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

Welcome to the 2025 First Quarter Announcement Conference Call for Budweiser Brewing Company APAC Limited. Hosting the call today from Budweiser APAC is Mr. YJ Cheng, Chief Executive Officer and Co-Chair of the Board; and Mr. Ignacio Lares, Chief Financial Officer. The results for 3 months ended 31st of March 2025 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, the risk factors in the company's prospectus dated 18th September 2019, the 2024 annual report published and any other documents that Budweiser APAC has made public. I would also like to remind everyone that the financial figures discussed today are provided in U.S. dollars unless stated otherwise. The percentage changes that will be discussed during today's call are both organic and normalized in nature and unless otherwise stated. Percentage changes refer to comparisons with the same period in 2024. Normalized figures refer to performance measures before exceptional items, which are either income or expenses that do not occur regularly as part of Budweiser APAC's normal activities. As normalized figures are non-GAAP measures, the company disclosed the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2025 first quarter results can also be found in the press release. It is now my pleasure to pass the time to YJ. Sir, you may begin.

Thank you, and good morning, everyone. Thank you for joining our earnings call today. It is my pleasure and honor to join this results analyst call for the first time as Chief Executive Officer, and I look forward to connecting with you more regularly forward. As a Brewmaster with 29 years of experience at Budweiser APAC, I am passionate about beer. My focus as CEO is to ensure we adapt decisively to evolving market conditions and execute with discipline to capture growth. By staying focused on what we can control, our winning brand portfolio, premium route to market and resilient team, we can navigate the current landscape to drive sustainable and profitable growth. I will now hand it over to Iggy to discuss our 2025 first quarter results, including our performance in each of our key markets and other highlights. Thank you.

Thank you, YJ. Good morning, everyone. In the first quarter, total volumes and revenue decreased by 6.1% and 7.5%, respectively, as our pan-Asian footprint helped to partially offset ongoing challenges in China. Revenue per hectoliter decreased by 1.5% due to a negative geographic and channel mix, while normalized EBITDA decreased by 11.2% and normalized EBITDA margin contracted by 140 basis points. In APAC West, volumes and revenue decreased by 8.6% and 11.7%, respectively. Revenue per hectoliter decreased by 3.4%, while normalized EBITDA decreased by 17.6%. In China, volumes declined by 9.2%, impacted by continued weakness in both our footprint and in the on-premise channels more broadly as well as inventory management initiatives that accounted for approximately 1/4 of our volume decline. Revenue declined by 12.7%, while revenue per hectoliter declined by 3.9% due to a high base and negative geographic and channel mix. We made further progress in our channel expansion strategy with a focus on premiumizing the in-home channel as in-home consumption occasions continue to develop. In the first quarter, volume and revenue contributions from this channel increased. We also increased our marketing investments for Budweiser and Harbin to further connect with consumers and drive market share. Budweiser unveiled updated brand imagery in March following extensive Chinese New Year activations, enhancing its iconic bow tie with a vibrant new Budweiser Red color palette designed to captivate the next generation of adult consumers. For Harbin, we launched a new integrated marketing campaign as part of our continued partnership with the NBA. This further connected Harbin Icy GD Zero Sugar to the health-conscious lifestyles of young adults, with sales volumes increasing by approximately 70% in the first quarter. On the digitization front, the usage and reach of BEES, our B2B wholesaler and customer engagement platform, continued to expand. As of March of this year, it was present in more than 320 cities across China. We continue to leverage technology to further enhance our commercial capabilities and drive value creation for our stakeholders. In India, the volume and revenue of our Premium and Super Premium portfolio continued to grow in the first quarter. Now moving to APAC East. Therein, volumes and revenues increased by 11.9% and 11.7%, respectively. Revenue per hectoliter declined by 0.2%, while normalized EBITDA increased by 24.4% with our EBITDA margin expanding by 337 basis points. In South Korea, our volume increased by double digits, supported by shipment phasing ahead of a price increase that we announced in April. We continue to grow our market share, driven by strong performance across both on-premise and in-home channels. Revenue increased by double digits, while revenue per hectoliter remained flattish, impacted by unfavorable channel mix. Our normalized EBITDA grew double digits and EBITDA margin expanded substantially, supported by strong commercial performance, commodity tailwinds, cost efficiency initiatives and operational leverage. On the cost management side, cost of sales for our total business decreased by 1.5% on a per hectoliter basis, mainly driven by commodity tailwinds and cost management initiatives, partially offset by operational deleverage and country mix. I'll close there. And with that, YJ and I are here to answer any questions that you may have. Thank you.

