U.K. STRs decreased 7.9 percent due to a weak U.K. off-premise channel impacted by poor weather and increased competitor promotional activity. With U.K. beer industry volumes declining approximately 5 percent, our market share declined in the quarter, driven by the lower-margin off-premise channel.

Net sales per hectoliter increased 5 percent in local currency primarily due to the positive impact of increased sales of non-owned (factored) beverages. Pricing on owned brands was negative, driven by lower pricing in the off-premise as a result of continuing competitive market dynamics, partly offset by positive pricing in the on-premise.

COGS per hectoliter increased 13 percent in local currency, with more than two-thirds of the increase due to higher factored product costs. The rest of the change was driven by input inflation, higher pension costs and fixed-cost deleverage from lower volumes. Factored product costs were unusually high in the second quarter, and we anticipate they will decrease slightly in the third quarter.

MG&A expenses decreased nearly 14 percent in local currency, due to lower employee incentive costs and cost reduction initiatives, partly offset by higher marketing investments and pension expense this year.

International Business

The International segment posted an underlying pretax loss of $13.4 million in the second quarter, up from $10.1 million a year ago due to the addition of costs related to the Cobra India business and infrastructure investments and the effect of asset-value and cost adjustments in our China joint venture.

International STRs increased 36 percent due to the addition of India sales, along with Carling growth in the Ukraine and Coors Light growth in Latin America. Excluding royalty sales (primarily in Mexico and Europe), International volume grew 32.2 percent. Net sales increased nearly 32 percent, driven by volume growth. Cost of goods per hectoliter increased 8 percent, with nearly two-thirds due to asset-value and cost adjustments in our China joint venture, and the remainder due to sales mix and input inflation.

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