Budweiser Brewing Company APAC Ltd
HKEX:1876
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Budweiser Brewing Company APAC Ltd
Earnings Call Analysis
Q1-2024 Analysis
Budweiser Brewing Company APAC Ltd
Budweiser APAC demonstrated resilience in the face of a soft industry by delivering EBITDA growth with robust margin expansion in the first quarter of 2024. Despite a 4.8% decrease in volumes, the company's strategic focus on premiumization and revenue management initiatives allowed it to achieve a net revenue per hectoliter growth across key markets such as China and India. The group's margin expanded by more than 200 basis points, a testament to successful premiumization and cost efficiency measures.
In China, Budweiser APAC managed to navigate a challenging environment marked by a 6.2% decline in volumes and a 2.7% drop in revenue due to the cycling of channel reopenings from the previous year and adverse weather conditions. Yet, the company succeeded in growing its revenue per hectoliter by 3.7% through a favorable brand mix. Key innovations, including Bud Supreme and Magnum, saw double-digit growth, contributing to a 2.5 percentage point increase in combined Premium and Super Premium volume rates.
Budweiser APAC is also capitalizing on its digitization efforts, having expanded its digital reach to over 265 cities. Moving forward, the company plans to leverage technology to further enhance its commercial capabilities and drive value creation for its stakeholders. This digital transformation is expected to strengthen Budweiser APAC's market position and operational efficiency significantly.
The company has rolled out several targeted marketing campaigns to bolster its brand presence. For example, Budweiser 0.0 will be introduced nationwide in China, starting with the Olympic qualifier series in Shanghai. Other campaigns include Blue Girl continuing to sponsor Hong Kong celebrity concerts and Corona partnering with Ctrip to offer unique travel experiences. These initiatives aim to connect deeply with consumers and sustain growth across various markets.
In South Korea, Budweiser APAC achieved strong EBITDA growth with significant margin expansion, driven by a powerful brand portfolio and effective revenue management. The company grew its market share with brands like Cass, HANMAC, and Stella Artois gaining traction in both in-home and on-premise channels. New product launches, including Cass Light Zero Sugar, resonated well with the market's increasing demand for health and wellness options, further solidifying Budweiser APAC's market position.
Budweiser APAC continues to outperform the industry in India, achieving double-digit growth in both volume and revenue. The company holds a commanding 67% market share in the Premium and Super Premium segments, with Budweiser now being the fourth-largest market globally for AB InBev, the parent company. The focus remains on accelerating premiumization and enhancing profitability through cost management initiatives.
Sustainability remains a core focus for Budweiser APAC. The company has achieved an over 25% carbon emission reduction across its value chain in China, two years ahead of its climate action target for 2025. These efforts showcase Budweiser APAC's commitment to sustainable growth and environmental stewardship.
Budweiser APAC forecasts continued margin expansion driven by ongoing premiumization and operational efficiencies. Despite external challenges, the company remains confident in its strategic direction and its ability to create value for shareholders. Upcoming summer campaigns across the portfolio are expected to capitalize on growth opportunities and further solidify market leadership.
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Welcome to the 2024 First Quarter Results Announcement Conference Call for Budweiser Brewing Co., APAC Limited. Hosting the call today from 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 3 months ended 31st March 2024 can be found in the press release published earlier today and available on the Hong Kong Stock Exchange's Budweiser APAC's websites.
Before proceeding, let me remind you that some of the information provided during this result call, including our answers to your questions on this call may contain statements of future expectations and other forward-looking statements. These expectations are based on the management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. It is possible that Budweiser APAC's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.
Budweiser APAC is under no obligation to and expressly disclaims any such obligation to update the forward-looking statements as a result of new information, future events or otherwise. For a discussion of some of the risks and important factors that could affect Budweiser APAC's future results, see risk factors in the company's prospectus dated September 18, 2019, the 2023 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 2022. 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 discloses the consolidated profit, EPS, EBIT and EBITDA on a fully reported basis in the press release published earlier today. Further details of the 2024 first quarter results can also be found in the press release. It is now my pleasure to pass the time to Mr. Jan Craps. Sir, you may begin.
Thank you, Mike, and good morning, everyone. Thank you for joining our earnings call. I hope you're all doing well. In the first quarter, we delivered EBITDA growth with robust margin expansion despite a soft industry. Net revenue per hectoliter grew across all our key markets as we continue to premiumize and drive our revenue management initiatives. Our group's margin expanded by more than 200 bps, driven by premiumization and cost efficiency.
