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

Welcome to the Full Year 2021 Results Announcement Conference Call for Budweiser Brewing Company APAC Limited. Hosting the call today for Budweiser APAC is Mr. Jan Craps, Chief Executive Officer and Co-Chair of the Board; and Mr. Ignacio Lares, Chief Financial Officer. The results for the full year ended 31st December 2021 can be found in the press release published earlier today and available on the Hong Kong Stock Exchanges and Budweiser APAC's website. 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. 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 18th September 2019, the 2020 annual report published and other documents that Budweiser APAC has made public. I would also like to remind everyone that the financial figures discussed today are provided in US dollars unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature and unless they otherwise stated. Percentage changes refer to comparisons with the same period in 2020. Normalized figures refer to the 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 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 of the full year 2021 results can be found in the press release published earlier today. It is now my pleasure to pass the time to Mr. Jan Craps. Sir, you may begin.

Thank you, Anna, and good morning, everyone. Thank you for joining our earnings call. 2021 was a year with strong results. We delivered a double-digit top line and bottom line growth and increased our market share, thanks to the success of our strategy and the resilience of our colleagues and partners. While each market has been recovering at a different pace throughout '21, volumes grew 8.3% as we consistently outperformed the industry, especially in China and South Korea. Revenue per hectoliter grew in all of our key markets, driven by premiumization, increasing by 6.1% versus 2020. We delivered a strong top line growth of 14.9%, resulting in a normalized EBITDA increase of 27.3% and an EBITDA margin expansion of 308 bps. On that note, let me share some highlights from each of our key markets as well as some recent ESG developments. Let's start with China, where we have seen very strong growth. Our disciplined commercial execution delivered an 80 bps market share gain in 2021, in addition to double-digit revenue and EBITDA growth in both the quarter and the full year. This result was driven by continued premiumization and supported by a well-defined brand portfolio approach. From a large brand portfolio, we have selected 6 mega brands on which we are focused to scale and address evolving consumer preferences across various drinking occasions. First, we have Budweiser, the icon for premium and the number one premium brand in China, which grew strong double digits and which will continue to lead and shape the premium segments. Then we have Budweiser Supreme, purpose built to provide a differentiated experience for premium Chinese restaurants and celebratory meal occasions, which grew by more than 50% in 2021. Laying the foundation for premium, we have Harbin Core+, leading consumers from Core and Value up to the Core+ segment and underpinning the route-to-market to expand our premium portfolio towards channels and regions. Finally, we have Corona, Blue Girl and Hoegaarden in our super-premium portfolio, which also grew by strong double digits as we expanded in the cities with higher disposable incomes. Innovation continues to be an important driver of future growth as we target more consumer segments and different drinking occasions. In addition to Budweiser Supreme, we cater to the growing SHEconomy with Hoegaarden Fruit variants and have seen the volumes more than double in 2021. In the Beyond Beer category, we increased the number of distribution points for Red Bull by double digits, while also making an investment in MissBerry, a fast-growing ready-to-drink flavored wine start-up, targeting female and Gen Z consumers. In digitization, our B2B platform, BEES evolved significantly in 2021. More than 500,000 customers have adopted it straight marketing investment and digital engagement module. Moreover, within the 2 initial pilot cities, around 10,000 stores are using the transactional functionality of the platform as of the end of last year. We plan to roll out BEES to 60 cities this year, which will support the acceleration of our premiumization and geographic expansion and unlock new business opportunities. Let me now talk about South Korea. We continue to accelerate market share gains quarter after quarter in 2021 despite continuous channel mix headwinds from ongoing COVID restrictions. Over the full year, our market share expanded by 129 bps, driven by our successful innovations, All New Cass and HANMAC and supported by double-digit growth in Premium. In India, despite the market being severely impacted by COVID restrictions in the first half of the year, our premium and super-premium portfolios grew strong double digits, which led to full year '21 EBITDA landing above pre-pandemic levels in India. Budweiser, which led our strong market share performance, crossed the double-digit market share milestone for the first time in the month of December. Finally, ESG remained an area of focus within our business and one which we continue to see as a strategic advantage. MSCI raised our ESG rating to A, marking the second consecutive year we see a rating upgrade in recognition of our continued progress across many ESG domains. Our Wuhan brewery officially became carbon neutral, the first brewery to do so in all of China as well as the first within the entire ABI global network. With our 2025 sustainability goals paving the way, we decided to take our ESG commitment one step further. We want to take this opportunity to also announce Bud APAC's commitment to achieving net-zero across our entire value chain by 2040, which we see as a significant step in building a more sustainable and inclusive future. And on this note, I will now pass it over to Ige to take you through our financial results in '21. Over to you, Ige.

