Thank you. Good afternoon everyone, and thanks for joining us today.

It's been a very interesting quarter. We'll take a bit of time to do an introduction.

I'll make a few comments before I hand over to Vivek, and of course afterwards we'll very happily address all of your questions. Before we dive into the questions, I think this last quarter we can characterize by two very different realities.

On one hand, the beer category continued to accelerate, industry growth at approximately 13%, very positively supported by both premiumization as well as increasingly supportive regulatory developments, which we see across several states, which Vivek will also comment a bit more on, which makes us believe that this is really the start of a new era for beer in India, where we think the reforms increasingly recognize beer as a differentiating category, which will create a more favorable environment for long-term growth. Now, that's one side of the story.

On the other hand, in the quarter we operated through one of the most significant cost shocks that the industry has experienced over the past couple of years, referring of course to the Middle East conflicts that created substantial pressure across the entire value chain on packaging materials, logistics, foreign exchange rates, our export business, on the overall supply chain. Despite the headwinds, we're very proud that we delivered solid growth, that we very intentionally improved cash generation, and that we continue to strengthen the underlying business.

I'll talk a little bit more about that. First, on the top line, as you would have seen, our sell-in volumes increased by around 9%, while our sell-out volumes increased in line with the industry at 13%.

The gap between the sell-in and the sell-out is given by a very deliberate choice to reduce our in-market inventory, which went down by approximately 20% versus the same period last year. This we did to strengthen our free operating cash flow, given the external headwinds, and which also grew our working capital by 38% versus the same quarter last year.

The combination of strong top line growth, while being able to really protect the margins, and I'll talk a bit more about that, as well as deliver cash flow, gives us a lot of confidence that the fundamentals of the business continue to strengthen. Now, stepping back a little bit from the quarter, we believe that the broader industry context is becoming increasingly attractive.

If we look at Karnataka and the ABV-based tax reform, that represents an important milestone for the industry and for the beer category specifically, while we see also other states like Maharashtra, Jharkhand, and Andhra continue to demonstrate strong category momentum as well. We think it's very important to mention that this is no longer a story of isolated growth pockets.

It is something where we see sustained category expansion across regions and across segments. UBL, as a market leader, will remain very committed to playing our part as a category maker with strong brands, better innovations, but also through responsible advocacy as well as disciplined execution, a lot of which we have seen proof of during this quarter.

I'll talk a little bit about margins as well. At the headline, we see that the gross margin, 41%, was down by approximately 155 basis points versus last year.

EBITDA delivered 10.9%, while EBIT margin was 8%. Clearly, these are not the margins that fully reflect the underlying performance of the business, because the Middle East conflict created an estimated impact on our GP margins of around 300 basis points during the quarter alone.

We've of course spoken about this after the previous quarter, as well as on a recovery program, which includes pricing actions, a lot of procurement activities, as well as productivity measures, and that helped us to recover approximately half of the impact that we've seen, mitigating the impact to roughly the 155 basis points that we see on the reported financials. During the quarter, we've delivered over 50 crores through that recovery program, both on the top line, with accelerated pricing across a large set of markets, as well as revenue management initiatives, including trade spend optimization.

Again, some very deliberate choices, which Vivek will also elaborate on. Secondly, on the cost base through productivity, both in our variable and in our fixed, across functional efforts, where procurement, as well as supply chain, drove many initiatives to deliver savings, as well as quite a bit of cost avoidance.

On the EBITDA margin, I'm happy that we improved materially versus the previous quarter, from 6.5% to 10.9% in this quarter, despite this external cost pressure. While we expect that the inflationary pressure continues to be elevated, especially on the near term, we remain extremely focused on the disciplined pricing, the cost management, as well as productivity improvements, to protect our profitability for the short term, as well as the long term.

One thing that I really want to highlight, which also plays into the margin story, is the continuous evolution of the premium portfolio, one of the structural growth opportunities for us as well as for the category. During quarter 1 of this fiscal year, we reached an important milestone, which we didn't want to leave unaddressed, because we've spoken about this many times, and following multiple years of localizing production, optimizing our network, and improving execution, we can now proudly mention that premium margins have become accretive for the first time in the past quarter.