Now let me provide you with more color on each of our key markets. In China, continued premiumization, combined with cost efficiencies, drove gross profit and EBITDA margin expansion. Revenue per hectoliter grew by mid-single digits as we benefited from a better brand mix with Premium and above revenue continuing to grow despite a high base.
Budweiser Innovations, including Bud Supreme and Magnum, grew by double digits with a contribution from Budweiser and Super Premium expansion cities to total revenue also increasing. From a channel perspective, we continue to premiumize within each of our channels, which resulted in our combined Premium and above volume rates increasing by 2.5 percentage points.
On the digitization front, we've expanded these to more than 265 cities. With this successful scale up, we are now focusing on leveraging technology to further enhance our commercial capabilities and drive value creation for all our stakeholders. We continue to invest in our mega brands and mega platforms to connect further with consumers and drive growth. We will launch our sports now with our party summer campaign alongside the nationwide introduction of Budweiser 0.0 starting with our partnership with the Olympic qualifier series Part 1 being held in Shanghai.
Blue Girl will continue to sponsor Hong Kong celebrity concerts and leverage its Explore More, Taste More summer campaign to further elevate its vibrant Hong Kong positioning. Corona will strategically partner with Ctrip to connect with Chinese consumers over their passion for travel and provide an unwinding travel experience. This summer, we will launch Corona Cero in non-alcohol beer and Corona Light to further accelerate Corona's expansion and grow our leadership in the Super Premium segment.
This year, Harbin became a partner of the NBA, with Klay Thompson, an NBA Champion and All-Star as a brand spokesperson. Furthermore, we introduced Harbin Icy GD Zero Sugar, targeting the legal drinking age generation and the growing health and wellness trends with volumes more than doubling since its launch.
In South Korea, we gained market share and delivered strong EBITDA growth with significant margin expansion, driven by the power of our brand portfolio and effective revenue management. We gained total market share with Cass, HANMAC and Stella Artois, all growing their market share in both in-home and on-premise channels.
In the first quarter, we launched Cass Light Zero Sugar, targeting increasing demand for health and wellness. We also drove great consumer interest with a permanent addition to our portfolio of Cass Lemon Squeeze and Cass Lemon Squeeze 0.0, 2 popular limited editions from last summer. This summer, we will launch Cass Zero in the on-premise channel as we leverage our partnership with the Korean Sports and Olympic Committee.
In India, we continue to outperform the industry in the first quarter with volume and revenue growing by double digits and our Premium and Super Premium portfolio revenue also growing by double digits. Before I pass it over to Iggy, let me update you about the progress we are making on our sustainability initiatives.
We have achieved an over 25% carbon emission reduction across our value chain for China, 2 years ahead of the climate action target for Bud APAC in our 2025 sustainability goals. I also hope that you can join our upcoming sustainability webcast, which will be held at 4:00 p.m. Hong Kong on time on Tuesday, May 14. Please refer to the Bud APAC website for more details. With that, 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 first quarter, Bud APAC's volumes decreased by 4.8% against a difficult comparable for the industry in 2023 in both China and South Korea. Revenue per hectoliter grew by 4.6%, driven by continued premiumization in China and India as well as revenue management initiatives in APAC East.
This revenue per hectoliter growth mostly offset the volume decline, resulting in flattish revenue decreasing by 0.4%. Cost of sales per hectoliter increased by 0.4% as cost management, productivity initiatives and slight commodity tailwinds mostly offset any cost escalation from premiumization. This led normalized EBITDA to increase by 4.2% and a normalized EBITDA margin to increase by 153 bps, driven by gross profit margin expansion.
In China, volumes and revenue declined by 6.2% and 2.7%, respectively, impacted by the cycling of channel reopenings in the first quarter of last year as well as adverse weather in March of this year. Despite this context, our revenue per hectoliter increased by 3.7% as we benefited from a favorable brand mix. Normalized EBITDA increased by 1% with a margin expansion of 145 basis points.
In APAC East, volumes decreased by 4%. Revenue grew by 5.2%, however, as continued revenue management initiatives drove a revenue per hectoliter increase of 9.6%. Normalized EBITDA continued to improve quarter-on-quarter, increasing by 18.7% versus last year, with a margin expansion of 334 bps. And with that, Jan and I are here to answer any questions that you may have.
[Operator Instructions] Our first question comes from Anne Ling at Jefferies.
Hi, management team. Can you hear me?
Yes, I can, Anne. Good morning.
