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

Welcome to the Full Year 2022 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 2022 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange 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 obligations 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 2021 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 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 2021 full year. 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 2022 full year 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. We faced a challenging Q4 last year with extensive channel closures and reduced consumer mobility in China. However, our top line continued to grow over the full year, thanks to the resilience of our teams and the strong growth momentum and market share gains in South Korea and India. We also delivered full year volume, revenue and revenue per hectoliter expansion at a company level. Although operational deleverage in China and commodity price escalation resulted in a mid-single-digit decline in EBITDA. Before I hand it over to Iggy to take you through our financial performance, I will take a few moments to provide more color on each of our key markets. In China, Q4 was a challenging quarter driven by extensive channel closures and reduced consumer mobility while the COVID cases peaked. Our business was disrupted due to prolonged channel closures, especially in regions where our footprint is most concentrated. Our Premium sales channels were disproportionately impacted, especially nightlife venues and Chinese restaurants, which led to a double-digit revenue decline. On a full year basis, however, with respect to our premium and super premium portfolio, revenues were above pre-pandemic levels, and volumes grew by double digits in more than half of the expansion cities despite COVID restrictions. We continue to invest in our craft portfolio, expanding our [indiscernible] footprints with 3 new locations and adding BrewDog to our craft offerings. We also continue to cater to rising demand for new product offerings and differentiated drinking experiences such as through the introduction of Budweiser Brewmaster Reserve Rabbit limited edition to celebrate the Chinese New Year. On the digitalization front, our B2B platform, BEES has been expanded to more than 160 cities and accounted for more than 40% of our revenue in the month of December. Now I would like to provide some updates on the current situation in China. While the resurgence of COVID infections in December last year and January this year significantly impacted traffic in stores business recovery has been strong since February. We estimate that both the restaurant and nightlife channels across our footprint had almost fully reopened by the end of February. So in light of the current pace of improvement, we are optimistic about our business in '23 following a transitional first quarter. Turning now to South Korea. Full year volumes increased by high single digits, supported by solid market share gains in both on-premise and in-home channels with total market share increasing by 150 bps. Revenue expanded by mid-teens and revenue per hectoliter increased by high single digits, benefiting from revenue management initiatives. EBITDA grew by strong double digits driven by top line recovery. In India, we continue to outperform the industry with Premium and Super Premium revenue almost doubling compared to '21. India is now among the top 5 largest markets globally in volume for the Budweiser brands with the industry having recovered to above pre-pandemic levels. Before I wrap up, I would like to also take a minute to talk about the key ESG outcomes we have delivered last year. Over the full year, we reduced carbon emissions per hectoliter by about 20% across our total value chain compared to our baseline year of 2017. We reduced carbon emissions per hectoliter within our operations by about 50% against the same baseline year. And our Ginger brewer in China became our second carbon-neutral brewer in APAC. We have lowered our water usage to 2.20 hectoliters per hectoliter of beer produced across our APAC breweries, representing a 26% decrease compared to our 2017 baseline. In our Nanning Brewery recorded 1.11 hectoliter per hectoliter, the lowest level of water usage among ABI breweries globally and the benchmark for the world's beer industry. We also increased our local barley harvesting in China by 60% to 40,000 tonnes, benefiting 4,500 farmers covering 60,000 hectares of land. I will now pass it over to Iggy to take you through our financial results. Over to you, Iggy.