We believe this is structural, and the premium portfolio will continue the upward trajectory to become a meaningful contributor to profitability for UBL in the future. The premium volumes increased approximately 17%, if we exclude the intentional interventions that we made in some markets where we reduced the investments to mitigate the pressure of cost, and to also really protect profitability, where premium is led by Kingfisher Ultra, which continues strong momentum, but also very good to see Heineken Silver growing approximately 28% in the quarter, and really guiding the growth on the international premium segment.

To conclude, we really believe that this quarter demonstrates the resilience of the category and specifically our business. Industry continued to grow at double digits.

We are very happy in how we're navigating external factors while we really improve and strengthen the underlying business. Premium margins, I can't stress enough, became accretive for the first time.

We're very happy with the cash flow delivery, where we also think it's really strengthening the muscle of generating profitable growth. While we do think that the near-term volatility will remain, the confidence in the long-term opportunity for beer in India has never been stronger than it is today.

With that, I'll happily hand over to Vivek, before we address your questions.

Thanks, Jorn. I think you have captured most of it.

I would just say that, as you started, that, this was a quarter with two key milestones and, and two key events. I think first big milestone for us, where we made structural improvement, the work we have been doing for last couple of years, to get premium business in structurally right shape.

I think we achieved it. We actually achieved ahead of our glide path.

Now we can say that our premium portfolio is accretive to the business, and it gives us even more courage and conviction to ignite the investment. The second big milestone is, we, we talked about making structural improvement in business through our network design.

We, despite having very tough context on the war, as an organization, we stick to our long-term priorities, and the structural interventions. In this quarter, we achieved a lot.

We did our network optimization work in North with. We closed our Punjab brewery, which was not an easy, easy decision, but the right call from a business and profitability and long-term health of the business.

We transitioned to a partnership with ABB in Punjab. We had a choice to delay this transition, because a lot was happening, but as an organization, we stick to the plan, because it was important to take some short-term hits to get the right, and I'm, I'm proud that our transition is complete, and we are back on full force from this quarter.

The second milestone is related to network design is our, our can line in Telangana is commissioned. It is one of the record time in which UBL has commissioned a new can line facility, and I'm happy to report that last week first can was consumed by the consumer from the line.

The third important part, as part of the network milestones, is that our other projects where we were doing localization of premium in, in some of the states, we were improving better product, production excellence related features, they've also been completed. On one side, good milestones.

At the same time, I think it's a revolutionary movement for the category. I, I can actually say that I think the beer category, after all the efforts of differentiating versus rest of the alcobev, is paying off.

The Karnataka move is a revolutionary move, and we have been seeing that category is now growing, higher of 30, 35% in Karnataka, and in some months, in recent months, is actually up more than 50%. We saw the similar intervention in Maharashtra last year, and category continues to grow upward of 20% in Maharashtra.

We saw privatization of retail happened in Jharkhand, and we have seen the category size has significantly increased. It gives us a lot of confidence that it is not an isolated event.

The more governments are looking at beer as a separate go-to category, and this is going to be revolution for us. Most important for us, during this turmoil phase, where the costs have really gone up, I think we have delivered our plans.

We had three priorities as a company. Number one, we wanted to make sure that we are increasing our brand power.

I am happy to report that, based on the recent data, post-peak summer quarter of April, May, June, our brand power as a company has improved. On brands like Kingfisher it has improved, on Ultra it has improved, with Heineken it's improved.

We have emerged stronger, from the brand power. Second, we continue to drive focus on premiumization and sell-through.

We, we, our sell-through volume increased 13%, and we took the right call to ensure that we, we reduce inventory so that we can offer fresh beer to consumers, specially getting into monsoon. This was a learning from last year.

Also, at the same time, we create working capital, because cash is king in, in this scenario. Third area, which is extremely critical, we make choices and tough choices to get the structure right in the market.