Thank you, Jan. Good morning, everyone. As mentioned earlier, the improvement in operating conditions in the fourth quarter allowed us to resume the top and bottom line growth momentum we saw in the first half of 2021. In the full year, revenue grew by 14.9%, supported by a well-balanced volume and revenue per hectoliter growth. Volumes increased by 8.3%, while revenue per hectoliter grew in all of our key markets, increasing by 6.1% overall. This growth was the result of our continued focus on premiumization and the corresponding brand and pack mix impact that it drives. Cost of sales in the full year increased by 9.7%, mainly driven by the aforementioned volume increase. With strong cost efficiency initiatives and the benefit of our hedging policy, which minimize the impact of commodity price escalation on our results in 2021, we are able to maintain the increase in cost of sales on a per hectoliter basis to 1.2%, which was significantly lower than the commodity price headwinds over the past few months. We will remain focused on mitigating cost pressure as we see continued and perhaps heightened commodity price escalation and volatility in 2022. Normalized EBITDA increased by 27.3% as a result of our revenue and cost management initiatives, yielding a significant margin expansion of 308 basis points. Overall, profit attributable to equity holders reached USD 950 million in 2021, an increase of 85% on a reported basis as compared to 2020. Let's now look at our key markets in more detail. In the full year 2021, revenue and normalized EBITDA in China increased versus 2020 by 18% and 28.7%, respectively, with both exceeding pre-pandemic levels. Volumes grew by 9.3% and revenue per hectoliter increased by 7.9%, driven by premiumization via our successful portfolio strategy. In South Korea, our revenue increased by low single digits. Volumes declined by low single digits as the industry faced substantial headwinds from COVID restrictions. However, this was partially offset by the strong market share growth Jan previously mentioned. In Q4, we saw a notable rebound in industry volumes, while we significantly outperformed the industry, driving revenue, normalized EBITDA and market share to all exceed pre-pandemic levels. With a continuous focus on financial discipline, we are closing 2021 with a strong balance sheet. Our net cash position increased by USD 743 million as compared to the end of 2020 to USD 2 billion at the end of 2021. Our recommended dividend per share increased from $0.0283 in 2020 to $0.0302 in 2021, landing at a 41% payout ratio. This strong finish to 2021 has left us with the right foundation for continued growth and success in 2022 and beyond. This marks the end of our presentation. And with that, Jan and I are here to answer any questions that you may have.

[Operator Instructions] Our first question is from Luo Chen from Bank of America.

Jan and Ignacio, congratulations on the stellar Q4 results. I've got 2 questions on the COVID situation as we understand that COVID has remained a key swing factor for 2022. First of all, on China, how is the COVID impact on our sales different this time around versus 2021 or 2020? Is there any color that we can share regarding our on-trade sales trend in the recent few months? Have we observed that China has started to adopt a more flexible approach towards the COVID restrictions? And also what's our target for volume growth in China for 2022 and what kind of underlying COVID assumption have we adopted for our sales target? And secondly on Korea. Korea actually saw the sharpest surge in COVID cases recently. Meanwhile, the COVID restrictions have also eased. How can we measure the impact on the beer consumption and the overall consumer sentiment in South Korea?

