Sustained Growth in a Complex and Challenging 2022 On March 24, 2023, China Resources Beer (Holdings) Company Limited (HKEX stock code: 00291) held its 2022 results announcement. The report showed that China Resources Beer's 2022 revenue was RMB 35.263 billion, a year-on-year increase of 5.6%, and net profit was RMB 4.344 billion. Excluding a one-off after-tax gain of RMB 1.316 billion from land transfer in 2021, net profit grew 32.8% year-on-year in 2022. In addition, overall beer sales volume in 2022 increased by 0.4% year-on-year (11.096 million kiloliters), with sub-premium and above products continuing to achieve double-digit growth of 12.6% (2.102 million kiloliters), reflecting continued improvement in product mix. At the results announcement, Mr. Hou Xiaohai, Executive Director and CEO of China Resources Beer, said, "The beer consumption market in 2022 was the most complex and difficult in the past few years. It was not easy for China Resources Beer to achieve the expected results, and management is basically satisfied with this performance." Multiple Measures Growth Amid Pandemic Impact In 2022, the Chinese mainland continued to be affected by the pandemic, putting downward pressure on the economy and dampening consumer momentum. In addition, some on-premise channels were temporarily closed, significantly impacting overall beer sales. Facing numerous external adverse factors, China Resources Beer minimized the negative impact of the pandemic through advance planning, timely adjustment of resource utilization strategies, enhanced employee protection, ensuring logistics, production, and raw material supply, and implementing measures such as "tightening the belt" and continued premiumization. In 2022, overall beer sales volume increased by 0.4% compared to 2021, reaching approximately 11.096 million kiloliters, demonstrating the effectiveness of stable growth efforts. Hou Xiaohai stated, "In 2022, under the guidance of the 'Decisive Battle for Premiumization, Quality Development' strategy, we effectively improved management efficiency, cost control, capacity efficiency, and brand influence through a rich product portfolio of 'Chinese brands + international brands', premiumization development, lean management, and green low-carbon development." First, implement "tightening the belt" to reduce costs and increase efficiency, controlling operating expenses. In 2022, sales and distribution expenses were roughly flat compared to 2021, while the sales expense ratio decreased by 1.1 percentage points to 19.1%. In addition, China Resources Beer recognized one-off employee compensation and placement expenses and fixed asset impairment losses from closed plants totaling approximately RMB 235 million in 2022, a decrease of 39.3% compared to 2021. The "tightening the belt" measures reduced administrative and other expenses by 8.3% in 2022 compared to 2021. Second, implement the decisive battle for premiumization strategy, cultivating and promoting key brands. In 2022, China Resources Beer continued to advance the "Decisive Battle for Premiumization" strategy, cultivating and promoting key brands through various thematic promotions and channel marketing activities. For Chinese brands, China Resources Beer enhanced brand influence through endorsements and sponsored variety shows such as "Let's Go Camping", "Street Dance of China 5", the extreme sports event "X GAMES", and "LGD Esports Club". At the same time, in 2022, China Resources Beer explored the metaverse marketing field, launching the first virtual person for the Snow brand, "LimX", to enhance brand influence among young people in the virtual world. In 2022, sales of core Chinese brands "Brave the World superX" and "Snow Pure" continued to grow. For international brands, leveraging the UEFA Champions League and the "Heineken®" electronic music theme, China Resources Beer held multiple marketing activities to promote the "Heineken®" brand. It also sponsored the variety show "Super Sense Electronic Music", driving continued strong double-digit growth for the "Heineken®" brand in 2022. In terms of innovative products, China Resources Beer continued to build a diversified brand portfolio, launching several new products in 2022. These included the first ultra-premium strong beer "Nong Li", an upgrade of "Li" with higher alcohol content and original wort concentration; premium products "Black Lion Fruit Beer" (#703 Cherry Red) and "Snow Whole Wheat Pure"; and two new flavors of the carbonated beverage "Snow Beer Soda" (Peach and Pineapple-Passionfruit Yogurt), further enriching the product portfolio and supporting premiumization. Third, continuously optimize capacity layout. In 2022, China Resources Beer continued to optimize capacity layout and ceased operations at two breweries during the year. As of the end of 2022, China Resources Beer operated 63 breweries across 24 provinces, municipalities, and autonomous regions in mainland China, with an annual capacity of approximately 18.414 million kiloliters. The continuous capacity optimization has brought China Resources Beer closer to international benchmark beer companies in reducing production costs and improving production efficiency. "Beer + Baijiu" Co-development "China Resources Baijiu's RMB 10 Billion Target Will Not Be Too Far Away" 2023 marks the first year of the final three-year phase of China Resources Beer's "3+3+3" corporate development strategy and a critical juncture as it enters the new stage of "Decisive Victory in Premiumization". Hou Xiaohai said at the event, "Through measures such as top-level architecture reshaping, brand building, organizational second transformation, digital marketing, and baijiu business development, we will build China Resources Beer into a diversified alcoholic beverage company, steadily advancing toward the goals of 'being the leader in the new world of beer' and 'being the explorer in the new world of alcoholic beverages'!" 1) Beer business continues to implement the "Decisive Battle for Premiumization" strategy. Regarding the beer business, Hou Xiaohai said, "In 2023, we will continue to advance the implementation of the 'Decisive Battle for Premiumization' strategy, striving to increase the proportion of high-end products to 23% within the year, and working toward 25%. The long-term target is 30% to 35%." With the further relaxation of domestic pandemic prevention and control policies, the overall beer market environment is expected to gradually recover. China Resources Beer will seize opportunities in the early stage of market recovery by increasing product coverage and brand investment, striving for sustained growth in 2023. In terms of new product development, China Resources Beer will continue to launch new products to enrich product diversity and meet diverse consumer needs. In addition, regarding the small pub layout, China Resources Beer, in cooperation with distributors, launched its first small pub brand, Joy Brew. The first pub is expected to begin operations in the first half of 2023, opening new marketing channels for beer products. At the same time, China Resources Beer will continue to use the strategic management theme of "Decisive Battle for Premiumization, Quality Development", promote the promotion and channel marketing of Chinese and international brands, and implement business initiatives such as brand building, organizational second transformation, excellent manufacturing, and green low-carbon development to enhance its competitive position. 2) Baijiu business will make significant strides. In the non-beer baijiu business, China Resources Beer indirectly acquired a 55.19% equity stake in Guizhou Jinsha Distillery Co., Ltd. (Guizhou Jinsha) on October 25, 2022, and completed the equity transfer on January 10, 2023. Clearly, China Resources Beer has larger goals in the baijiu business. Hou Xiaohai said, "The baijiu strategy is national layout and meticulous cultivation. The most important thing is not acquisition, but doing well with the brands we already have. China Resources Baijiu is not far from achieving the RMB 10 billion target." It is understood that China Resources Beer will integrate Guizhou Jinsha into the baijiu platform of China Resources Wine, actively promote the implementation of a multi-brand strategy, and continue to build a "beer-baijiu dual empowerment" business model characterized by "organizational connectivity", "talent sharing", "channel sharing", and "terminal co-construction", jointly developing beer and non-beer businesses. Ultimately, China Resources Beer will form a "beer-baijiu co-growth model" that integrates the advantages of "strategic synergy", "independent operation", and "mutual growth", and leverage the channel advantages of its beer business to expand and upgrade the sales network and grow the baijiu business. At the same time, at the announcement, China Resources Beer also stated that it will continue to pay attention to suitable development opportunities in non-beer alcoholic beverages, and continue to explore potential synergies through limited diversification to further expand its business.