We reduced trade discounts where it was needed. We made sure that we are not unnecessarily, taking big losses to serve a market versus working on structural solutions for the long-term health of the business.

We improved productivity in our organization. We created a lot of cost initiatives.

Despite having a 300 bps of impact on behind the war, I think the team was able to mitigate a large part of it. We actually, the most important thing is, we actually took pricing intervention in 22 states, and that have been all implemented.

When we take the pricing implementation, it takes time, it takes transition, but by end of this month, we are now live in 22 states with the pricing implementation, which again tells us that we, we were not chasing business at any cost. We did the right thing, and we are also able to create a large level of network with the stakeholders so that they can understand how the category is going to a bad phase, and leveraging BIR, we were able to do a lot of things.

The outlook for the category is looking positive. I expect, we are hearing positive news coming out of some of the other states, where they are looking at Karnataka model, where they're, where they're also discussing with us on what needs to be done.

Let's hope, since nothing is firmed up, but we, we think this momentum can actually further build up. The other thing is a lot of people ask that this volume result is based on good summer.

I think definitely based on good summer, but when we go deeper into it, there are big states where the category is still down, despite having very good summer. The states which are actually accelerating are having good summer, but mostly good strategic reforms, which are leading to the multiplication effect.

Some of those reforms, hopefully, will be there for rest of the year, and this category momentum should continue. With this, I'll hand over back to you for any questions.

Hello, everyone. Thank you for taking my questions.

I have two questions. First would be, we have seen contract brewing weighing on the price mix.

Could you just highlight some more color, was the contract brewing more than the 20 to 25% range which was highlighted previously? Also on the other side, do you also see any impact in Maharashtra from MML, that is Maharashtra-made liquor, because, and I'm talking about more towards the mainstream portfolio.

Are you seeing any substitution from beer category into the lower-end spirits category? My second question would be, could you just please remind us what is your fiscal year '27 ambition?

Is it still double-digit top line growth led by high single-digit volumes? Thank you.

Yeah. I think let me answer the Maharashtra and the other question.

I think it's very difficult to see the data on how much is the MML impacting beers. Based on the recent data, we haven't seen much of the impact.

One thing we're definitely seeing in Maharashtra, there is strong growth happening at economy segment. Definitely affordability is becoming extremely critical for the consumers, and we continuously see, at the economy end, there is significant growth happening in Maharashtra, which is more linked to affordability.

Whether there is a direct impact of beer to MML, I think is yet to be seen. On our '27 ambition, I think we absolutely believe that it is critical that the category continues to grow at high single digit, and our goal is to, of course, grow ahead of the category in the profitable, balanced manner.

We do expect our ambition is still to have double-digit revenue growth, business growth, and with strong momentum on premium, which we have done in the last 2 years. At the same time, we are also ensuring that we continue to improve our brand power and strengthen the portfolio so that we can continue to build this category.

On contract?

Sorry, yeah, to address the first question on contract brewers. Yes, the volume through our contract partnerships is growing ahead of the overall volume, which is in line with the plan, because we also expanded our footprint through our partnerships in locations where we saw growth.

I think also coming out of the summer, we were happy to be able to deliver those volumes for which these partnerships were contracted. On the accounting side, it has a dampening effect on the revenue growth, because actually we report this as one line in our accounting.

Hence also inflationary pressure there dampens the revenue growth. That combination of those two factors is what you see in the reported number versus last year.

Underlying, we're very happy with the 9% volume and the approximate 12% price mix right there.

Thank you so much.

Hi. Good evening.

Just on this follow-up from the earlier question, how much was the impact in the source mix for this quarter? Just wanted to understand how to look at this going forward.

Secondly, given that these states are delivering exceptionally high growth where we are contracted, is there a plan to kind of look at own manufacturing in these states? Are those states conducive for that?

That's my first question.

I think let me answer the second question. I think your first question was on the source mix again, right?

Sorry, because your voice was breaking. You were asking what is the source mix?

