to get back to that kind of mid- single-digit price mix run rate that you used to deliver, if indeed, can you get back to that run rate at any point?

Yes. Good question, Euan. For this one, I'll need to go like a touch technical to explain a little bit how we report our sales rebates. So when we report, we report net revenue and net revenue per hectoliter. And of course, the net revenue is the subtraction of the gross revenue by the sales rebates. And our gross revenue is reported based on what we call sales to wholesalers, our shipments wholesaler partners. The sales rebates, on the other hand, we pay to the wholesaler based on their sales to retailers. So essentially, when you have a quarter where we reduced significantly the inventory, that will have a significant impact on the net revenue per hectoliter because we pay the rebates based on the sales-to-retail, which were healthy, right? We saw a very healthy underlying trend of our brands and our premium brands back to mid-single digits growth. But our STWs, which is a sales-to-wholesaler, the shipments were actually lower than the STRs because we have reduced the inventory level, mostly because of the 3 weeks phasing of the later CNY. So inventory levels at the end of last year would have been significantly lower than previous years because of the CNY phasing, which in turn results in higher rebates, which, of course, results into a lower net revenue per hectoliter, which would have eaten part of the brand mix positive, that is mid-single digit growth would have caused. If you look at kind of the short, medium term and long term, we see premiumization still as a key driver for net revenue per hectoliter growth. We saw that our portfolio is healthy in the fourth quarter, mid-single digits premium, super premium growth. So we're quite optimistic about our revenue per hectoliter growth in the future and again, mostly driven by premium mix.

If I can just add to that, Euan. I think that the impact of the inventory reduction, right, and again, the payment of rebates based on sales to retailers depending on this reduction of inventory in Q4, that impact is even bigger just given the size of the quarter, right, for our business, which, as you know, Euan it's one of the smallest quarters that we have in terms of sales to wholesalers, right? So the impact can be even higher in the fourth quarter of the year.

So just to clarify, if you took rebate out of the -- out of both parts, of the numerator and the denominator, would you, would you get back to a kind of mid-single-digit underlying growth rate, price mix growth rate?

Yes. We didn't disclose that number, Euan, but that revenue per hectoliter will be much better than the 1% that we disclosed for China. So that number was not disclosed, but that was, by far, the biggest impact, biggest driver that we had in revenue per hectoliter for APAC West and China in particular.

Our next question is coming from Mavis Tay from DBS.

I'm just wondering that as many of us have become increasingly health cautious, especially after COVID-19, what could be some of the strategies that we might work on to ensure a sound long-term growth in terms of product innovation, marketing and channel mix? Say, do we have some expectations on our proportion of sales to be coming from alcohol-free products or maybe some light beer, like 3 to 5 years down the road? And then my second question is, is it possible to give us more color as to when you think we could regain a normalized EBITDA margin close to the 2019 level? And could we also have some guidance on CapEx and effective tax rate for 2021, please?

I'll take the first one, and I'll ask Gui to get in more details on the second question. So to answer this question is a very good one, right? We know health and well-being is one of the major trends around the world. And even with our parent company, we are tracking this very closely. And what is interesting when you look around the world is that our market maturity model is very helpful to look at what speeds to these different trends play in the alcohol category. And of course, health and wellness has different speeds of impact in different categories around consumer spend. And so we use our market maturity model to look at alcohol specifically. So when we look at the more mature markets, I would say, health and wellness is a significant trend. And when you look around the world, for example, the nonalc, for example, nonalcoholic beers have really lifted off mostly in the most mature and most developed markets around the world. When we think about for example, Seltzers or other products that have explicit kind of health being claims of either zero sugar or other health claims, they also so far, have seen a lot of success in the most developed market. So obviously, we are tracking this very closely. A couple of examples, right, in South Korea is one of the most developed markets within Asia. There, we have just launched last year, Cass 0.0 as an important innovation in-home and e-commerce channels because we believe South Korea is ready for a step-up and an acceleration for the non-alcohol positions because of the level of maturity of the markets and the trend we expect versus health and well-being in alcohol. So today, consumers in South Korea can actually already taste a great tasting, 0.0 alcohol beer. Because as you know, we have quite a good technology to make sure a 0.0 product really tastes like a full beer. An exception in here would be India. India is in the lowest maturity models markets. So you would not expect us to go for nonalc necessarily there but the reason India is an exception is that there is a very strict regulation at the state level. And actually, there is a limitation in the number of licenses that are able to sell alcohol. So we see India as an opportunity to gain more distribution by selling non-alcoholic products. So about 2 years ago, we launched Budweiser 0.0 in India and is doing quite well. And so last year, we launched additional non-alcoholic products like Hoegaarden 0.0. So now we have a full assortment with different flavors and different offerings in India to be able to build distribution on a much more significant basis and go to different channels where alcoholic products are not allowed to grow. In China, we expect these trends to come in the future. It's all a matter of doing the right timing. This year and last year, we've been very focused on launching innovations, on-line extensions of Budweiser to speak to different occasions and to extend our premium and super premium portfolio into different occasions within alcohol in the first phase. I have little doubt that nonalc will follow in China in the future, but we have not done as yet within our portfolio, at least not at scale. And when we look at these trends, what we typically do is that we use our strong route to market and distribution across China. And we can test and pilot different propositions at a very small scale, literally with 10 or 20 or up to 100 different outlets and see how consumers react. And of course, today, e-commerce is a great forum and a great platform to test innovations on smaller scale, and that's what we're doing with some of the more progressive kind of concepts and ideas that we have. And of course, we have the advantage of all these countries. That are parent companies active in that we can bring different propositions and pilot them in China in a smaller scale. So we expect to see quite some movement there in the next coming years. So with this, I'll hand it over to Gui for the margin question.