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

This is Luo Chen from Bank of America. I've got 2 questions on China business. So I will start with the first one. So I'm actually very interested to get an update on the Q2 -- in China. Any color that we can share with investors on the performance by different channels, regions and the price segment? And typically, we will take pricing for our non-Premium products in April historically. But so far, we have not heard of anything. Is it fair to say that pricing is not going to be the focus of 2025 given our volume focus and the cost deflation environment? This is my first question.

Thank you for your questions. As you know, consumer enrollment and consumer confidence in China remains low. And the softness is more pronounced in our footprint, which is in Guangdong, Zhejiang, Fujian and Jiangsu area and also on-premise channels. Although we see the first quarter a little bit positive, but we still see the consumer confidence still remain low. And for the second quarter, it's early to see, although we see the Golden Week and May holiday, data is positive. In terms of pricing, as you know, we increased a slight price in Premium and Super Premium December last year because we are the leader of the Premium and Super Premium. And for the core brand, we really consider macroeconomic and competitive landscape. And we look -- we usually look for core price before summer, but nothing to announce at this moment. I do want to use this opportunity to share with the team the position I have to take as a CEO. I want to share my strategy or my actions. The strategy for APAC will remain the same, which is leading our growth in the beer category, especially the premiumization and digitalized ecosystem and also optimize the business. As a global leading beer company, as a brewmaster myself, especially for beer, that's the journey I have been gone through entire my career. So the strategy we're going to remain the same. And we're going to focus -- I use 3 focus what we should do, which is we should focus on what we can control. One is market share. That's my -- that's our priority. And the second one is the in-home channel. This is a trend we see with beer consumption in China in the past few years. Another one is our mother brand, which is Budweiser and Harbin brand. So those are the focus we will mainly focus on. And the action is through disciplined execution. The disciplined execution, I used 3R, I call 3R, which is a responsibility, resources and rewarding. In Chinese it's [Foreign Language], which is a simple way of working. And as a resources, we have a very clear strategy as a responsibility, and we have a very clear focus as a responsibility as well. And the matter of fact is the resources, how people build -- provide the resources for the team to be able to execute it. The resources as a global company, we do have a lot of best practice that we can learn from other markets to apply in China. And we do have a very optimized management system like in supply VPO, like other excellence program that we to do the right thing, which is a system we can use to do the right thing. Another one is to build people capability or knowledge to be able to help people to execute it. So my strategy or my action will be -- strategy won't change. We will keep the same and we're going to more focus on what we can control and the focus what I just mentioned, market share, in-home, mega brand, Budweiser and Harbin. And to execute -- disciplined execute the 3R, mainly focused on execution and resources. So those are the main actions are going to take with my team to work on together to make the program mix China business and APAC business turn around. Thank you, Luo Chen. I hope answers your questions.

This is really very detailed APAC strategy. And secondly, my question is regarding the competition in our most important market, Guangdong province. It appears that our Core and Core+ segments are facing big competition from the local players such as [indiscernible] in the province. Are there any initiatives that we are working on to defend our market share in Guangdong. And also we are going to focus on are we going to strategy a little bit, especially considering that our largest competitor is now trying to more diversify its brand strategy by announcing a lot of [indiscernible]?

I would like to have Iggy to take this question.