Sorry, Harit, your voice was not clear

in the first... Can you hear me?

Can you hear me now? Is this better?

Yes.

Yes.

Yeah. My question was on how much was the source mix for the quarter so we can get a sense of the real revenue growth.

The question was, given that these states where we have contracted breweries, those states are showing very strong growth, just wanted to get your sense of whether there is a thought process here of having own breweries, etc. in them as well.

Yeah.

I think let me answer the second question as I'm coming with the data on this one. I think, look, I think what we are seeing is our own breweries are also getting full.

Like Karnataka is a good example where we have two breweries, and Karnataka policy started happening only in the second half of the quarter. Maharashtra, we have our own breweries, but we already have a plan to have a greenfield in UP, where today we are in contract brewery.

We also done the brownfield expansions with two can lines, one in Maharashtra, where some of that requirement was served through the contract breweries, and also now in Telangana as well. Yes, we have been investing in our own breweries, either in expansion, but I think the main thing is we look at the potential of a state, how much is the growth potential today, the stability of the policy, our portfolio gap, and then we make the call.

We believe that it's a good mix of having our own breweries and contract breweries, because it's a highly capital-intensive business. We need to also make sure the return on capital invested is also into account.

It is going to be a good mix. We consistently invest in our breweries.

The two can lines are in our own breweries. The greenfield is our own brewery.

At the same time, we also invest in the contract breweries wherever is needed. We consistently are looking at our network.

Yeah. No, and

indeed, I think that, like Vivek mentioned, the capital intensity also means that and the CBUs give us flexibility. If we see sustained growth of a category across states, that for us triggers the thinking around where do we think is feasible, and that's what happened, for instance, in UP, where we see that the opportunity is long-term and we'll stay, and then we'll move also to investments.

To your earlier question on the CBU, it's approximately 4% impact in the quarter.

Got it. The second question was if you look at premium now as you said is accretive to the margins, just wanted to understand that the earlier thought process was that you would require a higher share than it is currently to make that accretive.

Is it that your accelerated localization efforts have driven a sooner than expected milestone here, and would premium be in the low double digits, 11, 12% type of your total mix right now? That was my second question.

I think there's two things. On the premium and the being accretive, yes, you are absolutely right.

It's about tipping the scale on the size of the business where the localization helps. Being closer to the market also helps the collection of bottles, which is the underlying factor which really helps to drive the profitability.

The other thing is what I think we did well and where we accelerated is the interventions that we did through the revenue margin team and really looking at trade discounts also for the premium portfolio. That has helped, and as probably has also accelerated a bit the delivery on margins, where we structurally looked into the business and how can we optimize, where we have been more deliberate in choices, and that helps to drive the profitability.

Fantastic. Third question was, you mentioned about price increases.

What is the extent on a weighted average basis of these price increases that you would have got in these 22 states? Just wanted to understand how to model price increase component over this year.

I think it's always a very mixed bag, and also looking at how do we serve the consumer best and how does it work across the value chain. We would say that it's between 2.5 and 3%, but accelerated through other initiatives around price laddering and trade spend.

Great. I'll come back in queue for more.

Wish you all the best. Thank you.

Thank you.

Thank you. My first question is on the trade spend.

You said that wherever needed from the long-term health of the company, you have reduced the trade spend, and you also did mention that you don't want to do business at any cost. I wanted to understand there is an IPO for a large multinational company, and generally the valuation is linked to the exit quarter sales, etc.

We are picking up that there is some level of increase in aggression by that player. Are you responding to that, because it seemed you are not responding, and is that impacting you in any way, either in terms of share or in terms of say placement, etc.?

Thanks, Abneesh, for asking the question. I think one of the key focus area for us is to really build very strong brand power and pull for our brand.

As you said, in holistic package, which includes investment in sponsorship, trade spend, distribution, all of this put together, I think I'm very proud that we are able to grow brand power, which is consumer-centric data on this, and we continue to increase the brand power. We have seen the increased investment in the category, which on one side is good for the category, because there's more interest in the category.

