Driving future growth with a bold expansion strategy
From a classic cup of coffee to kick-start your morning to a refreshing glass of juice to quench your thirst on a hot day, drinks are an essential part of our daily lives. It provides not only moisture and essential nutrients, but also enjoyment.
Beverage companies are the heroes behind everyday moments, creating liquid magic that goes beyond thirst quenching. Companies like Varun Beverages play an important role in making hydrating drinks available to people across the country.
As PepsiCo’s primary franchise bottler in India, VBL not only produces popular beverages but also helps quench the thirst of millions. Learn more about Varun Beverages.
Industry Overview of Varun Beverages
India’s soft drinks industry faces a challenging yet progressive year in 2023. Despite unseasonal rains disrupting sales during the critical summer season, the industry has adapted well to evolving consumer preferences and maintained steady growth. The energy drink segment, which emerged as a growth category in 2022, continued to expand through 2023.
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The broader soft drinks market, including sodas, juices and bottled water, also continued to grow during the year. Carbonates remain the largest category in terms of volume and value, reflecting its continued popularity among Indian consumers. Industry growth has been fueled by expanding demographic profile, burgeoning middle class population and rising disposable income.
Urbanization has played a role, with more people moving to urban areas, increasing exposure to and demand for a variety of soft drink options. Additionally, the development of electrification and improved power supply, especially in rural areas, have contributed significantly to industrial growth.
Improved infrastructure has facilitated better cold storage and distribution capabilities, enabling wider market coverage and product availability in underpenetrated markets. The soft drinks market in India is poised to witness significant growth driven by factors such as the country’s young demographic, accelerated urbanization, rising incomes, rising household expenditure, rural development, and power enhancement.
Additionally, the industry is focusing on introducing innovative products such as new and creative flavors and packaging solutions to cater to the preferences of the large youth segment, further driving the market growth.
Varun Beverages Company Overview
Varun Beverages Limited (VBL) is an Indian multinational corporation that produces, bottles and distributes beverages. It is the world’s largest bottling company for PepsiCo beverages outside the United States and the largest supplier of PepsiCo beverages in the AMESA (Africa, Middle East and South Asia) segment.
The company was founded in 1995 as a subsidiary of RJ Corporation and was named after founder Ravi Jaipuria’s children. The company manufactures, distributes and sells a wide range of non-carbonated beverages, including carbonated soft drinks (CSDs) and packaged drinking water.
The brands produced and marketed by Varun Beverages under Pepsico CSD include Pepsi, Pepsi Black, Seven Up, Seven Up Nimbooz masala soda, Mirinda Orange, Mountain Dew, Sting and Evervess. NCB brands produced and sold by PepsiCo include Tropicana Slice, Seven Up Nimbooz, Gatorade, and bottled water packaged under the Aquafina brand.
Varun Beverages holds the exclusive license to bottle and distribute PepsiCo beverages in 27 states and 7 union territories of India. This accounts for nearly 90% of PepsiCo beverage sales in India. VBL has also been granted franchise rights in Nepal, Sri Lanka, Morocco, Zambia and Zimbabwe. As of fiscal 2022, India was the largest market, accounting for nearly 80% of total operating revenue.
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Treasurer of Varun Beverages
In FY 2023, Varun Beverages recorded sales of KRW 1,632.1 billion, an increase of 21.88% in sales compared to KRW 1,339 billion in FY 2023. An analysis of three years from FY 2021 to FY 2023 shows that the company has shown a good CAGR. (CAGR) return is 35.53%.
Varun Beverages Limited in FY 23 increased its net profit margin by 35.59% to 2,101.81 crores compared to 1,550.11 crores in FY 22. This increase in revenue and net income is the result of the Company’s expansion to acquire new production facilities during FY 2023. In Bundi, Rajasthan and Madhya Pradesh, lower manufacturing costs also contributed significantly to profits.
In FY 23, VBL maintained favorable financial metrics with return on equity (ROE) of 34.92% and return on equity (ROCE) of 27.83%.
Varun Beverage’s future plans
Varun Beverages plans to maintain its healthy growth momentum by further strengthening its market presence in both Indian and international markets. The company focuses on product categories that align with evolving consumer preferences, including juices, energy drinks (Sting) and value-added dairy beverages.
The key growth driver will be capacity expansion through new greenfield and brownfield facilities. The company has commissioned several new plants in key regions in 2023 and in 2024 Gorakhpur, Khurda (Orissa) and Democratic Republic of Congo (DRC). This expansion is expected to increase Varun Beverages’ peak season production capacity in India by approximately 45% compared to 2022.
The company also announced the acquisition of Beverage Company (BevCo), subject to regulatory approval. BevCo holds franchise rights for PepsiCo beverage products in South Africa, Lesotho, Eswatini, Namibia and Botswana. This acquisition is consistent with Varun Beverages’ strategic objectives and will significantly strengthen its presence in the African market, known for its high demand and favorable demographics for soft drinks.
Varun Beverages is also committed to sustainability and environmental stewardship. We are investing in green energy use and reuse of polyethylene terephthalate (PET) to mitigate our environmental impact and foster a greener future.
conclusion
Varun Beverages has completed a successful 2023 despite challenges posed by unusually high rains during the peak season. The company has witnessed healthy double-digit volume growth in both Indian and international markets, with a focus on strengthening its market presence, expanding its distribution network, and improving its cooling infrastructure.
With strong operating and financial performance, significant capacity expansion, and strategic acquisitions, Varun Beverages is well positioned to maintain growth momentum going forward.
The company’s strategic investments, combined with proven execution capabilities and operational excellence, should enable it to deliver sustainable value to its stakeholders while capitalizing on the growing demand for soft drinks in the market.
Written by Pavunkumar VM
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