Thank you, Jan. Good morning, everyone. In the 2022 full year, volume grew by 0.7%, with strong performance in South Korea and India, offsetting widespread channel closures in China throughout the year. Revenue grew by 2.4%, while revenue per hectoliter grew by 1.7% as revenue management initiatives in South Korea and premiumization in India were mostly offset by the challenging conditions in China. Our normalized EBITDA decreased by 5.2%, while our normalized EBITDA margin decreased by 239 basis points. Commodity price inflation was also a prevalent challenge throughout the year. Our cost of sales per hectoliter increased by 7.7%, mainly due to anticipated raw material and packaging cost escalations as well as operational deleverage in China during COVID restrictions both of which were partially offset by efficiency initiatives and optimized sourcing. Now let's take a look into our performance in several key markets. In China, volumes declined by 3.0% with COVID having a disproportionate impact on the on-premise channel, leading to a 44 basis point decline in market share. Revenue decreased by 4.2% as revenue per hectoliter decreased by 1.2% due to a negative channel mix, especially in the fourth quarter. Full year normalized EBITDA declined by 11.7% with a top line decline and operational deleverage being partially offset by agile cost management and commercial investment optimization. In East Asia, revenue increased by 15.5%, and Volumes grew by 8.9% and revenue per hectoliter expanded by 6.1%. Normalized EBITDA increased by 23.9%, with operational leverage driving margin expansion. Finally, we closed 2022 with a stronger balance sheet despite the difficult operating conditions, thanks to ongoing financial discipline and cash management practices. Our net cash position increased by USD 0.5 billion to USD 2.5 billion as at the end of 2022. As such, we are pleased to announce that the Board has recommended a 25% increase in dividend to USD [ 0.378 ] per share compared to USD 0.302 in 2021. This concludes the presentation. And Jan and I are here to answer any questions that you may have. Thank you.

[Operator Instructions] Our first question is from Euan Mcleish from Bernstein.

I just wanted to pick up on your COGS line first of all, if that's okay. It seems like you actually managed to control COGS better than we were expecting in the fourth quarter. And there's obviously a lot of different moving parts there. Can you help us understand the kind of key factors, the input prices, which have had been having the most pronounced impact on your COGS and how that combined with hedging is going to drive the evolution of your COGS line going forward. Also quite helpful if you could maybe just help us understand a bit more about your -- how your procurement relationship with ABI has been helping or impacting your COGS line as well.

Thank you, Euan. Good morning. Good to hear you. So let me maybe pass this question to Iggy about the COGS. Go ahead, Iggy.

Sure Jan. Yes. Thank you, and thanks for the question, Euan. Let me start maybe with a reminder on our hedging policy. It's designed to reduce volatility in our input costs, as you well know and give us some visibility to better manage them through this kind of 12-month visible rolling horizon. But of course, we reserve some flexibility in exceptional circumstances. Given commodities can represent between 1/3 to 2/3 of our COGS on a per hectoliter basis, and that depends, of course, on the geography and brand mix. Without taking any actions, we would have anticipated last year a mid-teens increase, right, in the cost of goods per hectoliter. This would be in 2022. However, of course, as we noted, our COGS per hectoliter increased 7.7% on a full year basis and 5.6% specifically in Q4, driven mainly by the offsets from efficiency initiatives and the benefit of operational planning. In 2023, we still expect, of course, continued escalation in commodities. If you think about the market rates in 2022, we know that would be the case, but we expect them to a lesser magnitude as the year-over-year escalation has been more muted if you look at current spot pricing. So for example, if we take a look at aluminum, which, of course, is one of the key drivers from that peak of above $4,000 per metric ton at the start of the previous year to near to $2,500 per metric ton. We're now holding at, obviously, a reduced rate. So it's more of a tailwind than a headwind at this point. Barley has been more volatile, of course, and that was driven by unfavorable weather and overall multi-acreage reduction -- multi-barley acreage reduction. So it's increased over the past year. But of course, the seasonal cycle there for the harvest can also influence it significantly. I think this is one of the places where the benefit of being part of the ABI network is very helpful. The procurement relationship gives us global sourcing flexibility. So we can quickly adjust our sourcing origin. And since malting tends to be done locally that reduces volatility for us as well. The other great benefit for us, of course, is the purchasing power of the total ABI scale, right? So we benefit from both on the APAC side. So what does this mean then for 2023, right, to get to your question. At the end of the day, on a like-for-like basis, we're seeing half or less of the year-over-year escalation that we would have seen in 2022 versus 2021, and we would also expect that the cost escalation will be far more weighted towards the first half of the year, so first half of '23. Then the second half of '23, we expect it to ease in the second half of '23. Of course, there will be some volatility going forward, but we don't see raw material cost increases and packaging material cost increases, a structural headwind, more transitional one, as we mentioned before. And then, of course, we'll look to mitigate cost related risks with other initiatives, not just on the hedging side or on the raw material side, also includes premiumization, revenue management and efficiency initiatives as well. So thanks for the question, Euan.