Thanks, YJ. Thanks for the question, Luo Chen. What I got there was you're asking on essentially Guangdong as a market and whether Harbin was a strong enough beer brand. You were cutting out a bit, but I'll try and answer both parts. I think in the case of Guangdong, I mean, it's the largest profit pool for China's beer industry. That's not really new news. And naturally, of course, as a result, it's always been a very competitive province. All players want to enter and operate there. And everyone is talking about premiumization, obviously, different segments for each brewer, but everyone is talking about premiumization in the province. I mean we're committed to succeeding in Guangdong given the relevance it has to our business. The Core++ segment, as you kind of suggested, is growing in Guangdong, especially in the in-home channels. But we see this as an opportunity, right? It's a chance for us to build the Harbin Icy GD Zero Sugar variant effectively as a bridge, which can drive future premiumization within Guangdong, particularly in the in-home channel, where we have a large distribution opportunity as we've discussed in the past. And I mean the in-home channel fundamentals, right, to succeed are effectively assortment, right? You need to have a broader brand and pack assortment that you generally would have in the on-premise. So we have an opportunity to do so with distribution of more packs, particularly within Core+ and Core++ to fulfill these different consumer needs. Product superiority plays a big role. I mean, to your question on whether Harbin is strong enough, we think we have a great brand there. And more specifically, right, from a brand perspective, we've used the superiority framework to make sure that the Harbin Icy GD Zero Sugar variant is a winning proposition, right? So it has to have better liquid, better packaging, better positioning, better communication and alternatives for consumers, and we see that we have that. And brand power plays a big role. It's the best indicator we have, of course, of future market share potential if you normalize for distribution. Our brand power position for the total portfolio is very strong. So we know we're in the right position to drive overall share and premiumization as well. But I think even beyond portfolio, there's also the route-to-market element. And in terms of initiatives to go back to that part of your question, we're expanding in-home coverage and distribution. Historically, we've been over-indexed in the on-trade channel in Guangdong because we built our brand power there first and foremost. What we've been doing recently is expanding our route to market, as YJ was alluding to, in the in-home. So the teams are laser-focused on expanding that moving forward. And the key to successful in-home expansion is really to develop a high-quality distribution network that can cover more POCs in the right way. Where we already have a robust route to market, we're investing together with our wholesalers to increase the number, but also the capability of our in-home sales force, so more specialized sales representatives that can enhance in-home trade execution. And then in areas where the route to market is a bit less developed, we're also recruiting and developing new Tier 1 and Tier 2 wholesalers, obviously, carefully vetted based on their capabilities to expand or help us to expand to more POCs. So that's a bit what we're doing in terms of both the brand portfolio and the route to market. And I hope that answers your question, Luo Chen.

Also I look forward to our strong execution going forward and our market share recovery further down. So that's my questions.

Thank you, Luo Chen.

Our next question is coming from Euan McLeish of Bernstein.

My first question, I'd like to focus on your Core++ strategy a bit. It was good to see the Harbin Icy GD Zero Sugar growth rates that you published in your release. Can you maybe talk a bit more about the strategy? And what is the source of the trade-up volume? What's going to make this strategy work? Is this about stealing share from competitor brands or trading up from your own brands? Is it more winnable in the on-trade or the off-trade? Are there specific geographies where you think the opportunity is particularly attractive? I guess what I'd like to understand is where should we be looking for indications that your strategy is progressing well or maybe hitting speed bumps? So it would be great if you can help us to understand a bit more detail, please.