Yes, I have 2 questions both regarding China. So let me start with the first one. Regarding the operating environment in China, would you share with us the operating environment trend so far? And do you have any plan to raise your price this year? That's my first question.
Thank you, Anne. Thank you and good morning. Yes, I think when you look at 2023, so last year, the industry evolution sets the high base really for the first half year this year. So when you think back last year, after the first COVID wave, which finished in January, we saw a strong growth momentum driven by the COVID recovery euphoria really from February, March, April into the start of May.
Then when you looked at May and June, the industry was impacted by the second COVID wave. When you look at the second half of last year, the slower economy negatively impacted industry performance and then especially the core and the value segments. So that's kind of the movie, if you will, for last year.
So when you look at this year in Q1, you would have seen our volumes declined mid-single digits, which was really impacted by the cycling of the tough comp from the reopening of last year, combined with a soft industry and also adverse weather in the month of March. If you look at what would I expect for this year, we would expect the second quarter to be another quarter with a high industry volume base.
Unfortunately, also some further rather impact, especially in our geographic footprint, Guangdong-Fujian. However, if you look at the second half of the year, we will lap a declining industry.
Then to your question on pricing, I would always start by saying that the main driver of our revenue per hectoliter, which in the first quarter was mid-single digits, that growth continues to be driven by brand mix. So beer is continuing to premiumize. If you look at the rate front, which is less impactful for us in China, we did do a small price increase in the premium and Super Premium segments, the segments that we are leading. I'm talking about last November, so about 6 months ago. We did not take any nationwide price increases in the other segments, considering the current macroeconomic environment. So I hope that answers your first question, Anne.
Okay. Okay. Got it. And my second question is you just talked about the premiumization. So what is your view regarding premiumization trend in China and the current environment? And would you also comment on the beer volume performance at different price points, i.e., the RMB 8 to RMB 10, RMB 10 to RMB 12 and the RMB 12 to RMB 15 which is the Super Premiums? And which one do you think that has the highest potential?
Yes, sure, Anne. I think the short answer would be that the biggest opportunity in China continues to be premiumization. So in our definition, which has been quite consistent, different than some of the other brewers, I think, we distinguish between the premium segments, which if you take a Chinese restaurant to describe the pricing, a big bottle of premium beer is typically between RMB 10 and RMB 15.
So Budweiser is a leading brand, typically between RMB 10 and RMB 12. And then we have line extensions like Budweiser Supreme, Budweiser Magnum, which are between the RMB 12 and RMB 15, if you look at the big bottles. When you look at the super-premium segment, small bottles would be above RMB 12 in a Chinese restaurant. When you look at comparable sizes, so big bottles, they would be above RMB 20, typically RMB 20, RMB 22, RMB 25.
So in that segment, Blue Girl, Corona, Hoegaarden are our leading brands. If you think about the medium to long term, most of the profit pool in China will actually come from these premium and super premium segments. And we often get the question, so we actually did the work recently now that all the competitors have reported their full year results. And according to our estimates, we continue to lead and grow the Premium and Super Premium segments in China.
We estimate that we grew our market share in Premium and Super Premium last year, both in volume and in revenue. If you look at the shorter term in Q1, our Premium and above portfolio revenue continued to grow despite a high base of last year. But innovations like Supreme and Magnum continue to grow double digits. So as a result, our combined Premium and Super Premium volume rates increased by 2.5 percentage points.
Now to the other part of your question, when you look at the RMB 6 to RMB 8 space, we call it Core+ and Core++. Because typically, the brands in Core++ are actually Core and Core+ brands that have created line extensions to trade up consumers from Core to Core+ and then to Core ++. In that segment, Harbin Icy is our lead brand. So in Core+, which is actually supporting our route-to-market expansion to accelerate our premiumization.
If you look at last year, we launched Harbin Icy GD to further trade up Harbin Icy into the RMB 8 price points. And this year, we actually made it Zero Sugar, so it became Harbin Icy GD Zero Sugar. And together with the sponsorship of the NBA, we appeal to the growing health and wellness trends. Since we did a Zero Sugar, we saw Ice GD has already more than doubled the volume since its launch. So I hope that answers your question, Anne.
Our next question comes from the line of Christine Peng from UBS.
I also have 2 questions, both about the Chinese beer market. Firstly is about the premiumization strategy Jan just elaborated. But on the other hand, we also noticed the trade-down pressures, especially among middle class. So I was wondering how will Bud APAC adjust the portfolio strategy considering this trend?