At the same time, I think it is extremely important that we do the business responsibly. I think the state where we don't make enough money, and pricing and margins are very thin, spending more money to push the product with the trade discounts doesn't make sense.

At the same time, we work with the retailers to create value creation initiatives. We are working with retailers to actually create initiatives which actually help them to create category.

We have placed 50,000 coolers now. We did not put a break on our cooler program, which is also seen in the depreciation numbers, because that is the right thing to do when the category is growing.

In states like Karnataka, Maharashtra, with the go-to-market executions, where we are now able to clear the retailers claim within 20 days, which used to take 6 months. We are using technology to better predict the out-of-stock and giving them the service.

We have reduced 20% less inventory and bringing better ROI for the retailers. We are actually moving our capabilities from being just push-driven to actually building category and building business for the retailers.

In most of the cases, we have got very strong conversations and very good alignment with the retailers. At the same time, we have been brutally honest and transparent, the impact on the margins and the cost because of the war impact.

The data is absolutely clear that the states where our EBTs are very low, we actually don't make money, and it's very difficult for us to invest the money in pushing the product. It is always a balance.

We are not playing in isolation. Having said that, we are making the choices.

We are also challenging our own cost structure to really see that where we can actually reduce the inefficiencies so that we can invest behind customers, consumers, and our products. Short answer is, yes, we are seeing impact.

For example, Haryana is one state where we saw significant drop because we significantly reduced the trade spend. It is also one state where the product is not sold on MRP.

Consumers is actually paying much more than the beer should be. I think there's no point in feeding those margins when it's not going to the consumers.

I think we have made those choices.

Understood. Second question is on the price hike and the cost inflation.

You had given out very upfront that number of the cost inflation due to war. Now, we have a bit more understanding of war, plus you have got now price hike in most of the states, which is also reasonable price hike.

Now, how do you see Q2, Q3 cost impact of the war? Yeah.

Look, I think no one has a good understanding of the war and it will remain volatile, we remain a bit cautious. That being said, and also seeing that our recovery program really kicks in, we do revise our full-year impact downward, where we said 400 to 500 crores, we now think it's more on the lower side of that range, between 350, 400 crores impact.

In that sense, we're slightly more positive. Overall, we see the volatility is high, we can see oil today and how it moves, every day is a new dawn.

We keep being very vigilant on how we treat it from a recovery point of view.

Sir, last quick question on the demand side. Some of the large states are doing very well for you, Maharashtra 20% volume growth, Karnataka 20% to 40% or maybe even higher.

What are the laggard states, if you could discuss? How is your performance in those laggard states, say versus competition, and what will be the outlook in such states?

Now, peak season is behind, but anyway we will see the YoY numbers. If you could discuss the laggard states pulling down the number.

See, we do have a, see,

we have a national business. Of course, there are states where we have made choices.

I gave an example of Haryana, where, we had to reduce the trade discounts because the business was not viable, and that had an impact on us. We also had an impact in state like West Bengal, because we import, used to import a lot of products from other states, and it did not make sense, at an inflated cost, to pay higher taxes and other things to do that.

We do have structural plan in next few months, where we will see more capacity in that state, which will mean that instead of relying on, these short-term volumes, we will actually have volumes to serve the market to really do that. We also working a very good plan in Haryana with the retailers to actually work a joint business plan to show them the value of what we can bring in the market.

It is it is state by state. As I said, we are seeing more positives where they are reforms, but we also have states where, we we we still are in negotiation with the government on on on pricing and the viability of the business, and it is difficult for us to invest more commercially till our our our margin structure make the business sustainable.

I think it's a it's a matter of doing the right thing for the business, but also the right thing for the category. In a whole, as Jorn said, we feel the outlook is positive.

We have got more positive response from the state governments and corporations that 22 states is a is a huge number when we are saying that we are implemented our revenue and pricing plan, which is now in market from this month of month of July. We feel that, we'll be able to grow shares in the coming quarters.

Sir, 22 states is a large number. One question on Haryana I had, I'll end there.