Thanks for the question, Euan. I can take this one here. Look, probably the first thing to think about is what does the Core++ segment represent, right? And we think of it as an accessible upgrade from Core+ options available given the slight price differential, obviously, for a consumer moving up from RMB 6 to RMB 8 in the Chinese restaurant channel as an example, right? And it plays as an in-between offering as well, right, of course, particularly given the current macro environment, kind of an in-between step that prepares consumers for further trade-up opportunities to Premium, right, in the future. And this is particularly true, obviously, in the in-home channel, where as I was mentioning before in Luo Chen's question, the assortment is wider, right, and the price ladders tend to be generally a bit more compressed. Now consumers don't really think of Core+, Core++, et cetera, as their own segments, right? But given the sourcing of the volume, it does suggest a couple of things to your question. I think the first one is that there's different consumer behavior at Premium and above versus below premium. And so this, in many ways, is intended to become the best value proposition that a consumer can buy in the sub-Premium space, right? And this is why, as I was mentioning before, it's so important to have a superior and differentiated product because long term, that becomes the key to success, at least on the product, right, in the brand side. So Harbin Icy GD Zero Sugar is playing this role for us here. I think the way we can measure success is a combination of both the growth rate or growth curve as well as the mix contribution of total Core+, Core++ that it represents. As you alluded to, we're very happy with the growth rate in the first quarter as Zero Sugar volumes grew around 70% in the first quarter with expanded reach and engagement with young adults in particular, which we think is important because that consumer demographic is one that we're targeting very specifically. I mean we introduced Harbin Icy GD Zero Sugar really because of the strength of the Harbin brand and the volume of Harbin Icy GD Zero Sugar, not surprisingly, is being sourced from different types of consumers. We see it both from our existing consumers trading up within our portfolio, moving from Core+ like Harbin Ice, particularly in places where Harbin Ice is strong, but also from newly acquired consumers. And actually, some of the research, the consumer research that we have suggests the primary source of volume in places where competitive Core++ offerings exist is those brands. The second source of volume is trade-up of Core+, right? And then, of course, how much of that comes from our brand or others depends on the relative market share of the different Core+ brands in that given region. And we see very little really from Premium and above, again, going back to this differentiation in consumer behavior, above and below Premium. And I think the way we attribute the volume sourcing is I think the fact that we have such a strong -- from a superior perspective, a strong mix, right, for Icy GD helps, right, like the NBA partnership, having a Zero Sugar functional benefit, all of these things help quite a bit. And the good news is that the principles that we use behind Harbin Icy GD can apply anywhere. So in any place where you have a strong regional brand, you can execute the same playbook for those brands as well. So that gives us the opportunity to do this even in regions where Harbin Ice is not as relevant or as prevalent as it is today. So yes, I think from that perspective, we're quite excited what we see in Q1. As YJ mentioned, right, there'll be a lot of focus right on the Harbin brand and Icy GD in particular. We're going to look to accelerate Core++ distribution with a focus really on in-home channel and Chinese restaurants, which is where we see the most runway for this kind of RMB 8 to RMB 10 price point, and where we see as the largest opportunity for incrementality as well. So I hope that answers your question, Euan.

Yes. Great. I appreciate it. And I'd also like to come back to Guangdong because as you said, it's such a critical province for you. And obviously, it's a very export-heavy economy and U.S. tariffs are already causing problems there. So what are you seeing in the near term in terms of consumers in Guangdong? How is it impacting your business? What can you do to offset headwinds if they continue or get worse in Guangdong as a result of tariffs?

Maybe I'll keep going here. I think maybe the first thing, I think it's too early to quantify, to be honest. I mean, the tariffs are just in market now, right? At this point, we've not really seen any shift in our consumers' behavior. I can't speak for other industries, but at least in our case, for our consumers, we haven't seen a shift. So it's hard to assess what the potential impact could be. We're, of course, closely monitoring that. And if anything, you would expect that any impact of tariffs, if they were to be prolonged, would probably be more an accentuation of the existing trends, right? It would be more economic pressure. So if you think about it, that would probably just accelerate channel shift, the strength of Core+ and Core++, et cetera, trends that are already in place. So from my perspective, it's more about focusing on what we can control, as YJ said earlier, within this context. So I think the key thing for us is to have the strongest possible execution of our strategy. We can always adapt with agility. We've done it in the past, right, in terms of sales and marketing investment, as we discussed during COVID and during other periods. I think the fact that we have clarity on our portfolio choices and our channel priorities is helpful because the teams know what they need to do. It's just a matter of execution, right? So as YJ said, Budweiser will continue to be the #1 priority. And then, of course, we'll allocate more resources to Core++ as a second priority, particularly behind Harbin Icy GD in response to kind of the current consumption environment. Beyond that, it's in-home distribution expansion, right? So that's going to be a key focus as well. We'll selectively still invest in Super Premium. So that doesn't go away, Euan, but I think it's more a regional thing depending on how prevalent and how well established Super Premium is already. And that's it, right? Fundamentals, basics, strong execution. I think if we can deliver that, that insulates us as much as possible from any tariff impact, and we'll keep you updated if things change.