Thank you, Christine, and thanks for your question. So I think let me start by saying that beer is resilient as a category and premium beer actually offers an accessible luxury. And I know it's confusing when we talk about premium and super premium beer, but really all of these price tiers are what we would call accessible luxury. It does not cost that much for consumers to offer themselves a premium experience within the beer category.
So fortunately, people still want to pursue happy moments and treat themselves well, right, despite the whole macroeconomic environment. And beer actually plays a significant role in that purpose because we would not necessarily position China's consumers' consumption attitudes and behaviors as trading down in beer. It's more about spending smartly.
So people still want to look for experiences. They still attach value to emotional values. They're still interested in rituals to make it everyday moment a bit more special. And so all of these things are actually becoming more important for consumers. So they just want to pay the right price for the experience, and Budweiser as our leading brand, is actually offering that because they know what Budweiser stands for and it gives them a little bit of an uplift of an everyday moment.
So if we look in the first quarter, we continue to see beer segments trend similar as in the second half of last year. So beer is premiumizing. The Premium and Above portfolio revenue continues to grow despite a high base. At the same time, we continue to premiumize within each of our channels. So every single sales channel, actually, the premiumization continues.
When you look at while we look forward to offer these consumers these special experiences this summer, we're actually quite excited by our Mega platform. So Budweiser, we launched the Sports Now is our party campaign this summer, along with the introduction of Bud 0.0, really on the back of our sponsorship of the Olympic qualifier series, the first party in Shanghai. That's when it will kick off.
Corona, as I mentioned earlier in the call, will strategically partner with Ctrip because Chinese consumers are looking for travel experiences. They were to unwind. So this summer, we're also launching Corona Zero in non-alc and then Corona Light just to expand the portfolio of Corona and continue to grow our leadership in Super Premium. And then, of course, with Blue Girl, which is the best-selling beer in Hong Kong for 17 consecutive years, we continue to sponsor Hong Kong celebrity concerts.
We have this campaign, Explore More, Taste More that we just launched for the summer to elevate the Hong Kong positioning and connect with more consumers. So you actually see with the strength of our Premium and Super Premium portfolio. And we also continue to develop, of course, our Premium go-to-market. We see them as competitive advantages. They put us in a very good position to continue to lead the segment growth and also capture an outside share of the premiumization opportunity in the future.
So I hope that answers your first question, Christine.
Jan, that's very clear. So the second question is really about the channels. So we know that Bud has a very much leadership position in the on-trade channel. But on the other hand, we also see that the Chinese consumers sort of have the habit of drinking premium beer in the in-home channel during the COVID. And that trend hasn't yet reversed completely. So I was wondering how will Bud adjust its strategy to adjust this in-home optimization trend for the Chinese consumers?
Yes, I think you're totally right, Christine. It is a very important opportunity for us because, I mean, as you know, we built our premium brands originally in the nightlife channel. After nightlife, we always run first in premium restaurants and modern trades. And of course, now with the increasing disposable income across China since several years, premiumization of the in-home channel actually offers a very large opportunity for us to further expand our distribution.
We have been expanding our auto market to more channels. Even in geographies where we are well established, we continue to see opportunities to develop the in-home channel. And actually, we see the in-home channel weight of our total volumes has increased in recent years. So there's really 2 types of opportunities. In areas where we're already strong and with the developed total markets, it's about deepening our route-to-market model.
So China, overall, has more than 5 million outlets in the in-home channel. We are not even close to fully distributed, right? So we have a lot of opportunity in in-home. And really, the key for a successful in-home expansion for us is to develop high-quality distribution networks to cover more outlets. So we are developing new Tier 1 and Tier 2 wholesalers to help us expand to more outlets.
And actually, it's quite interesting that BEES as a digital tool is helping us build this route-to-market at a more granular level with the visibility and the transactions that we can digitize to help expand our distribution footprint to cover more outlets effectively.
The second way that we approach this is in areas that we are less well developed. Our recent partnership with Swire, for example, in the Anhui and Hebei provinces is a very good example of how we can expand in in-home in an accelerated way. So the brands typically are strong in these areas, but our route-to-market is completely underdeveloped because of the competitive scenario in some of these provinces.
So even if the partnership is still at a very early stage, we're only, let's say, 4 or 5 months into the partnership. We already grew our market share in the in-home channel, according to Nielsen. And we think that this partnership will continue to bring synergies and translate in increasingly more meaningful benefits in the future. So I hope that answers your question, Christine.
Our next question comes from Leaf Liu from Goldman Sachs.