Thank you, Chen Luo, and good morning to you. Thank you for your 2 questions. I think to start with China regarding COVID, you would have seen that in Q4, there continued to be some localized channel restrictions across different cities in China. Despite that, the industry still grew by mid-single digits, of course, also benefiting from an earlier CNY, which was 2 weeks earlier than the year before. If we look at October, for example, they were mostly outbreaks in Northwest, which led to the closure of the nightlife channels in several provinces and also some channel closures in Northeast in Heilongjiang and in December in Zhejiang province, which are for us 2 strong provinces. So there was some level of impact in Q4, but I would say generally much less impact than what we have seen in the third quarter. And despite this kind of limited impact, we still delivered a very strong performance, both in market share and top and bottom line performance in both the quarter and the full year. When we look at the beginning of this year, we continue to see some sporadic cases across China, I think in the beginning of the year, more of Tianjin, Beijing, Henan province, recently in Jiangsu, Shenzhen and now also in Wuhan. However, we do see the business impact is less than we would have seen in '21 and for sure, if we compare to the year 2000. What we see is typically in areas where we see a COVID impact, we do see nightlife and some on-premise channels where people gather impacted due to local restrictions and it takes in our experience between 4 and 6 weeks for the channels to normalize. However, we are encouraged because we do see the evolution of the zero COVID policy to a dynamic zero COVID policy in more and more cities having a positive effect in terms of how the restrictions impact both populations and the business as a consequence. Because essentially with a dynamic zero COVID policy, really the purpose is to identify the new infections as soon as possible and essentially cut off the transmission chains. So when there are local cases, maybe 2 years ago, there would have been whole cities impacted and maybe last year would have been whole district of the city. If I look at a city like Shanghai, we've had situations with some cases locally where only one block, one building or even one store has been declared a medium risk zone. So we see the level of granularity that the government is able to manage. This dynamic zero COVID policy is actually quite strong and quite successful in terms of reducing the business impact of the situation. Of course, when we look forward, it is difficult to predict, right, what will happen in the COVID situation, especially with Omicron variant being more contagious, but we are encouraged by the higher vaccination degrees in China, right? The vaccination rates are above 85% now. And also this dynamic zero policy that I just explained. When you look at the recent trends in volume, of course, Chinese New Year was about 2 weeks earlier than the previous year. By the way, this year or next year, it will be again 10 days earlier than this year. And of course, that always drives a more positive impact in the fourth quarter. So when we combine December and January, we still see a very strong CNY campaign. And when you take all of these things into account and you look at our volumes so far this year, our volumes are essentially in line with our expectations at the start of this year. So let me then maybe move Chen Luo to the Korea part of your question. I think in Korea, we see a different situation in that the number of COVID cases has been increasing quite significantly recently. So Korea is a country where, let's say, in the second half of last year, the restrictions in place had allowed the government to control the number of daily cases between 1,000 and 2,000, 3,000 cases per day. However, more recently, we see a sharp increase in the number of cases, driven by Omicron. And most recently, even more than 170,000 cases in the last couple of days. On the good news front, we do see that the number of critically ill and death rates remain stable. And actually, as you might know, also in South Korea, vaccination rate is very high, actually, more than 87% of the population fully vaccinated. And the ICU, the intensive care units occupation remains below 40% despite a very high number of daily cases. We are also encouraged recently that despite this increasing number of cases, the government has slightly reduced the number of restrictions. So still private gathering restriction of up to 6 people. But for example, restaurants and bar opening or closing time has now moved from 9 PM to 10 PM despite increasing number of cases. So we also see when people test positive that people who have been in contact with them, close contacts, if they're vaccinated and they test negative, they don't need to quarantine anymore. And on another front, if you test positive, the quarantine period has been reduced from 10 to 7 days. So we see some level of change in the restrictions put forward, some easing of the restrictions, which is encouraging us. And then on the broader front, of course, within that environment, we see our commercial strategy and our business results on the underlying trends very strong in South Korea. As I mentioned on the full year, almost 130 bps market share growth. So we actually see our commercial strategy very successful in South Korea in that context. I hope that answered your question, Chen Luo.

Yes, definitely. Congratulations again.

Thank you so much.

[Operator Instructions] Your next question is from Christine Peng from UBS.

So I have 2 questions. One is on the group level. The second one is specifically towards the Chinese beer market. So the first question I would like to understand is, is it more the margin outlook in 2022 in view of the surging cost pressure for the beer industry globally? The second question is specifically for the Chinese premium market. So you mentioned earlier that overall in the beer market, Bud APAC has gained share in 2022. But what about specifically for the premium and the super premium market? So can you elaborate the market share trends you have seen in 2021 for these 2 markets specifically?

Maybe the first question, let me pass it to Ige, and then I will take the second one. Christine, good morning, thank you for your questions.