If it is unviable for you in Haryana in the short term, is it also unviable for other players, or their scenario can be a bit different?

I think everyone's scenario is very different, because the portfolio is different, ability to have local manufacturing of different format is very different. I think it's all about making choices, right, and it's also about the network part of it.

Sure. Thank you.

That's all from me. Thank you.

Hi. Thank you for the opportunity.

A couple of clarifications. The first one was on your differential in sell-in and sell-out volume growth.

Was this specific to the quarter, or do you anticipate that the inventory rationalization piece is kind of behind us, and both these growth rates will now be more aligned in the quarters ahead?

Yes, I think this was primarily for the quarter, because usually we build the stocks, and we say that when you come out of the season, you need to maintain a certain level of inventory. Based on our last 2 years learning, and getting more smarter analytically, we were able to do more deliberate attempt to really do that.

We still are working on stock norms in many of the depots, both for ours as well as for our partners. I would say that mostly you will see our sell-through and sell-in in line, but we will not hesitate to take corrections, because the fresher the beer, the better it is.

Because many of the inventory points are actually government depots, and we still are working with the new tools to really understand what is the right replenishment model, we get the freshest beers and high rotation, and given that we are also focusing on premiumization and, in many cases, economies that need so large number of SKUs are added now. We are working through it, but we expect this to be more in line, but as I mentioned to you, if we find opportunities, we will continue to correct it.

If I can add one thing is, in this quarter, I think we were specifically bold also to make sure that we protect the cash flow from any shocks that we couldn't anticipate upfront. I think that's where maybe we were a bit bolder than we otherwise would have been.

Another element that we cannot underestimate is the reliability of our supply chain. Given the high seasonality of the business and the fact that it's capital intensive, as was mentioned before, there's a lot of reliability around stocking up to be able to source the season.

I think the increased reliability of our supply chain on delivery also led us to lower stock levels throughout the season, because we knew that production would be able to cover the demand. Now, for the full year, we don't expect that inventory levels will be lower exiting December 2026 versus the previous year, because we still build stock for the peak season ahead of peak season really happening, and that starts at the end of the year.

As an exit for the calendar year, I don't expect material changes in inventory, because that's required and obviously relevant to peak season.

Sure. No, this is very useful color.

The second bit, I heard your optimism on volume growth and the traction that you're seeing on account of policy reforms. When you look at Q2 and Q3, and maybe even Q4, the volume numbers, there is a low base, right, from a volume perspective for you.

Is it fair to assume that we are getting into a double-digit volume growth trajectory for the rest of the year, or at least close to it? See,

we are hoping that. That is how we are building the plan.

I think you're right. There is a base there because of the seasonality.

We are in a better position on our inventories, sell-in versus sell-through, and we continue to see the momentum on the category. Definitely, in the coming months, coming couple of quarters, we should be seeing a double-digit growth, unless there are big roadblocks in the policy or something else come, which we are not predicting, but definitely, the data is pointing to that.

Understood. The last one on margins, do you think 41% gross margins that you delivered in Q1 is kind of the bottom, because you have taken pricing interventions in 22 states, which will get fully reflected in coming quarters, there has to be an operating leverage benefit, plus the fact that your cost impacts is now at the lower end of the earlier guided range?

Is it right to assume that gross margins kind of bottomed out in Q1, and they can progressively stay here or possibly improve depending on how raw material inflation plays out?

As you mentioned, a lot of dependencies here. I think important to note here that we don't necessarily take this as a quarter-by-quarter guidance or deliverable.

Over time, we look to expand our margins whilst making the right choices, and whether that has to do with the supply chain network, investing behind the brands, whether it's the right choices on portfolio or inventory. That will be our guidance.

Over the longer term, we're still looking to expand margins, absolutely. Is it the absolute bottom?

I'm not going to commit to it, but of course we do look to expand margins quarter-over-quarter.

All right. Just for a better understanding, you called out the source mix impact of 4%, your reported price mix growth was negative 2%.