I also have 2 questions. I'll ask one by one. So first of all, on cost level. So for the group level and also for each region, we saw a minor increase in unit cost in 1Q organically, but we also note that the raw material cost actually going down. So how do you look at the cost trend into the second quarter and the rest of the year? Do we see quarterly differences in terms of the cost of benefits?
Sure. Let me -- thank you for your question, Leaf. Let me pass this on to Iggy.
Sure, yes. Thanks for the question, Leaf. Yes. In the first quarter, Leaf, our COGS per hectoliter increased by only 0.4%. So of course, both cost efficiencies and commodity tailwinds alike helped us to offset any of the cost escalation. Of course, it's driven by continued premiumization. This 0.4% COGS per hectoliter increase was a significant improvement versus last year, right, versus the first quarter of '23 and actually 2023 overall, but we saw more in line with roughly 5% or 6% escalation in most quarters.
As we look at the rest of this year, right, FY '24, of course, commodity impacts can vary quarter-by-quarter. However, on the whole, they'll land as a tailwind full year as we've seen actually both aluminum and barley prices improve. Aluminum specifically, the cost base is now closer to $2,400 in the first half of the year and should continue to improve in the second half.
If you think about Barley pricing, it's been coming down really since mid-2022. Of course, some small escalations here and there, but overall coming down for almost 2 consecutive years, right? And then I think the most important piece is continued efficiency improvements and cost management initiatives. Those will be fairly consistent across the quarters, right? So we should expect continued benefit and very similar as we move forward.
And finally, of course, premiumization, it will also continue to be a meaningful driver of COGS per hectoliter as it has been in normal years. But of course, we welcome this right as it's a benefit to us in terms of gross margin. So I hope that answers your question, Leaf.
And also the second question is on Korea, mainly on Korea competition. We are quite excited to see all the new product launches into the summer season for Korea market. But also I want to understand, is there any change or update on the competitive dynamic in Korea market that we have observed YTD with the Japanese beer imports coming back? And also any new actions or product launch by our major local competitors?
Thank you, Leaf. And we share your excitement about Korea and our product launches. So I mean, of course, we don't talk too much about our competitors in detail and we respect all of them as we don't comment too much on directions. But I think you noticed in the last number of quarters, we became increasingly more excited about South Korea and our portfolio there.
And we -- of course, we continue to invest behind our leading brands, our innovations, our capabilities. And as you know, we built strong brand leadership in Korea, both in the Core and the Premium segments. So if you look back at the last quarter, we gained total market share in South Korea according to our estimates despite tough comps, right? Why do I see say tough comps? Because if you think back about last year, major competitor innovations were launched in the second quarter last year, not in the first quarter.
And also this Japanese brand recovery, which you mentioned, actually accelerated starting May last year. So for us to gain significant market share in Q1 is actually quite strong if you look at the comps base. Then if you look at the brand level, all Cass, HANMAC and Stella Artois grew market share in both channels, amidst competitor new product launches. So for example, we launched Cass Light Zero Sugar, which is targeting, of course, increasing demand for health and wellness in South Korea.
And we also responded to last year's great consumer interest with the permanent addition of Cass Lemon Squeeze and Cass Lemon Squeeze Zero, which were both very popular limited additions in the last summer. So this summer, we will launch Cass Zero in the on-premise channel, which until now was not possible. And we will leverage our partnership with the Korean Sports and Olympic Committee to do that. So we're actually very confident in our strong and our healthy brand portfolio, also our route-to-market and our people capabilities to continue to lead beer industry growth in Korea. So I hope that answers your second question.
Your next question comes from the line of Lillian Lou with Morgan Stanley.
Jan and Iggie, I also have 2 questions. And the first question is on Korea. So definitely, we see, as Jan mentioned, we gained pretty good market share in the first Q. So with the base trending relatively lower and easier for the rest of the year, are we going to see continuous growth to accelerate? And as well, I think on the margin side, we did increase the margin pretty nicely in the first quarter as well in the country. So are we going to expect even bigger margin recovery in -- for the rest of the year as well?
Good morning, Lillian. Thank you for your question. Iggie, go ahead.
Thanks, Jan. No, I think you heard, of course, Lillian, Jan's excitement, right, on South Korea. For South Korea, we grew revenue mid-single digits, as you mentioned, right, on the back of revenue per hectoliter, high single-digit increase. And of course, that was driven by our revenue management initiatives, right? So it translated very nicely into double-digit EBITDA growth and very significant margin expansion.