Great. Appreciate that. Just on the China on-trade it's been a pretty turbulent few years in the China on-trade. And obviously, Q4 was kind of at the extreme end of that. Can you maybe talk a bit about the kind of level of outlet churn that you've seen -- and how that's impacted your strategy in China, how the level of on-trade outlet churn has impacted your premiumization rollout and how that impact your business going forward? Is this a threat? Or is this an opportunity for you in 2023?

Thank you, Euan. I think, I mean, overall, we see that as an opportunity, right? I think when we talk about expansion, we always talk first geo and channel expansion, the 2 parts. Geo, you would have seen that despite all these COVID kind of restrictions that we had, we see that more than half of our expansion cities going double digits for Budweiser and Super Premium last year. So the underlying trends are really strong. And we actually continue to expand for this year we want to bring Budweiser distribution from 201 cities to 220 cities in '23. For Super Premium, we want to go from 51 to 60. I remember cities, we define as cities where we sell more than 10,000 hectoliter or more than 1 million liters of Budweiser basically. So we continue to invest on expansion, and we do have a lot of kind of room to grow in China as the disposable income continues to increase. On channel specifically, you're right that the on-premise would have been disproportionately impacted last year, especially nightlife, but also premium restaurants. However, when we look at February, actually, since December, we see a recovery of the opening rates. But then as of end of February, we estimate that we are essentially a 98% reopening rates. So almost 100%, right? Probably couple of percentages would indeed be some churn, but it's a relatively limited churn. I think the industry has shown a lot of resilience in the last number of years. We believe that this will turn into an opportunity because, obviously, last year, there would have been a disproportionate impact on our channel mix. And as a result, brand mix, we believe that this year, especially nightlife channels showed increase its mix, both in the industry, but especially in our mix. So we do expect to unwind this proportionate impact it had on our business and as such, take a disproportionate portion of the growth, which, by the way, is something we have also seen if you compare '21 to '20. We also saw a very similar kind of unwinding of an impact and us taking a disproportionate portion of the growth. So -- and as you know, premiumization continues to drive the industry both short-term and long-term, we expect that not to change. So we're quite excited actually with '23. Thank you for your questions, Euan.

Your next question is from Ye Lu from Goldman Sachs.

This is Lee from Goldman Sachs. I hope you are both doing well and get to travel around the world for this year. So I've got 2 questions. I will ask one by one. Firstly, on China reopen. So with reopen definitely, the worst is behind us. We are also seeing encouraging recovery trend and some good monthly run rate among the China brewers recently. So will you please share the recovery movement that you have observed year-to-date.

Good to hear from you. Thank you for your question. So you're right. I think when we look at last year, right, obviously, it was big disruptions because of the COVID restrictions throughout the year and Q4 visibly as you see in our results, right, would have been the most challenging quarter of the year. And it was both because of the channel closures in the beginning of the fourth quarter. But in combined with big consumer traffic reductions, especially towards the end of the fourth quarter. So when we look at January the conditions began to improve, right? But of course, with the 10 days earlier, CNY than the previous year, volumes would still be negative versus prior year in the month of January because of 10 days earlier CNY basically. If we look at February, we estimate, as I mentioned to you, and right that all channels that's almost fully reopened by the end of the month. We see very healthy traffic in our stores and for our business. We see this very similar across all city tiers, whether it's kind of Tier 1, Tier 3, Tier 5, all city tiers basically very similar recovery patterns across the country. And our volume in February grew by more than 20% in the month, so we had more than 20% volume growth last month, so -- which obviously is very encouraging and makes us very optimistic and very excited actually for this year. And then if you -- as I was saying with on as well, right, I think -- if you think about last year, our business would have been disproportionately exposed to these channels and regions most impacted by the restrictions. So accordingly, this year, we are quite excited about the opportunity to capture an outsized benefit from the recovery following a transitional first quarter. So it gives you some color as to where we are.

That's really exciting and encouraging about China. And my second question is on Korea outlook. So what will be the long-term growth driver in Korea? Do you -- like do we still see sufficient room for ASP increase each year given the current inflation environment in Korea and also the annual excess tax escalated model by Korean government, especially the government will review the excess tax again quite soon in April this year.