Perfect. Thank you, Jan. Good morning, Christine. So I think let's start maybe with the margin question. Well, we don't provide, obviously, specific guidance on margin. I can share with you some of the drivers we have to manage, obviously, margin pressures, right, which include of course premiumization, first and foremost, cost efficiency initiatives and a revenue management strategy as well. So premiumization, as I mentioned, is the key driver for our margin expansion. Even despite the COVID volatility, the premiumization trend across the region remains intact and we continue to lead and grow in both the premium and super premium segments across Asia-Pacific, which is critical. To give you an example, if we were to look at China, both super-premium and premium grew more than 20% in the full year '21 and the weight of both segments with the premium and super-premium segments have been constantly increasing in our portfolio. And as we mentioned at a previous time, which is critical, right, the super-premium has more than 9 times the higher gross margin versus Core and Value and the premium more than 5 times higher gross margin than Core and Value. So of course, there's a significant margin accretion that we're able to capture as we drive consumers to do that trade up. Now of course, we're experiencing transitional headwinds from a commodity pricing perspective. And we've actually been mitigating that risk with several cost efficiency initiatives, right? So we execute these initiatives across functions. We look to minimize consumption, wherever possible to reduce the impact of cost escalations. So just to give you an example here, we lowered our water usage significantly by 22% actually versus the 2017 baseline, which also supports, of course, our efforts in sustainability, but has a meaningful impact from a cost perspective as well. Leveraging, of course, the global scale of AB InBev, we also have the flexibility to adjust sourcing options as needed, which helps us to offset cost pressures as well. And then of course, the hedging policy for raw materials, where we tend to hedge approximately a year in advance has been a significant driver. So if you think about it as a result of the time frame of escalations, our full year '21 cost of sales on a per hectoliter basis remained fairly stable at a 1.2% increase, so below inflation, as I mentioned earlier, despite the headwinds that come from the premium channel and package mix effects, obviously, as we grow our premium and super-premium brands. In 2022, we're seeing the impact of increased commodity escalations, the ones that, of course took place in 2021. However, the hedging policies have given us up to 12 months to plan ahead and build out cost management initiatives. And then, of course, we have a comprehensive set of revenue management initiatives to ensure that we're not solely dependent on cost initiatives to protect our margin moving forward. I'll pass it to you, Jan for the second one.

Thank you, Ige. So Christine, on the question regarding market share and then specifically premium, the premium beer segments, we are quite excited with our results in China. You would have seen they were quite strong, both on the quarter and on the full year. The quarter actually even accelerating versus the full year despite the H1 easy comps last year. So we see quite consistent market share growth in China. And when we look at the premium, super-premium portfolio, they actually continue to increase the share of revenue that they represent in our business. Budweiser grew more than 20% on the full year basis last year. If we compare to 2 years ago, pre-pandemic still grew by high single digits. And remember that Budweiser, even despite its scale today and the clear segment leadership, it's still well below 50% distribution in China. So we continue to see expansion opportunities. In the super-premium, portfolio also grew by more than 20% last year. If you combine the 2, as we mentioned in the previous calls, we estimate our market share within premium and above to be more than 45%. And of course, we drive the growth of these segments within the industry as we continue to lead and grow the segments. Our portfolio strategy, of course, is very important in that context, but also our route-to-markets. When you look at our portfolio strategy, we continue to invest in driving new innovations to expand our portfolio and also seeding and investing early in craft and specialty brands as we create more experiences for beer drinkers in China. Route-to-market-wise, we have a premium route-to-market that we've been working on since over 10 years now to essentially partner with strong wholesalers who have built their premium brand-building skills over-time and who are also capable of investing in the channels at scale. If you look at our total results, we grew about 80 bps market share in the full year. If you compare to pre-pandemic level, we grew 24 bps versus 2019. Q4, the last quarter was actually our strongest quarterly market share since the IPO and we actually grew market share in both channels, both in on-premise and in retail in the full year '21. I hope Christine that answered your 2 questions.

So can I just follow up with a very quick question. So you mentioned earlier that you have very high visibility in terms of the cost environment. So what's the forecasted cost inflation you are seeing for your company in 2022?