While we don't provide an explicit guidance, of course, for EBITDA margin, we're still very confident, we remain very confident about our margin expansion opportunities over time. Maybe the way I would look at it is, I go back and reflect on the main drivers, right, for our growth in APAC East to better understand why we would expect a more robust business in 2024. And the drivers continue to be in order of relevance: rate, first and foremost; operational efficiency, second; and mix third.
So on rate, of course, we increased price on our core brands' rate by 6.9% across both the in-home and out-of-home channels in October last year, October 2023, and by more than 9% rate for our premium brands and the in-home channels in April of '23 as well. So of course, that's been a big driver. Then on the operational efficiency side, of course, I just mentioned earlier, we've seen commodities normalize from being a headwind in 2022 and 2023 to being a tailwind this year.
And most importantly, of course, we continue to implement cost management initiatives across the business at a similar rate, right? So this, of course, should be expected to drive future EBITDA margin growth benefit as well. And then lastly, we anticipate the industry will continue to premiumize. It's still under indexed versus other mature markets, as we've said in the past. We're incredibly well positioned, right, to capture an outsized portion of that growth with a comprehensive portfolio of brands that we have in both kind of Premium and Super Premium.
And we're seeing many bright spots, right, including Stella Artois on-premise, which is raising the bar from a pricing perspective. So yes, longer term, I would say we don't see any barriers to margin expansion. We're very confident that our strategy and our commercial capabilities have put us in a very good position, right, for future sustainable growth. And we can expect that this would accelerate as any of the existing headwinds ease further. So we're very confident there, Lillian. Thank you so much for the question.
My second question is back on China. I think you also mentioned about this route-to-market opportunities. And definitely, I think starting from the year and actually from last year, we've been really emphasizing this China market expansion strategy, the new market strategy. So how is the progress so far in terms of helping our Premium and the Super Premium category growth? And can we have some idea about this new market expansion contribution to the overall performance of premiumization?
Thank you, Lillian. And you're right, I think expansion plays a very important role in our Premium and Super Premium growth. And we actually prioritize expansion by city based on our market maturity model and we continue to do that because we have this expansion playbook, which really tailors our strategies and toolkits by city cluster. So today, we still have less than 10% distribution of our Super Premium brands, still about 1/3 of the available outlets with Budweiser distribution.
So it means that there is still 2/3 of the outlets in China that don't sell Budweiser today. So imagine the opportunity, right, is one of the key reasons that we see significant runway for further expansion. So when you look at this year, we target to expand our Budweiser distribution cities from 220 to 235 cities; for Super Premium from 63 to 70. And we define a city as a distributed city when there is more than 1 million liters of either Budweiser or Super Premium sold there.
Obviously, many cities would become much larger than that as we continue to develop these cities once we kind of cross that first milestone. For example, we developed new wholesalers for Budweiser to help expand our Budweiser distribution cities. And in the first quarter, we delivered high single-digit growth in the Bud expansion cities as an example. So we do see these expansion cities grow in an accelerated pace versus the average of China.
Also, the contribution of both Budweiser and Super Premium expansion cities continues to increase in our total business. And we are on track according to our estimates to deliver both Budweiser and Super Premium distribution expansion as to the numbers that I shared earlier, the 235 and the 70. So I hope that gives you some extra color, Lillian.
Your next question comes from the line of Euan McLeish from Bernstein.
Can I start off, maybe ask you to give us a bit more color on the on-trade outlet universe in China. Obviously, the nature of changes in the on-trade outlet universe changed the nature of the premium opportunity. Can you maybe talk a bit about how the on-trade outlet mix has been changing over the last 6 or 9 months? And where are you seeing this going in the future and what the implications are for the attractiveness of the premium opportunity?
Sure. Thank you, Euan, and good afternoon. Good to hear you. I think when you look at the outlet universe, maybe first, just to state that given how we are in post-COVID, right, we actually see normal opening rates across all of our sales channels in China. When you look more specifically in the nightlife channel, we've been busy with, as you know, nightlife, we launched initially with Budweiser to expand the Budweiser weight. We are very busy continuing to premiumize with more Super Premium products there.
So Bud was built originally in night life, but now it's really the Super Premium mix contribution that we are driving. Then when you look at the different formats of the channels, Chinese consumer demographics, they constantly evolve, right? So there continue to be new subchannels and new occasions that are being targeted by our customers. And when you look at this nightlife channel, for example, we used to focus a lot on high-energy bars, KTV and clubs in the initial kind of 5 to 10 years.