Yes. Thank you, Lee. And you're right. I think Korea is a country that has already recovered last year, right, from COVID. So the restrictions were lifted early last year. And it's actually like for us, for the team, kind of an extra driver to be excited for this year in China as well because when you look at our results in South Korea, top line EBITDA, they all increased by double digits last year. EBITDA grew strong volume recovery as well as the revenue per hectoliter performance that was quite solid, right? So volumes grew high single digits, which was both industry recovery and the strong market share performance, driven by the all new cost innovation we had. When we look at net revenue grew mid-teens in South Korea, a combination of volume recovery and driving management initiatives, where as you remember, we took price early last year, both on the core business and on the high-end business. Recently, end of January, the government has even lifted the indoor mask regulations or restrictions as well. But also interesting to know that when we look at the beer industry, it is not fully recovered yet to the pre-pandemic level. So it's another reason, at least for us to believe that there is more room for growth from an industry perspective as well. So I always say, coming to your other question, right, for APAC East, if you look at the key drivers for growth and EBITDA expansion, its first rate than operational efficiencies and then mix, if you look at the longer-term perspective. On rates, for the moment, nothing to announce right regarding price increases. On the operational efficiencies, we continue to implement cost and operational efficiencies across the business in East Asia and applying our cost connecting mindset to reduce indirect overhead costs and drive the EBITDA margin, which still has room to recover, right, and we're on the right track there. And then we believe the industry will continue to premiumize in South Korea as well. It is still under indexed versus more mature markets. And as you know, we are well positioned. We are the market or the segment leader in premium as well. So we believe we will continue to grow as a premium segment grows in South Korea. Thank you for your questions, Lee.

Your next question is from Anne Ling who's from Jefferies.

I have 2 questions here. Let me start with first one, it's on the China commercial investment. So will we [ build up ] our marketing and promotion expense in China short term, especially at the beginning of the reopening?

Thank you, Anne. Thank you for your questions. I think -- I mean, obviously, COVID restrictions made it a rather challenging year last year. But on the positive end, I think our team really developed a set of very solid capabilities, especially on resource allocation. I think there is a big agility in the team. They're acting in a very agile way also in terms of where to invest to commercial resources. And they're quite efficient as well in terms of what we spend where and when. And I think the team learned a lot in the last 2 years and then even more in the last year specifically. So when we look at 2022, our sales and marketing as a percentage of net revenue was actually lower than 2021. The team was able to quickly save and reallocate investments between regions and channels. And as you might remember, we developed digitized tracking platform where we looked at different trends at a city level. Of course, our digitization is helping us do that. And we reallocate quite efficiently our resources where they have the best ROI and the most impact. So we learned a lot in the last 3 years, and I think it will really help us for the future. When you look at next year or the coming year, we believe our commercial investment is at the right level. If you look at it as a percentage of net revenue, we're quite optimistic about our business, and we do continue to see opportunities to apply our cost connecting mindset also within the commercial investments and reinvest any savings we have to connect with our consumers and drive longer-term growth for our business.

Okay. And my second question is on your managers plan to increase shareholders' return? And what is the rationale behind the proposed dividend payout for year 2022, i.e., an increase in the payout dividend?

And this sounds like a question for Iggy.

Thanks for the question, Anne. No. I think the first thing is we should probably refer back to the current capital allocation priorities, right, which we share often. So I mean, first and foremost, we see tremendous opportunity for organic growth. So we invest in organic growth initiatives, first and foremost. Then of course, we pursue strategic and organic growth opportunities that make sense with financial discipline. And then finally, we share profit with our shareholders. I think keeping that context in mind, even despite the challenges in 2022, we were able to maintain a very strong balance sheet. The financial discipline and cash management practices led to a significant increase in cash and cash equivalents, right, from $2 billion the previous year to about $2.5 billion at the end of 2022. So keeping that in mind and taking a look at what we're able to project, we believe that there's a great opportunity here to increase, of course, the amount of profit we shared with our shareholders. So that's what drove the dividend per share proposal in this case, right? So again, USD [ 0.378 ] per share for the full year '22 is the proposed dividend payout. It represents a fairly significant increase, both in absolute dollar terms, but also as a percentage, right? So it will be just over $500 million in total dividend payout. It's a dividend payout ratio of 58% and a 1.2% dividend yield, both of which we see as on par we're ahead of listed peers, which is important as well. And it's a significant increase, again, is a 25% increase, which is more than we've done in the past. So I think it's more really a product of a strong balance sheet position, right, and having that strength and knowing that we can fund organic and organic growth and still share more with shareholders drove the proposal. Thanks for the question, Anne.