Yes, of course, Christine. So maybe the way I would respond to that is we know that commodity escalations, price escalations are in the double-digit range, and they have been for a while. Of course, there's volatility if you look at it now versus a few months ago, even actually on a week-by-week basis. But the way we kind of look at this is looking at using all 3 of the levers I mentioned before. So of course, hedging from a timing perspective, cost initiatives and revenue management initiatives to have a significant impact against that escalation. So double digits if you were left untouched, but of course, you've seen our track record and our Q4 results as an indication of how we manage cost of sales increases.

That is very clear.

Thank you, Christine.

Our next question is from Lillian Lou from Morgan Stanley.

Hey Jan and Ige, I also have 2 questions. First one is on China product strategy. Basically, that's a little bit of a follow-up on Jan's comment just now. What's the key priority of your resource allocation among products in 2022, especially after the good performance of Budweiser, the main brand and the super-premium? So what are the goals for these 2 categories in 2022? And also, how was the performance of Budweiser innovation so far? That's the first question on China products. And the second one is on Korea market strategy. How do you evaluate the performance of HANMAC in 2021 in South Korea? And also what's the target for HANMAC and All New Cass in 2022? How do we see the market dynamic changes impact your commercial strategy in the market?

Thank you, Lillian, and thank you for your questions. I hope you're doing well. On China, essentially, you know that we have a brand portfolio of more than 50 brands that we sell in China and our parent company more than 500 brands globally. So what we do is within this broad portfolio there is several brands with future potential, we actually focus on what we call our 6 mega brands. So the 6 mega brands that I mentioned a little bit earlier, basically, let me detail a little bit why they are important because actually they operate within our premiumization strategy and premiumization, we really see as the continued big driver for the future performance of our business. And actually, when you look in China, the middle-income classes in terms of number of households, we expect it to quadruple by 2030 versus today. And actually in the year 2030, when it happens, that would actually give China about twice the number of middle income households than the whole of the US. So it kind of give you a sense of how big the future potential of premiumization is in China. And that's just based on GDP growth expectations and disposable income growth in the different parts of China. So our 6 mega brands, if I explain a little bit in more detail, essentially, of course, the first and most important one is Budweiser. Budweiser is the number one premium brand in China, and it brings about half of our total revenues in the country. It continues to grow very strongly, right? So 20% growth in '21, the high single digits versus pre-pandemic. But also the second one, Budweiser Supreme was launched as a line extension of Budweiser, but is really focused on premium Chinese restaurants and celebratory meal occasions. So a very different kind of packaging, communication, positioning and also beer that goes very well with meals. And we've seen this innovation very successful. It actually got to quite a good scale in 2021 and it grew more than 50% versus 2020 with a small bottle expansion across China. Then second part is in our Core+ segment, we have Harbin Core+ is actually, if you look at the volume contribution, the second largest brand in our portfolio after Budweiser. And the role of this brand is that it's creating inroads for consumers to trade up from the Core and the Value segments into Core+. The brand has been growing high single digits in 2021 and it actually plays quite an important role to support a strong route-to-markets to prepare for premiumization. And then thirdly, it was kind of 2 Budweisers right, one in Harbin Core+ and then we have 3 brands in super-premium at scale. So we have Corona, Blue Girl, and Hoegaarden. These brands grew by -- all of the brands grew by double digits. Super Premium portfolio combines grew more than 20%, both in Q4 and in the full year of 2021. And on the innovation front, we innovated quite a lot on the Fruity variant in super premium because we want to target more female drinkers. And we know that this Fruity propositions, they please both male and female, but proportionately, we see a very good balance there with more exposure to female drinkers. So we innovated on Hoegaarden Fruity variants. And also for Corona, we launched a world first with Sea Salt Guava, so kind of a tropical fruity variance. If you look at Hoegaarden Fruity, that business more than doubled in 2021 versus 2020 and now actually represents more than 10% of the total Hoegaarden volume in China. So it's quite a simple approach, right, with 6 brands. It's simple as one plus 2 plus 3 because it's kind of one Core+ brands, 2 in premium and 3 in super-premium and that's really the main focus for our team to focus on the expansion and distribution buildup while of course, we continue to invest in innovations and in craft & specialty to identify the number 7, 8, and 9 brand for the coming years. So then maybe moving to your second question, Lillian, which was about Korea. Essentially, in South Korea, our 2 domestically focused innovations, which were All New Cass and HANMAC have been performing very well. Since we introduced All New Cass in the first half of last year, where we brought a new visual brand identity and fin bottles to the markets, the brand has been performing very strongly with market share gains in all channels, both in on-premise and in in-home, further strengthening its leadership position in South Korea. When we look at HANMAC, HANMAC being our Korean classic lager product, it actually further enhanced our brand portfolio because it is quite complementary to Cass as an easy drinking lager. HANMAC became the third biggest brand in Korean restaurants, which is an important channel for us and we see very good early results, right? We're about one year in the launch. Even though we were not able yet to fully execute all the launch plans that we have because of the COVID restrictions, for example, that sampling in retail or brand activations in on-premise have not been fully executed yet. So we believe there are further opportunities in the future to continue to build and expand the brands. We see both innovations have led to strong market share gains. So when you look at '21, we see that we have delivered market share gains in every quarter despite the channel headwinds due to the COVID restrictions. So overall, we had a gain of 129 bps in full year '21. And actually, Q4 was the tenth quarter in a row that we achieved market share gains versus the prior year. We see that we gain share both in on-premise and in retail, essentially because of the successful innovations on All New Cass and HANMAC, especially Korean restaurant channel, very successful, but also in retail on top of the double-digit premium growth that we have with our leading premium portfolio in South Korea. I hope Lillian, that answers your 2 questions.