Our next question is coming from Ye Liu of Goldman Sachs.

This is Leaf from Goldman Sachs. So the first question is on China on-trade recovery. Recall that the management team hold a conservative outlook for the on-trade recovery for this year, but with some encouraging data coming from Labor Day holiday. Have we observed any change for China consumer behavior and any change for the on-trade recovery pace? And also maybe some other hiccups going forward amid the macro volatility and the recent retention since early April?

Iggy, go ahead.

Thanks, YJ. Thanks for the question, Leaf. Yes, we've been conservative on the on-trade recovery because the trend of consumer occasions growing in the in-home continues. And it's been taking place roughly at the same rate or similar rate right over the past 1 to 2 years. As YJ mentioned earlier, right, the industry improved a bit sequentially in the first quarter. For all intents and purposes, estimates of the first quarter are more in the kind of low single-digit decline range versus 2024 being more mid-single-digit decline versus the previous year. But also, as YJ said, right, consumer confidence remains low. And directionally speaking, that's probably the best barometer, right, for any potential change in kind of the trading environment. In terms of on-trade recovery, we haven't really seen any significant change or improvement, but there were still some nightlife closures in the first quarter. So we'll monitor that. If those things unwind, there could be a bit of a tailwind there, particularly on the back of the early readings, right, we have for the Golden Week, which YJ mentioned, right? So holiday consumption, at least for other categories because we don't really have any data yet on beer, seem to be a bit positive versus last year. So we'll see if anything changes, but still too early, in my opinion, to see what the impact would be on beer sales. So we don't expect significant changes in the business environment until consumer confidence begins to pick up. And so we're focusing also, as YJ mentioned, kind of the factors under our own control. And I think if we continue to enhance our execution, expand our distribution and coverage in the in-home and accelerate the premiumization right in the in-home channel, which is going to be critical for us, all those things will be helpful as kind of hopefully the on-trade recovery resumes. So I hope that answers your question, Leaf.

Sure. So the second question is on Korea. Firstly, congratulations on the strong quarter in Korea in the first quarter. But I believe investors are getting curious about the recent color, especially about your market share strategy following the pricing hikes in April. Have we noticed any feedback or some competitors in terms of following the price hike? And any change from consumer side receiving this price hike so far?

This is a good question. As a rewarding, I give to Iggy.