Your next question is from Lillian Lou from Morgan Stanley.

This is Lillian Lou from Morgan Stanley. Also, I have 2 questions for Iggy and Jan. First of all, in China reopening set up in 2023, what are the company's key strategic focus in terms of products, market expansion channel? And how will you prioritize resource allocations in between sales and profitability?

Thank you, Lillian. Good to hear you. So let me take this one. I think really our strategy will be allowed to come to full play in 2023 as we get these COVID restrictions behind us. Really, our strategy continues to be about premiumization, expansion and digitization. And when you look at the digitalization opportunity on the commercial agenda, it is still our biggest opportunity. And of course, it will be first about Budweiser expansion of the portfolio because we have several innovations behind Budweiser that we want to continue to scale this year especially Budweiser Supreme in the premium restaurants and dining [ meal ] occasion and Budweiser Magnum with a very special profile, beautiful packaging, higher ABV more developed kind of Budweiser experience. And then the second one is about Super Premium which we want to build is our next blue ocean, right? It's really a segment of high growth in the future. We have a winning portfolio there, where we are leading the segment and continue to bring new offerings to the market. Probably our biggest priority from an expansion point of view from our portfolio would be Blue Girl this year with innovations -- from an innovation perspective because Blue Girl is very strong in Guangdong, Fujian, but we believe we have significant opportunity from an urban center perspective in expanding to more and more cities in the future. And then if you think about geographic and channel expansion, I covered this a lot in the previous questions, but really keep in mind that Super Premium is only a 10% distribution today in China according to our estimates. Budweiser is roughly 1/3, right? One out of 3 stores has a Budweiser distribution point. So even with the size of these brands, we have plenty of opportunity to continue to expand both geographically and channel-wise as disposable income increases in China. Of course, we have Beyond Beer, where you know that we focus on [indiscernible] and energy drinks or a premium end of the spectrum. We believe we continue to invest there and start to have some interesting propositions with potential. And then finally, digitization, we are quite excited with what the team has been doing despite all of these restrictions to go from 2 cities at the beginning of last year to 160-plus and go from a very minor portion of our revenue to more than 40% of our revenue in digital in B2B in our BEES platform in the month of December. It's quite exciting because as you probably know, you need scale to be able to develop the right algorithms and really add value for our partners in the ecosystem. So we are quite excited with what technology can bring us to be an ever smarter competitor and an ever smarter driver of premiumization to sell more and more stores with a better ROI and better service, and we truly think we are in a very special moment here to accelerate this in our agenda as well.

Next question is about the M&A strategy because it has been our long-term strategy. And sort of harder during the COVID period. So after markets are back to normal now, sort of, are there any updates or progress on the M&A front?

Thank you, Lillian. Let me give this one back to Iggy.

Thanks, Jan. Lillian, I think the thesis for our IPO still holds, right? One of the main reasons we did it was to create this local champion as a catalyst, right, for further regional consolidation, which we see as a significant opportunity still in Asia Pacific and that hasn't changed, right? I think beyond that, of course, given the fact that we see inorganic growth as a core competency, we will continue to consider suitable opportunities when and if they arise. And strategically, we'll continue to look at it through the following lens, first to cover sizable white space, right, in both existing and new markets and M&A can be a tool to accelerate growth rate in many of these markets. We also still see the opportunity to combine our world-class portfolio with those of local players, right? We may have an established route to market already. And then, of course, given the scale of procurement that we have and given the best practices, right, that we have across different regions, we know that we can import those in some of these markets. On the other side, of course, on the opposite side, we can still see opportunities to transform great local brands into regional champions, right, which can leverage our global network. But of course, any such transaction, if and when it were to happen, will be subject to the same strict financial discipline that you know and trust us for. So we keep evaluating. You're right that markets have begun to reopen. But at this point, we still don't have any news to announce to the market at the moment. Thank you for the question, Lillian.

Your next question is from Melody Zhou from CICC.