What we see evolve now in the nightlife channel is that there is a lot of new different formats coming up, including, for example, livehouses. So several of the clubs, actually, many of the clubs, they have transformed themselves and changed the format into this new format of a livehouse, which is essentially a place where groups of young people gather. They snack, they drink alcohol, they enjoy live music performance for the whole evening, and it's well spread between weekdays and weekends.
So these new formats, they create new opportunities for us. As long as we are very close to the new formats opening up, it gives us new opportunities to grow our brands and typically Super Premium brands there. So we continue to premiumize within each of our channels and we see more consumer needs for differentiation, which opens more opportunities for Premium and Super Premium brands. And as you know, our portfolio caters to these needs quite well.
When you think about Corona position to satisfy chill and relax needs so that that actually fits well with the livehouse I was describing before. Blue Girl in Super Premium as the best-selling Hong Kong lager is also used by consumers to make an impression on others. So it's kind of a different consumer need there. When you think about our Bud Innovations like Budweiser Supreme plays an important role in the Chinese restaurant channel, especially in the more premium restaurant channels where we use Budweiser Supreme to further premiumize our Budweiser brand.
So I hope that gives a little bit of color on different formats and how we play to these different formats with our different Premium and Super Premium brands, Euan.
Okay. And then a similar theme, maybe in Korea about the Korean restaurant channel. So that's obviously been a very big stronghold for you over many years, but it's predominantly a mainstream opportunity. Can you maybe tell us how have you created this dominance in the Korean restaurant channel? What are the risks to this leadership? And what would it take to meaningfully premiumize that occasion? Is that realistic to happen?
Yes, I think -- a very good question, again, Euan. I think the -- I mean, as you know, we grew and we lead the beer category in Korea through the strength of our core segment offerings, especially Cass. And when you combine it with our hotel market execution capabilities, we are looking to unlock more of the potential in premiumization.
I mean recently, on top of Cass, we also have our classic lager, HANMAC, which we launched a couple of years ago, and we launched recently a new campaign highlighting the smoothness of our liquids. And at the same time, we launched HANMAC Creamy draft, which is a new draft experience with a very solid creamy [indiscernible], which we already have more than 700 restaurants in only 2 weeks after launch. So it's really something to watch. A lot of learning from some other markets that we kind of replicated in South Korea, and we target more than 2,000 restaurants by the end of this quarter. So we're really rolling out that experience quite quickly.
On top of that, as you referred to, right, South Korea being a higher maturity market in APAC, we do believe the premium segment is still underdeveloped. We are leading that segment. So we do want to continue to develop that. As you know, the price and the margin ladder in Korea is much more compressed than other markets like China, for example. So we really want to take an extra effort to try and premiumize the on-premise channel.
So last year, we introduced Stella Artois, the 500ml bottle. We did that with the exclusive mini chalice, like the small glass chalice that we offer in the Korean restaurants. And really, the purpose of that is to further accelerate the Premium on-premise expansion. So we do that with Premium visibility materials. We have brand promoters to promote this ritual with the chalice. We also offer a very differentiated consumer value adds.
And if you imagine, Cass being sold typically around KRW 5,000 an as a price point in the Korean restaurants, we launched Stella Artois between KRW 8,000 and KRW 9,000 depending on the level of restaurant we are talking about. So you can imagine that offers a higher margin, not only for ourselves, but also for the wholesaler and the outlet, the Korean restaurant owner. So this is creating quite some interest in this new proposition.
Beyond that, we also deployed our global program of Perfect Serve, which is providing toolkits to bars and restaurants in a broader sense to further elevate the consumer experience. Because we know consumers are looking for more premium experiences that really needs to be differentiated. So with its perfect pouring of Stella Artois chalice glassware that we demonstrate a premium and differentiated beer experience in the on-premise channels to our consumers.
And then more recently, we launched a new campaign a couple of weeks ago with a Taste Worth More in South Korea with our global brand ambassador, David Beckham, really celebrating the premiumness and the distinctive taste and really moments to connect with friends with this global brand ambassador with David Beckham.
So as you know, Euan, we are the only local brewer in South Korea to own the premium portfolio with our own global brands, right? Stella Artois, Budweiser and Hoegaarden. So we are quite confident in the long-term investment in the brands and the portfolio we have, along with our route-to-market and our people capabilities to continue to lead and grow the beer industry in South Korea. So I hope that answers your question, Euan.
In the interest of time, the final question will come from Linda Huang at Macquarie.