Yes, Jan. Stay safe and take care.

You too. Thank you, Lillian.

Your next question is from Euan Mcleish from Bernstein.

I'll follow on with another question about Korea and then maybe pivot to China secondly if that's all right. So in Korea, I know that the beer excise taxes used to be adjusted for CPI at the beginning of April. And we've got kind of CPI running around 2.5% in January. Can you maybe talk a bit about the -- what you're expecting in terms of the excise tax revision magnitude and the kind of considerations that you have to take into account when you're thinking about passing this on to consumers? And then the second part of that question is really around kind of which mainstream brand pack channel combinations do you see the best opportunity for increasing pricing on? I saw that across the board, the international beer was up by 10%, pricing up by 10% in January. So are there specific mainstream brand pack channel combinations where you think there's a really strong opportunity? And then maybe I'll ask the China question separately, if that's all right.

Sure. Thank you, Euan. Good afternoon. Hope you're doing well. So on Korea, you're right. We took price on our premium brands in January and was indeed a price increase on average by 10%, mostly in the in-home channels and of course, they are mostly on canned packs, and that price increase took place on the 1st of January. For the context, right, we do see in South Korea that the industry has been experiencing quite strong commodity price increases across different categories, mainly aluminum, which we use for the cans, but also malts for the barley. And we are implementing, of course, on top of these revenue management initiatives quite some cost efficiency initiatives as well to mitigate the headwinds. As you probably know, difficult for us to give any pricing guidance. But I think maybe for context, since last year, the Korean government has implemented the specific tax system rights, which essentially adjust the excises on an annual basis based on CPI over the prior year. So last year, what we did is that in connection with this excise increase, we did an excise tax adjustment over our prices in our price to wholesaler last year early in the year. This excise adjustment system will continue this year, right, in 2022. And so we will continue to evaluate our pricing with the revenue management initiatives in the coming months.

Thank you, Euan. I think you have another question on China, right?

Yes. So I'm interested in the regional profitability of your business in China because it looks like these kind of periodic localized COVID restrictions are going to be a feature of doing business going forward for some time. So it would be really helpful if you can help us understand the regional profitability variances so that we can evaluate how these kind of swings in geographic mix are likely to impact your revenue and profit going forward. That would be really helpful.