It's Melody Zhou from CICC. Thank you so much for giving me the chance to ask these 2 questions. And my first question is about China premiumization. Are we seeing premiumization trend continues and to consumers downgrade beer consumption and what is the pace of upgradation this year. This is my first question.

Thank you. Good to hear from you. I mean, yes, we are, I mean, very excited by the overall premiumization potential in China and APAC at large, but China, especially because essentially, it's driven by the increase of the number of middle income households. And whatever economic projection you do for China, I think everybody would agree that the number of middle-income households will increase. In our own estimates, we believe it will be about quadruples, so times 4 in the next 10 years. At which point, it will be more than 2x the number of middle-income households in the U.S. So it gives you an idea of the size of the opportunity in China. And so also our strategy is really structurally intact because there is really no change in this assumption of the opportunity. And when you look at beer premiumization itself really be as an affordable luxury. So we think that consumers will continue to consume and upgrade and premiumize to Premium, Super Premium beers because really, it's affordable on a relative scale versus other categories, and it gives people not only a physical reward but also a mental reward and bring them comfort. So we believe that this will continue to increase especially as the sales channels reopen because when you look at even last year with all the headwinds that we had from a restrictions point of view, we still saw more than half of our expansion cities with double-digit growth in these segments. And we see, despite all of these restrictions, it's a pretty resilient category because our Premium and Super Premium portfolio was still growing in volume and revenue versus pre-pandemic levels. So really, we believe there is a lot of growth to come. For '23, given all the headwinds we had in '22. If anything, we expect to take a disproportionate share of the growth because of the weight of the impact on this segment last year with the premium channel closures, very much like happened in '21 versus 2020. It was a very similar situation. So we continue to be excited by the premiumization opportunity here in China.

And my second question is about overseas market, especially for India. Now what will be the outlook for profitability in India market this year? And can you share the target for the percentage of contribution to group EBITDA.

Thank you, Melody. India, I think, has had an amazing year 2022 is again one of these markets that are post COVID recovery, and you see our team and our portfolio, our strategy really fully at work. So we've seen India, our business in India continue to be a #1 brewer in the Premium segment, which is a high-growth segment. We have about 67% segment share in Premium, Super Premium in India. To the point that it became 2/3 of our business -- of our net revenue in India coming from that segment. And actually, our Premium, Super Premium net revenue almost doubled versus last year. So we see a lot of momentum there. When we compare it to the IPO timing, actually, India starts to be relevant in our numbers, right? So India is about 5% of our net revenue for APAC about 1% of EBITDA and EBITDA doubled versus last year, driven by the strong double-digit volume and revenue growth. So our strategy there continues to be focused on premiumization. We are leading the Premium segment. We've seen very significant growth there and the very strong brand power. And we are driving a faster growth in the Premium segment in the India industry. We combine that with a lot of engagement on moderation. We have an active engagement with several state governments to adapt the tax structure that is existing today in the alcohol segment because beer is really a beverage of moderation. So we want to have more promotion of beer and also our lower and alcohol beverages with a more favorable auto market and tax allowances to stimulate this part of the alcohol industry. Last, but not least, as we get scale in India. Obviously, you can imagine we can improve profitability quite a bit by brewery productivity, but also by investing in returnable packaging because as scale comes in all the economics start to work much better in India. And we actually have quite a bit of opportunity there to continue to improve our cost benchmarks and our productivity in that country. So we scale that will come, and there is a big focus for the team as well to accelerate our EBITDA growth as well as scale comes back to the country and continues with the momentum we have in the business there. So thank you for your questions, Melody.

We have time for one more question. Our final question will come from the line of Ethan Wang from CLSA.

My question is coming from the ASP growth pay angle in China. So we know China has finally reversed all the COVID restrictions, which gives confidence in the market that ASP increase in the beer sector is going to continue. But when investors try to gauge our company's ASP growth in China, would the management subject using a pre-COVID reality growth [ pay ] as a benchmark or actually we can expect even higher ASP growth due to all our efforts during the past few years. And maybe more importantly, what will be the major drivers behind management's expectation on this ASP growth.