Yes. I think a good question on the margin side. I think we have been quite vocal about, especially during the IPO but afterwards as well that our premiumization has been and will continue to be the main driver for margin expansion, right, especially when we look at the size of China in Bud APAC, right? And we believe that in the end of the day, premiumization trends across the region, not only in China but across the region remains intact. And as I mentioned before in my previous answer to Euan's question, we'll continue to invest in both premium, super premium in our countries -- in our main countries, and lead this segment in Asia and Pacific region. So when we look at some examples of that, we can take a look, for example, in China. As Jan mentioned, right, with the business recovering momentum, we're able to deliver very good Q3, but a very solid Q4 in premiumization line. Basically, we achieved mid-single-digit growth for premium and super premium combined in the quarter. In Korea, which is a developed country, as Jan also mentioned, and of course, as we disclosed in the IPO, has only 25% of its market at that time in share of segment for premium, super premium. We believe there is tremendous opportunity for premiumization in Korea, right? And we already lead the premium segment there and continue to grow market share in the last few years according to our estimates. So again, another key country for us to continue to drive our premium, super premium agenda, as we know, based on the market maturity model that the country will continue to premiumize. And for the first time, we also disclosed in India that Budweiser remain extremely strong Budweiser, the premium brands that we have in the country remain extremely strong in 2020, even amid, of course, a very difficult year with other restrictions and grew market share in the year and became the biggest brand that we have in our portfolio in India, right? So of course, I mean, premiumization will continue. The position will continue in the region. It's key for us to win. And that, combined with our operational leverage mindset we believe the margin expansion will continue to increase in the upcoming years. Of course, 2020 was an exceptional year, right, given the operational deleverage that we suffer with the volumes decline by more than 10% in the region, right? So of course, with that, we have a significant impact in the bottom line. But of course, with the pandemic restrictions going away and the situation improving, we believe that we will be able to continue to deliver positive operational leverage in the region given, of course, our cost connect win mindset. I think the second point that you brought was on the CapEx side. So CapEx, again, we don't give guidance for CapEx on an annual basis. But basically, if you look at the 2020 results, you're going to see that more than 90% of the CapEx that we spent was in APAC. And again, the main reason for that was the faster recovery of China in the size of the business. You remember that, especially after April, as we said before, our business recovered strong. And basically, we're able to deliver the biggest month ever, right, in the summer, in June. And of course, with the business returning very strong, we put money in returnable CapEx, new bottles, kegs, pellets, et cetera, et cetera, so we could support our commercial expansion and commercial growth, right? We continue to focus of course, on the commercial logistics investments to support the momentum that we have in the business, right? In terms of footprint, as we also said before, we're quite satisfied with the footprints that we have in -- right now in our countries, especially in China, right? So we're able to deliver significantly volume growth with the current footprint. So of course, our investments are going to be much more towards strengthening our existing footprint, either, of course, on the technology side or, or to improve and to deliver cost efficiencies, but much more on the capability side, of course, to support with the big innovation agenda that we have ahead of us. And I think that the last point was the -- on the ETR, and you're right. In 2020 full year, we had a high ETR compared to historic levels. So normalized ETR for the full year was 39% when you compared to 32.3% in full year '19. The main impact for the difference, it was basically twofold, right, but the main one was the higher dividends that we announced. So probably, you saw that we announced $375 million of dividends or $0.0283 per share, higher than the number in 2019. So a much higher dividend on, of course, a much lower profit before taxes given the impact of the pandemic, and as I mentioned before, the operations deleverage in our bottom line. And also the country mix, country mix plays a very important role in the ETR in 2020. And of course, some of the countries that are in growth stage, as India, for example, suffered significantly due to the COVID-19 pandemic, right? So the ETR at the end of the day, on a reported basis was 42%, and the difference between the 42% and 39% are actually the 41.9% and the 39% was the additional tax expenses related to the tax audits in our business in South Korea, as we disclosed in the H1 results of last year. And then when we think about the future, we don't give guidance on ETR, right? But if you just take the 2 biggest impacts that we just mentioned, which is basically the withholding tax on the on a much lower PBT and the country mix, right? As soon, of course, as the situation normalizes in the region, the COVID-19 pandemic normalizes in the region, we believe that those 2 impact will go away and we'll alleviate, of course, the pressure on ETR, and we could go back to better levels, historical levels as before.