Thanks, YJ. Thanks for the question, Leaf. I think this one -- maybe the way I would look at it is, first and foremost, we're very excited with the momentum, the commercial momentum that the Korea business has today. As you can imagine, we make pricing decisions, we make them not only based on the macroeconomic environment and the competitive landscape, but also on the strength of our portfolio and being in a position, right, to do so. And this decision obviously is taken with quite a bit of discipline, particularly in Korea. Our most recent announcement was a 2.9% price increase for our core brands from April this year. And of course, the first quarter volume was a significant increase, right, double digits, but supported by some shipment phasing ahead of that price increase as well. I think in terms of price pass-through, I mean, an increase in factory price doesn't necessarily lead to an increase in on-trade market prices. Usually, of course, this is determined by the voluntary judgment of kind of each business, right, in any market in which we operate. And so far, this is in line with our expectations. But I think maybe the 2 points I would make is, the first one, the business needs to be in a good place to make these decisions. When we look at the Core portfolio, it's doing incredibly well, right? The brand power of the Core portfolio is the strongest it has been. On top of that, we have all these new health and wellness focused offerings that are doing very well. We've got Cass Light Zero Sugar, Cass 0.0, which is expanding, of course, participation in the category by targeting new audiences and occasions as well. And we have Cass Lemon Squeeze, right? And when you look at it, Cass Light Zero Sugar grew by more than 50%. It's now a top 3 domestic beer brand in the in-home channel. So it's doing very well. The team is very excited about that. Cass 0.0 grew by more than 70%, now leading the nonalcoholic segment, right? It's the first mover in the Korean restaurant channel. So giving a new offering, right, to consumers there. And then Cass Lemon Squeeze, you probably recall, once upon a time, it was a seasonal play. It's kind of graduated from there to an all-year round line extension based on consumer demand. And it almost doubled, right, with more than half of its growth actually being sourced from outside of our portfolio, including even ready-to-drink segments, which is good as well. And then on top of that, actually, even in the Core segment, we have HANMAC performing very well, right, which grew more than 40% as kind of a leading player in the classic lager space. So from that perspective, we still see very strong market share traction. We're very pleased. Then not by coincidence, right, we also introduced a new visual brand identity for Cass in April. And the new packaging design, I think, helps to keep us kind of in this leading or growing the category position, as YJ mentioned. It's been very well received by consumers. This should only further help as we go into the summer. So all in all, I'd say we're very pleased with the commercial momentum in the South Korea business and things are as they should be at this point. So thanks for the question, Leaf.

Our next question is coming from Xiaopo Wei of Citi.

This is Xiaopo from Citigroup. I have 2 questions for China. And the first one is for YJ. Congratulations on taking the office and talking to us as Chief Executive for the first time. And we know you for more than -- almost 10 years since listing. And YJ, we know that you are not only a brewing master, but also a cost efficiency improvement master. So with you in the office, what, almost 1 month, as you said, you have made a lot of tough decisions and decisively focusing what you can control. And when shall we expect a benefit on margins from your cost efficiency improvement initiatives? And what areas are you focusing on cost efficiency improvement? That is my first question, first before asking the second.

First of all, thank you. Thanks for your question. So I may change the master call, not cost master, cost efficiency master. The efficiency cover more not only cost, but also the performance as well. So if you don't mind. So when I talk about efficiency, the experience I have in the past 10 or 20 years or 30 years, I mainly focus on sustainable and continuous improvement. You see if you set up a system to improve your efficiency should be sustainable and also have the performance continuously improving. So that's the system we should set up. So that's one. And in terms of the future focus on the efficiency, I mean, more focused on, I call value creation. We will continue to invest both supply chain and commercial. The money we spend, we should spend smartly. I challenge the team that any money we spend should link to the result, should link to the value creation. So that's the challenge I'm going to put on the team. We are not talking about cutting or reducing investment. We may even increase investment, but how to make the money more efficiently, how to make the investment bring the value or value creation in each area. So if people have a very clear direction, very definition or description or calculation, the money they spend linked to the results they have or the target they have bring the value for stakeholders of the companies and that's the focus we're going to put there. You see supply example, we're starting the efficiency, the system, sustainability, performance continue to improve. And furthermore, we use the digitalization, the supply tech logistics to further improve the efficiency. And the question you have linked to 2 strategies, what I mentioned earlier. One is digitalize our ecosystem and another one is optimize our business. So for sure, whatever money we spend, whatever efficiency we improve, the safety, quality and supply is a priority. And which is similar for commercial. Whatever efficiency we improve in commercial area, we should put our market share and also brand power as a priority. So the same concept for supply. Safety, quality; and for commercial, brand power and the market share as a priority. You see we have started digitalization in commercial route to market and also digitalized to have our people's capability through BEES in commercial area. So as I mentioned, we will continue to invest the commercial and supply chain and focus on efficiency, create value and make this consistently and -- sustainable improvement. So the mindset in our company is efficiency connect linked. I hope to answer your question, Xiaopo.