Thank you, Ethan, good afternoon, good to hear from you. When we talk about ASP in China, the first thing to say is that the most important driver is premiumization. So really a mix, right? So combination of brand mix driven by channel mix, product mix, the whole key drivers of our revenue per hectoliter growth -- and really there, the very important ones to project, right? As you know, we don't give specific numerical guidance on this KPI. But you can imagine, as premiumization continues to grow -- this is a very important driver that makes us actually quite optimistic given the business recovery I've been describing in the earlier answers. On top of that, we have been taking price, right? As you've seen, we announced in the last quarterly call that we have taken price on the Premium, Super Premium segments in November benchmarking the CPI. And actually, very recently, yesterday, actually 1st of March, we took price on the core and value segments in China as well, slightly above CPI, actually as a consequence of the whole kind of context that we take into account when we take these decisions. So I would say in the last couple of months, right, November, we took Premium, Super Premium at CPI. March -- 1st of March, we took core value. We'll continue to evaluate opportunities for the other segments, but really premiumization continues to be the key driver for ASP and we're quite excited overall about what premiumization opportunity offers itself as we see the business recovered.

We actually have -- have enough time for one more question, if you may ask your question again, please.

Sure. Maybe I want to touch on our nontraditional business, our craft portfolio and beyond the business because consumer behavioral impact in APAC region keeps changing and it seems that drinking habits starts to expand beyond the traditional beer to understand Budweiser has actually built up the business lines outside traditional beer for years. So is it possible for management to give us an update and a latest strategy on this front in particular, yes, the [ classic ] and Beyond Beer business.

Sure. Thank you, Ethan. Quite interesting topic, although it's really about the future portfolio, right? Because -- as we look at premiumization, really, the biggest driver is Budweiser and then the Blue Ocean of Super Premium where we focus a lot on Corona, Blue Girl, Hoegaarden of course, given the size of these mega brands. But when we look further out, we're already building the portfolio to capture further premiumization above these price points. So that's where we really have a very interesting portfolio versus our key competitors because, of course, we have access to these 500 brands of ABI globally and we're continuing to build partnerships as well. So if you look at our craft part of the Super Premium portfolio, in craft & specialties. Of course, we have a number of specialty brands that we are starting to import and test in like the highest income cities in China within craft, we have Goose Island as international craft brand. We have Boxing Cat and 059 Coastline as regional brands. And then very recently, we have also added BrewDog to our craft offerings as an international craft brand with big potential in China as well, just to continue offering more options to Chinese beer lovers and to continue to bring different experiences as well. On these craft brands, we typically invest as well in brewpubs and tap rooms. So we continue to expand. We actually just in the fourth quarter, opened 3 new locations for brewpubs and tap rooms kind of portfolio. We expect in the next 12 months with a kind of normalization of the business environment with less restrictions to continue to accelerate the openings as well of these footprints both in our own kind of ownership, but even more with franchise partners. And then when you look at Beyond beer, the other part of what I think your question was is really, we -- it's also a portfolio building, right? Beyond Beer, we are earlier in the journey, right? We do have an ecosystem that is very well coming to offering more brands in our portfolio, whether that's in Beyond Beer with a big focus on RTD, leveraging our route to market to bring other offerings to the market as well because our wholesaler partners are very premium partners. They have channels that are very open for a broader portfolio. So we've been innovating quite a bit in the last couple of years. So beyond the partnerships that we have, we also invest in our own kind of product innovations and end of last year, we've seen a lot of success with some RTD offerings. We are FOR CHILL which is a ready-to-drink alcoholic tea basically and also [indiscernible], which is more a nightlife-oriented young adult population premium offering kind of a flavored vodka offering which has been doing very well as well in our nightlife channel. So we have different offerings that we are going from C2 launch stages that the teams are quite excited about in specific cities and regions. And I'm sure you'll hear more about these in the next coming quarters as we expand and as we build these brands to become relevant on the RTD front as well. So thank you for your questions, Ethan, appreciate it.

Ladies and gentlemen, this concludes our Q&A session today. I would like to turn the conference back over to Mr. Jan Craps for the closing remarks. Please go ahead, sir.

Thank you, Anna. As we shared earlier, there are already strong signs of business recovery in China this year. So we are optimistic about our business, excited about the opportunity to capture disproportionate benefits from this recovery. I want to thank everybody for joining us today, and I look forward to speaking to you again soon.

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