[Operator Instructions] Our final question will come from the line of Chen Luo of Bank of America.

I've got 2 questions. First, I think a lot of investors have concerns on cost inflation in China. So what's our view on the future cost trends? As we use 12 months forward hedging, do we expect cost pressure to rise by the latter part of 2021? What measures are we going to take to mitigate the pressure such as price hikes or mix upgrade or cost control? So this is the first question. As for the second one, with regard to the capital allocation, inorganic growth has always been one of our key strategies. Is it fair to say that ASEAN will continue to be a focus area for inorganic growth? Are we open to different kinds of opportunities such as controlling stakes or minority stake? In whatever cases, are we aiming to play a very active role in strategies and operations of target companies, if any?

If you don't mind, as this is my farewell call as the CFO of Bud APAC. I'm going to take the mic here and answer your last 2 questions, very good question, right? I think the first one, of course, related to cost inflation, right? We see, of course, several players being vocal about this. And you're right, we do have a 12-month hedging policy, which allows us kind of to basically set our budget and look for initiatives, right, to mitigate any potential cost headwind that we're going to have in any given year. And this is, of course, what we did. So we do see some pressure on the commodity side, especially on the raw materials side, less on the packaging side, but especially on the raw materials side, we do see some pressure there. But of course, we have a strong initiative to try to offset that, right, basically, first one, as we always mentioned, right, leveraging the global scale of our parent company of ABI and the Global Procurement Officer that ABI has. And of course, how we connect with the parents on a stand biologists matter to deliver a better contracts, right, for commodities, especially, right? And also allows us to adjust sourcing options, right, as needed, given, of course, the ABI is a global company and operates in several different countries, right? So again, we are confident that this will not play a very big impact in our margins for the next year. Our hedging policy, as you mentioned, allows us to have some certainty on that. Of course, we're not able to hedge 100% of our COGS base for obvious reasons. But we are confident that the initiatives that our supply, logistics and procurement team will be able to mitigate most of the commodities pressure that we have in 2021. And I think that your second question, Chen, was on the inorganic growth, right?

Yes, that's right.

I mean, we never hit at that one of the reasons for basically our IPO was basically the creation of buddy pack, right, the creation of this company and have this local equity rights in Asia and Pacific. So of course, that will -- that is and will remain one of our big priorities, strategic priorities going forward and again, we believe there are tremendous opportunities ahead of us, especially again in the region of Southeast Asia, as we mentioned before, right? Of course, that all every single opportunity will be evaluated with strict financial discipline. As we always mentioned as well, we believe that M&A is a core strength of our group, and we'll continue to look at every single opportunity with a lot of financial discipline, but we believe, again, that the opportunities are there. They are compelling, especially when you combine the local presence and the local expertise of the players with our premiumization, know-how with our best practice in terms of delivering efficiencies in supply. So we believe that, of course, there's a tremendous win-win for both parties when we look at that, right? We don't have anything to announce. We always said that as soon as we do, of course, we're going to announce. But just to wrap up, we never say never to any type of structure opportunity. So if the question is about only looking at controlling our minority stakes, we'll evaluate every single opportunity. Of course, that we believe that achieving control would allow us to deploy more our best practice. But again, I think we're open to analyze each situation on a stand-alone basis, and of course, as I mentioned before, with strict financial discipline.

Thank you, Jan and Gui, and we wish Bud APAC continued success going forward, and all the best to you, Gui, in your future new role.

This concludes our Q&A session today. I would like to turn the conference back over to Mr. Jan Craps before closing the call.

Thank you, Jason. This is Gui's last call as the CFO, Bud APAC. I'd like to take this opportunity to thank Gui for his contributions to our company. He has been instrumental in many of our key strategic initiatives, including the listing of Bud APAC on Hong Kong Exchange. In addition, he builds a strong and talented, diverse team and instill strong corporate governance throughout our finance organization. Succeeding Gui, we will have Ignacio Lares joining us on March 1. He joined AB InBev in 2007 as a global management trainee. Ignacio has held progressively more senior positions in the North America and Middle America zones in a variety of functions, including CFO for LABA Breweries of Canada, and CFO for Middle America zone at based in Mexico. Thank you, Gui. I wish you every success, and welcome to the team, Ignacio. I look forward to partnering with you to continue to grow our business through premiumization, expansion and digital transformation, supported by strong financial discipline. Thank you.

Thank you, Jan.

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