Yes. My second question for Iggy. Iggy made some commentaries on the industry landscape in 1Q, presumably that is sell-through. And if you look at the past 2 quarters, starting from 2Q, the company proactively destocked the channel, continue to destock the channel, as you announced in 1Q result that the destocking actually resulting in about 25% decline of volume in China. So heading into 2Q, and I'm not so sure whether the destocking come to an end, we can see that in March as Matt talked to us like earlier about the updated images about Budweiser and as well as the new packaging which is recycling to us. So shall we presume that the sell-in, sell-through dynamic change a little bit, i.e., the sell-in to the channel, should we presume that has picked up a bit and we complete all the destocking in the past quarters?

Thanks for the question, Xiaopo. I think on this one, I mean let me take a step back, right? Sales to wholesalers or STWs, as we call it, is how much product we sell to our distributors, which is what we call sell-in, you're right. And STRs or sales to retailers, which tracks, of course, how much product makes it to POCs or store shelves is what we call sell-out. And of course, the gap between the 2 numbers is effectively the change in inventory levels, right? So maybe we should walk through a little bit how things played out last year because I think you need 2024 for context on this year, right? So last year, in preparation for the summer season, as we do every year, our STWs tend to outpace our STRs, right? There's usually a natural inventory build as people prepare for the summer. And last year, specifically, people were expecting a stronger industry than actually materialized, right? So I think by the end of the summer, last year, it became quite evident that the industry was under some level of pressure. It was softer than people had expected. And so the gap between STWs and STRs was higher than expected, right? We essentially landed at the end of the summer with a higher inventory position than would have been ideal. So then from the third quarter through to the end of the year, we took some proactive steps to adjust our inventory to the current or the business environment at the time and ensure the health of our route to market. That effort continued into the first half of this year, right? So we continued that through the first quarter, which is why you heard those comments from me earlier in the call. Plus on top of that, right, if you really think about the first half of this year, we're now lapping the inventory build from the previous year, right? So think of it this way, we have tougher comps, so to speak, as we're not building as much inventory going into the summer as we would have done last year. Given this, I think the way I would qualify it is we could directionally expect STRs and STWs to converge a bit more in the second half of 2025. So by the second half, we should be normalized out of kind of this trend from the first half of this year and the back half of 2024. So I hope that answers your question, Xiaopo.

I'll clarify because I tried to understand in plain English, I know you have a terminology, which is understandable, but a lot of audience on the call may not be as specific as you are. So should I say that the sell-in, you're more in line with sell-through in the second half of the year, that is what you're saying?

That's correct.

In the interest of time, our final question will come from Wenbo Chen of CICC.

This is Wenbo from CICC. I think my first question is about China. Could you share what the current development of our cooperations with Swire? And is there a possibility of expanding the area of cooperation in the future?

Thank you, Wenbo. I will take this question. As I mentioned, one of the focus is in-home channel. And also, you see the consumer trend in China turn to in-home as well. This is a risk and also opportunities. We are very careful to assess this partnership [indiscernible] in-home channels. Swire, where Coca-Cola as the partner we very carefully review and work with. In December 2023, we built a partnership with Swire Coca-Cola. We picked 2 province as a trial at the beginning, which is Hubei and Anhui province. We start to understand each other, build a model and run the trials. We see very good execution capability in Swire and also the strong in-home channel they have with their product. So this is an opportunity for both of us for their brand, for our brand, also to meet the consumer trends, which is the in-home channel. And first quarter this year shows quite good. We gained market share in those 2 trials programs, and we see the benefit already. And potentially, we think this partnership with Swire in in-home channel will benefit both for us, either top line growth and also financial results as well. So we will continue to work together to identify further opportunity for the future. And we feel the synergy we work together. I just met their CEO last week and the conversation, the partnership went very well. And we do have a big hope for the future, for the long-term partnership and more area for the future. In this moment, I do not have anything to announce for any steps. I hope I answered your question.