I just wanted to understand directionally how these two numbers will change or behave in the coming quarters, given your growth agenda and capacity plans.

That will continue to be there. We have a hybrid network between contract brewers and our own assets, so that will continue to be there and will continue to also be part of the reported financials.

Our underlying price mix is plus 4, right?

Yeah.

Sorry, could you repeat, Vivek? Sorry.

I'm saying our underlying price mix is actually plus 4%. I think the role of contract manufactures will remain, and will continue to accelerate business in our own breweries, but we expect the business to grow in their breweries as well, the ratios will still remain.

Okay. It should lag on that.

All right. Thank you, gentlemen.

Thank you so much, team, for answering these questions.

Thank you.

Thank you.

Hi, Vivek. Three questions on a structural basis.

One, while you had a very good summer season, it is also true that the 7-year CAGR in terms of the summer season has been about 6% top line growth, right? I understand there are many factors which is outside the control of the industry and the participants, whether it is war, whether it is seasonal patterns.

Do you see this changing, and therefore, if not, then are you still dependent on the vagaries of the weather? See,

I think you said that 7-year CAGR is 6%, I think this quarter has been 13%. It's almost double the category growth.

That's what I'm mentioning, it's not only the summer season, because summer has been there in many states, and I think it is summer season plus significant reforms which are now translating into category growth. I talked about it's the beer revolution happened in few states like Karnataka or Maharashtra last year, or the change of this reform, which is showing that if it is in the right direction, the category growth and the potential is much higher.

Okay.

Sorry to harp on this, but still the seasonality does remain a factor, right, for the industry, and will it stay like that always? Absolutely.

It has to be. You drink beer when it is hot.

Last year also, in the season, our volume growth was more than 8%. There is a seasonality factor, but there is also seasonality plus reforms, which is accelerating it even higher.

Okay. The other two questions hark back to the analyst meet that you had a couple of years ago.

Vivek, you had pointed out that 75% of Indian customers start out with beer, and then subsequently their share of throat, as so to speak, is only about 20%, right? One of the longer-term targets that you had was to ensure that you retain a decent chunk of these customers.

I know still early days, 2 years is still early from a strategy perspective. Could you highlight the efforts and the success that you've seen on that front?

No, I think it's a great question. Absolutely, I think we are consistently working our innovation pipeline and our brand plans to address that.

Few things which is already working, we launched Kingfisher Strong Smooth innovation, which is actually growing share every month. The share is better than the previous month, and we are getting very, very, very strong repeats, because consumer trend is towards smoother beers.

Our Heineken Silver business is up 28%. Heineken Silver beer is again which is about one of the beer which is only from barley, hops, and water.

We also having the right premiumization there. We are actually expanding the portfolio mix on Heineken Silver in many states.

We are launching Heineken Silver in states like Kerala. We launched Heineken Silver in Haryana.

Our innovation program is working. Third is we also looking at craft beer in many states, because that also improves the consumption and more consumption occasions.

We also have a strong innovation pipeline, which I don't want to talk much, which addresses some of the share of occasions things which you are talking about. This is absolutely on top of the mind, and that's why I started off saying the good part is the brand power is improving, which means some of these actions what we are taking is actually being recognized by the consumers, and we are seeing that is only going to accelerate.

That's very encouraging to hear. Another thing, Vivek, that you highlighted in the analyst meet a couple of years ago was that beer penetration, consumption drops off significantly out of the large cities, right, and your vesicular expansion plan was to ensure that this doesn't happen.

While you have highlighted the extent of the vesicular expansion, can you just also highlight as to whether the outside of the larger cities that demand is picking up?

Absolutely. In fact, we are actually ensuring there are disproportionate allocation in the smaller cities.

In fact, activation in the smaller cities have significantly improved. It is also showing in our share data.

In some of the states, we got the data by city, and it's showing that we have much higher shares and category growth in some of the tier 2, tier 3 towns behind these efforts. It is a start, because the number of stores are still a limiting factor.