Yes. Sure, Euan. So I think as we go back, right, since 10 years, we've been investing ahead of the curve in the premium segment and that gave us quite a strong presence, especially in the cities with high disposable income. So today, the Tier 1 cities and also the coastal cities, South, Southeast and East Coast. The profitability by geography is mostly driven by brand mix. So it's essentially provinces with a strong premium, super premium development will drive a significant more positive margin for us for that geography, but it's really driven by brand mix. So purely going by geography, it will probably be a bit misleading, but essentially, provinces with a strong brand mix to premium, super premium, which are typically South, Southeast and East of the country, they will have a disproportionate profit contribution for us. We are balancing though, more and more our expansion because we do see a very significant opportunity to accelerate our expansion across China because of the increasing disposable income across the different geographies and we have been investing quite a bit, right? You know that we have this expansion playbook with a city stage model and the city stage essentially are determined by the market maturity model combined with our market share position. So maybe just to do an update on that is that last time we talked about our super-premium expansion, where at the time we identified 31 cities for expansion in '21. Happy to say that we reached around 30% growth in these 31 cities combined. And these cities, again, are mostly coastal cities and Tier 2 cities. So we talk about Changsha, Chengdu but also, for example, Ganzhou, Suzhou. These are all cities that we focus on with our super premium expansion. So given the success we've seen, we are increasing the number of cities to 45, more than 45 cities in 2022. When we look at Budweiser, as I mentioned earlier, we're still below 50% numeric distribution on Budweiser, and we have a strong leadership in the premium segment. So we want to continue to expand the brand as well. Last year, we identified more than 50 cities for expansion. We also achieved more than 30% growth of Budweiser in these cities. These cities typically are more middle market maturity, but low market share for us. So think about Xi'an in Shanxi province or Handan in Hebei province or Neijiang in Sichuan province. So these are typically cities that are middle market maturity, but low market share. And given the success we've seen with our expansion strategy, we are now increasing the number of cities that we are targeting for expansion to more than 70. So last quarter, in Q4, we increased the number of sales reps by about 150 versus the year before in these cities, more than 200 brand promoters versus the year prior in these cities and we made about 5,000 new outlets customer by this expansion plan. And safe to say that given we are increasing the number of cities and the success we see in this expansion strategy, we are planning to invest additional resources to support the expansion in 2022 again. I hopem Euan, that gave you some context for your 2 questions.

Yes. Excellent.

Thank you, Euan.

Your next question is from Melody Zhou from CICC.

It’s Melody Zhou from CICC, Food and Beverage team. Congratulations again for such a surprising results. I have 2 questions, and I'm going to ask them one by one. The first question is about India. So you have mentioned a lot on the business in China and in South Korea. I'm wondering what's the latest market situation in India and how is your business performance? So this is my first question.

Sure. Good afternoon, Melody and good to hear you again. I hope you're doing fine. So regarding India, maybe to just describe the COVID situation there as well. In India, there has been a significant decrease of the number of cases in the last couple of weeks. So for context, a daily number of cases in India have increased with Omicron to more than 300,000 per day by the end of January. But in the last couple of weeks has dropped already to below 30,000 per day. India is one of the countries with high vaccination rates, right? More than 60% of the population fully vaccinated. So more than 1.5 billion doses administered and more than 90% of the eligible population has received the first dose. And in terms of hospital occupation has also been very low numbers, positivity rate very low in the last number of weeks. So we actually see that India is already beyond the Omicron wave that happened during the month of January. So as a result, even if, of course, in January, there would have been some impact of the Omicron wave on the beer industry. We have seen a gradual month-on-month improvement and retail essentially reopened now and more than 75% of the on-premise also reopened by now in the industry. We do see that India industry is still below pre-pandemic levels, different than some other countries. When you look at our business in India, it's been quite successful. Last year, we have seen double-digit growth, both in volume and in net revenue despite these restrictions that I described. Our EBITDA actually in India is now not only above last year, but also above 2019 level on a full year basis and in the quarter, of course. That's all driven by premiumization. So essentially, our premium and super-premium brands have achieved very strong double-digit growth, both in the quarter and in the full year. And the contribution of the premium and super-premium brands has been strongly increasing in our portfolio, driving very significant benefits in ESP in net revenue per hectoliter. Our most important brand is Budweiser. So of course number one premium brand in the Indian market by far, and it actually outperformed the industry quite significantly. For the first time in the month of December, it even crossed the double-digit market share mark, which is quite a magical number for the team in India. And maybe for interest, we also expanded on Budweiser in the non-alc segment. We already launched the non-alc beer version of Budweiser last year. And to the end of last year, in the fourth quarter, we also launched an energy drink, Budweiser Beats that brings the kind of high energy premium image of Budweiser into the energy segment. I hope I gave you some color Melody on India.

It was very helpful. And my second question is about digitization. So you have mentioned about the digitization a lot in the quarter. And how is your latest progress in this? What is your plan for this year 2022?