So my first question is regarding for M&A because I think this is very important to Budweiser the share price rating. So I'm curious what is the progress of the M&A and what is the bottleneck right now?
Sure. Thank you, Linda. Let me hand this one to Iggie.
Sure. Thanks, Jan. Good afternoon, Linda. Thanks for the question. So look, I think one of the main reasons for the IPO was to create this local champion that could serve as a catalyst, right, for the regional consolidation in Asia Pacific and that opportunity and really the rationale behind it. They're both still fully intact. So through M&A, we still expect we can cover a sizable white space, both in our existing and new markets.
Of course, it would allow us to combine our world-class portfolio with established route-to-markets of local players. And then additionally, where we can increase the scale, both procurement initiatives and weight as well as exchange best practices between regions.
And then even thinking in the other direction, of course, there's always an opportunity to transform strong local brands, right, into regional champions by leveraging our regional network as well. So this perspective, coupled with the fact that we also still see an organic growth as a core competency -- it's a core competency for our business. It means we'll continue to consider suitable opportunities if and when they arise, right?
And we still see M&A as a value driver for Bud APAC. So we share your opinion that it's an important part of the platform. And of course, if any such opportunity were to arise, it's always subject to strict financial discipline, which you know us for as well. So I wouldn't say there's a bottleneck. But as we've discussed, there was a period of time through COVID, in particular, where managing one's existing business was a top priority, at least for us, and I would presume would be the case for many other businesses out there in the region.
But as we kind of look at today, conditions are actually significantly better than they've been at any point since COVID started. Premiumization opportunities abound in most of the markets, right, in most of the region. And we can see that the players that have a full portfolio have an advantage and are outperforming. Cost management and procurement scale, for a while, they weren't priorities. But today, they're kind of back in stock, right back in vogue.
And given commodity cost escalations in the past few years, that shouldn't really be a surprise. So yes, effectively, our capabilities are becoming increasingly more valuable, which I think is important. So while we're always evaluating different alternatives, we don't have, of course, any news to announce in the moment. So I hope that answers your question, Linda.
Okay. And the next follow-up is the exciting part is the India market. So we know that Bud is doing so well in India. So can management also update the business status in India, such as the premiumization progress, capacity expansion plan and the competition dynamics?
Sure. Thank you, Linda. Indeed, I mean, we're quite excited about India, both as a total industry and our performance in the markets. If you look at industry in the first quarter, India industry grew strong double digits versus pre-pandemic. So if you compare Q1 this year versus prepandemic, it grew by strong double digits. So in our definition, more than 30%. And we continue to outperform the industry in that period and also in the first quarter versus last year.
We have strong growth momentum in India. We are, I mean, the #1 brewer in Premium and Super Premium with 67% segment share. Also, when you look at our total revenue, more than 2/3 is coming from the Premium and Super Premium brands. And when you look at the Premium and Super Premium revenue, it grew double digits versus last year. So really, all these different drivers are continuing to show strong momentum.
So to the point that now India is already globally for AB InBev, our parent company, the fourth largest market for the Budweiser brand. If you look at our strategy to accelerate that, the first one is on premiumization. We continue to focus on accelerating the premiumization of the market and to lead that premiumization, and we continue to see significant growth in our brand mix. And we have been driving fast growth in the Premium and above industry and also our brand power continues to grow for the Budweiser brand.
If you look at kind of the broader India, moderation continues to be a very important topic and differentiation versus spirits. And we continue to engage with several state governments to equalize and actually differentiate the tax structure between beer and hard spirits because beer is a beverage of moderation, and we want to promote the lower or no alcoholic beverages with more favorable route-to-market and tax allowances.
And then thirdly, on productivity, you probably remember from some of our prior conversations that the revenue per hectoliter or the ASP in India is already at a level or even slightly above the China level, but the average margin is actually quite a lot lower. And so we have a big program on productivity and we have met initiatives to improve the profitability through [ more ] productivity, harmonization of our returnable packagings and different cost savings initiatives that we have to improve our profit margins. So I hope that gives you some color, Linda, and thank you for your question.
This concludes our Q&A session today. I would like to turn the conference back over to Mr. Jan Craps for closing remarks.
Thank you, Mike. We are confident in our strategy, our execution capabilities and our ability to create value for our stakeholders and shareholders. We will continue to invest behind our commercial plans, the focus on premiumization channel and geographic expansion and digital transformation. We're also excited about our upcoming summer campaigns across our portfolio, and we look forward to fully capitalizing on the growth opportunities ahead. So 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.