As there only 100,000 stores which are selling beer, and we're using some of this data with the stakeholders also that why is it required to have some more stores in tier 2, tier 3 towns, and how the cold infrastructure is critical to drive beer category growth. We also partnered with BCCI to actually activate fan parks in some of these tier 2, tier 3 cities, where we actually brought the IPL experience to these consumers, and in wherever we piloted it, we saw a massive response.

Yes, there's a lot of work happening in tier 2, tier 3 cities.

Very useful. Thanks, Vivek.

Hi. Thanks for taking my question.

Wanted to understand a bit more on the premium beer side of it. What kind of a level of the premium beer can help us to offset this input cost inflation, because I believe that input cost inflation will be persistent kind of a feature going forward as well.

If we grow the premium beer to certain extent, then obviously that could be offset. What level of that premium beer can offset this kind of a input cost inflation on an ongoing basis is the question.

Unfortunately, I think it's a very less leverage on the scale there, because the beer is a very low-margin business. I think we need to just have the right pricing and right revenue structure by SKU and by brand to make it happen.

If you make it too expensive, you just say we can price it premium, because the consumer is only willing to pay a certain price on premium as well, right? Affordability across the tiers is important for consumer to do that.

I think localization has helped, but we need to just get our revenue structure and the cost structure right. Most important thing is, with the inflation, we need to price it right, we have to have the ability to recover the price, we have to balance our trade spend to make sure it's there, and we need to make sure the design of the product is right so that we are not adding inefficiencies on the product or in the network.

Understood. Any sense on the volume and value share of the revenue pie that the premium beer is sitting right now?

See, premium is almost 10 to 11% of our revenue, and we only expect this to increase, the saliency of premium to increase. As I mentioned in previous calls, we have aspiration that premium will become almost 20% of the revenue, and we are on track on that.

Understood. Also if you can share some bit of insights into the cost efficiency measures and the cost efficiency programs that we had, what is the status and the timelines on the same?

To start with the last part, the timeline is continuous. We are delivering and we're also very aware that this is a continuous effort.

To Vivek's previous answer, in a market where it will, at least for the short and medium term, always be difficult to translate cost hikes into pricing, we very much rely on cost efficiencies throughout any period. If I can elaborate a little bit more on ongoing initiatives that help to deliver on the productivity, we can talk, for instance, with the procurement team to really look into what are the longer-term partnerships, what can we do in forward buying to make sure that we lock in price.

We talked about recipe flexibility, where we see how can we optimize both the utilization of our supply chain as well as be flexible in terms of recipe, where we look how can that contribute to a better cost base. We look very closely at investing in the organization, to really make sure, and we've done a lot of investments in the organization in the past, but now we really look where can we add value and where can we accelerate growth through investments, and just remain very strict on overall budgets to make sure that let's call it the cost consciousness and the cost-saving muscle within the organization is a constant development, we can leverage it not just to navigate current headwinds, but for us is really the foundation of building a strong business for the future.

Understood. Quite helpful.

Thanks.

thank you everyone for asking the question. As I said, this quarter has been a tipping point for the category with some of the policy changes which has happened, some of the discipline what we have brought in the organization.

We still are not out of the woods because of the war, but having said that, as a company, we are much better prepared. We were the first one to declare the impact so that we could plan.

We took strong actions. We believe the category growth momentum will continue, and our choices are working.

We look forward to seeing you next time. You want I hand over to Jan?

Quickly do the announcement before we end it here. It's a quick intro just what's coming to your way is that we're planning a capital markets day early September to basically give a bit more lens about the industry in total.

Like we mentioned before, we feel like we're at an inflection point, really at a revolution of time in the beer industry at the moment, and we feel we can give a bit more total lens of what's currently happening and our position in the total market with that. More information to come, but just make sure to keep an eye on the email, and we'll share it shortly with all of you.

Thanks, Jorn. We really look forward to hosting you for this day, because I think it will be good for you to see what plans we have in store, but also to get your thoughts as well.

Jan, anything?

Thanks, everyone. Thank you.