Thank you for the question, Melody. Digitization is actually quite an important strategic pillar for us, right? We put it at the same level as premiumization. We just don't communicate until we do it. It's kind of our approach. We don't want to over -- we basically want to under-promise over-deliver. Maybe to give some color on digitization on the sales end, we have been investing quite a bit in technology in the last 12 months with our own Bud tech team, where we in-sourced our development engineers to develop the right applications and functionalities. What do we want to achieve with digital sales is essentially 4 things. We want to sell more to more customers with a higher ROI and offering more services. So these are really the 4 things we want to achieve. So it's really not about cost efficiency alone, I should say. It's actually much more about top line growth, right, selling more to more customers with a higher ROI, offering more services. So we already scaled these to significant levels. So if you look at the part of BEES' functionality that drives pre-marketing investments and digital engagement, we've already more than 500,000 customers that are on our digital platform for their business. When we look at the transactional functionality, we have piloted it in 2 cities so far in 2021 and we have now more around 10,000 stores that are successfully using our transactional functionalities to place their orders with our wholesalers into our business. We have quite ambitious plans for BEES, right? So we are set to roll out in more than 10 cities in the first half of this year to reach about 60 cities by the end of the year 2022. So we're actually quite excited about this digitization program. Thank you for your questions, Melody.

There are some questions from the webcast participants. I will pass it on to Mr. Jan Craps to read out the questions. Please go ahead, sir.

Sure. So I see we have one question on carbon neutral. What are your initiatives in the carbon neutral and net zero front? So maybe on that question, I think the biggest kind of news we had last year was Wuhan Brewery achieving a carbon-neutral status in 2021. Why was that so important? Because this was actually the first brewery in the whole China beer industry to go carbon-neutral. And it was also the first brewery globally within the whole ABI group within our parent company, breweries. And as you might know, we have more than 200 breweries around the world. So this was actually quite a significant pilot and first brewery to achieve that and Wuhan Brewery is actually one of our biggest breweries in Asia. So it was not just a small brewery where we were trying, we actually went for one of the biggest ones and we're able to realize carbon neutral. Of course, increasing energy efficiency and renewable energy users has always been a very important part of our sustainability commitments. Because as part of our 2025 sustainability goals, we want to have 100% of our electricity coming from renewable sources by 2025. So on that path, we now have 3 breweries in China, operating in RE100, so 100% renewable energy. We have 7 breweries in China with solar panels and 6 more in Vietnam and India. And in South Korea this year, we will come online with the solar energy through solar panel installations that will take place in the next coming months. Beyond our own kind of footprint, we also work with our whole supply chain. So we actually inspire and encourage our suppliers to take part of our ambition and our journey on sustainability. One of our biggest suppliers, Huaxing Glass, they already now have 4 factories, glass factories using solar energy. So it's quite encouraging and we continue to motivate our suppliers to invest and also be part of this journey towards carbon neutral. Of course, with these 2025 sustainability goals paving the way, we now decided to take our ESG commitment one step further. And so really happy to take the opportunity to announce today that we have a commitment to go to net zero across our complete supply chain and value chain by 2040, building a more sustainable and inclusive future. So expect more news in the coming months and quarters. We will not stop with Wuhan, right. We hope this year to do at least one or 2 more breweries in carbon neutral and gradually basically convert the whole park to carbon neutrality as soon as we can. So I think that is the only question I have on the webcast, operator.

This concludes our Q&A session today. I would like to turn the conference back to you, Mr. Jan Craps for the closing remarks.

Thank you, Anna. So in 2021, we made significant headway towards our dream to become the most loved high-quality growth leader in beverage. In '22, we will continue to progress to our commitment to our 3 strategic pillars. First, we aim to lead and grow the category through premiumization and expansion. Second, we will digitize our ecosystem to accelerate both existing and new business opportunities. And third, we want to optimize our business to drive top line growth and margin expansion. And in addition, ESG will remain a key priority this year as we advance towards our 2025 sustainability goals and our 2040 net-zero supply chain goal, creating the greatest value in terms of commercial excellence, environmental resilience and social cohesion. So thank you very much. Stay safe and well, and I look forward to speaking to you all again. Thank you.

Ladies and gentlemen, this concludes today's results call. Thank you all for your participation. You may all now disconnect your lines.