Okay. And my second question is about Harbin series. And currently, we already had a very successful execution of premiumization strategy and market showed confidence of our Budweiser's packaging upgrade. What about Harbin beer, we think market curious about the development of series? And what do you think the competitive edge of Harbin beers as a domestic product? And what do you think in future that it can be successful as our main brand in China?

I will have Iggy take this question again.

Thanks, YJ. Thanks for the question, Wenbo. I think you're completely right, right? In the premiumization side, we've been focusing there for more than a decade, right? And I think one of the competitive advantages we have is the deep consumer insights that led to the development of our demand landscape model, which you've seen, of course, in our Capital Markets Days previously, where we've mapped, right, the brand portfolio. Not just the Premium brands, but the entire brand portfolio is mapped to these differentiated kind of consumer occasions and consumer types because we know consumers need multiple brands with different positioning, right, to cover these different occasions. And then, of course, having a leading brand portfolio in the industry in terms of brand power, in terms of the portfolio options that we have available is great, right? We have both the brand power, which is a great proxy for market share as we continue to expand our distribution. But then we also have what we believe are the right brands, right, to fulfill consumer needs as they look for more experiences for added value in these different occasions in these states. So we're very pleased with our premium position. I think on Harbin, I spoke a lot in some of the other questions earlier today. But I think as YJ mentioned, right, it's one of our mega brands in China. We think it's uniquely positioned to win in both Core+ and Core++ because it combines kind of the best of both worlds. So you have this local heritage angle, but then we also benefit, as YJ mentioned, from best practices, these global innovation capabilities, right, which is one of the luxuries we have in our business. So some of the attributes, I would say, are kind of unique or differentiated for the brand. I think the first piece Harbin is a national brand. There's a lot of regional brands in China, but Harbin is a national brand. It has scale, right? It's a top 3 local brand in China. And then, of course, can leverage our national distribution footprint to kind of scale this heritage beyond its point of origin, right? Also, I would argue in many ways, Harbin is more than just a beer brand, right? It's a cultural icon as a brand. It has more than 120 years of history. It's the first beer in China, right? And it comes from a place that is intrinsically linked with beer, beer capital of China. Also a place that has a functional benefit and a functional story for consumers, right? The north. It's cold, refreshing which actually is very helpful as well. And I think we were touching on it before, but the idea of a superiority framework is very important, being able to assess liquid, package, communications, positioning, execution of the trade, all of these things, using a structured framework with discipline, right, which I think is one word you hear a lot from YJ and from me, it's really important, right? And we know we have a winning proposition. We test this, right, in a very disciplined way. Most recently, actually, we just enhanced the visual brand identity of Harbin. It's actually already in market as of May. And so this will further increase its relevance, particularly with younger adult consumers, right? So I think that helps, too. And then I think the momentum, I don't want to belabor the point because we discussed it, I think, at length. I think the momentum of Harbin Icy GD Zero Sugar is important, right? I think there aren't any regional brands or local brands that have access to partnerships like the NBA. So we need to take advantage, right, of the mega platforms that we have access to, make sure we execute them with discipline. So yes, we're very excited about the prospects for growth for the Harbin brand. We're committed to it, as YJ mentioned. And of course, there'll be a lot of focus on expanding in the in-home channel with the brand as well. So thank you for the question, Wenbo, and I hope that answers it.

This concludes our Q&A session today. I'd like to turn the conference back over to YJ for the closing remarks.

Thank you. As we progress through the year, we see opportunities for stronger execution in our China business, supported by continued momentum in South Korea and accelerating our growth in India business. Thank you all for joining us today, and I look forward to speaking to you soon.

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