### **Overview** Varun Beverages Limited (VBL) is the **second-largest PepsiCo franchisee globally outside the United States**, operating under a deep, 33+ year strategic partnership. The company is a key driver of PepsiCo’s beverage sales in India, accounting for **over 90% of its sales volume** in the country. VBL operates a fully integrated, franchise-based business model—handling end-to-end operations including manufacturing, distribution, warehousing, marketing execution, and capital allocation—while PepsiCo provides brands, concentrates, R&D, and above-the-line (ATL) marketing support. --- ### **Geographic Footprint & Global Expansion** As of November 2025, VBL operates in **14 countries** across two continents: - **India (dominant market)**: Contributes ~72% of total operating revenue (FY24). - **South Asia**: Nepal, Sri Lanka. - **Africa (high-growth focus)**: Morocco, Zambia, Zimbabwe, South Africa, Lesotho, Eswatini, Democratic Republic of the Congo (DRC), Botswana, Namibia, Mozambique, Madagascar, Tanzania, Kenya (new), and Ghana (pending). The company holds **franchise rights in 10 countries** and **distribution rights in 4 additional nations**, with aggressive expansion underway in Africa. #### **Key Expansion Initiatives (2023–2025):** - **Acquired BevCo (South Africa)**: Consolidated operations in South Africa, Lesotho, and Eswatini; gained distribution rights in Botswana, Namibia, Mozambique, and Madagascar. BevCo generated ~ZAR 3.6 billion (~₹15.9 billion) in FY23. - **Greenfield Entries**: - **DRC**: New plant operational since July 2024; reached **full capacity on a three-shift basis**, with strong demand supporting plans for a second facility and backward integration. - **Kenya**: Announced in Oct 2025—the incorporation of a **wholly-owned subsidiary** for manufacturing and distribution. - **South Africa**: Entered in 2024 via acquisition; achieved double-digit volume growth in its first year. - **Acquisition Agreements (Pending Approvals)**: - **SBC Tanzania Limited (SBCT)**: Controls 5 facilities and a leading market position with ~74 million 8oz case sales (FY24). Valued at ~$154.5M. - **SBC Beverages Ghana Limited (SBCG)**: One facility in Accra; produces PepsiCo brands and own-brand energy drink ‘Cheetah’. Valued at ~$15.06M. --- ### **Operational Scale & Infrastructure** As of December 2024: - **48 state-of-the-art manufacturing facilities**: 36 in India, 12 internationally. - **Supply Chain Backbone**: - >130 depots - 2,600+ owned vehicles - 2,800+ primary distributors - >1.15 million **visi-coolers** installed - Serves **~4 million retail outlets**, with plans to reach **8–10 million** in India over the long term. - Reaches a target consumer base of **over 1.4 billion people**. Capacity expansion remains central: VBL commissioned **7 greenfield plants in India (2023–2025)**—Supa (MH), Gorakhpur (UP), Khordha (OD), Kangra (HP), Prayagraj (UP), Bihar, and Meghalaya—and one in DRC. These facilities support carbonated soft drinks (CSD), non-carbonated beverages (NCB), packaged water, and juice products. --- ### **Product Portfolio & Diversification** VBL produces and distributes a broad range of PepsiCo-branded beverages: - **CSDs**: Pepsi, Mountain Dew, Mirinda, 7UP - **Energy Drinks**: Sting (key contributor; ~16% of sales in recent quarters), Rockstar (launched) - **Sports & Hydration**: Gatorade - **Juices & NCBs**: Tropicana, Slice - **Packaged Water**: Aquafina #### **Strategic Diversification (Beyond Soft Drinks)** 1. **Snack Foods**: - Launched distribution and manufacturing of **PepsiCo snacks** in Morocco, Zambia, and Zimbabwe. - **Cheetos production** began in Morocco (May 2025). - **Simba Munchiez (PepsiCo subsidiary)**: Secure exclusive rights; manufacturing expected by **Oct 2025 (Zimbabwe)** and **Apr 2026 (Zambia)**. 2. **Alcoholic Beverages**: - Entered into **exclusive test-marketing agreement with Carlsberg Breweries A/S** in select African territories. - Expanded corporate charter to include production and distribution of **RTD alcoholic beverages** (beer, wine, spirits) in India and globally. 3. **Value-Added Segments**: - **Dairy-based beverages** and **juice products** growing at ~100% YoY; enhanced reach enabled by expanded capacity. - Focus on **low-sugar variants** (Sting, Gatorade, 7UP, Lipton) to align with health-conscious trends. - Product innovation ongoing—e.g., **malt-based energy drink** (launched Mar 2025). --- ### **Growth Strategy & Market Presence** #### **India (Core Growth Engine)**: - Revenue contribution: ~72% in FY24. - Expanding in **semi-urban and rural markets**, which represent large untapped potential due to low per capita consumption. - Strategies include: - Affordable pack sizes (small SKUs) - Enhanced chilling infrastructure (visi-coolers in rural areas) - Last-mile distribution improvements - Despite monsoon-led short-term consumption headwinds, long-term demand outlook remains strong. - Backward integration (preforms, caps, crates, films) at **17+ plants**, reducing costs and improving quality control. #### **Africa (Next Frontier)**: - Revenue contribution rose from ~15% (2022) to ~17% (FY23); rising with new acquisitions. - Focus on **geographic diversification**, with no single African market exceeding 2–5% of total turnover. - South Africa: Shifting from **private-label (B-Brand, 85% of sales)** and low-margin modern trade (~40–45%) to **higher-margin general trade** (60–65%). - **Double-digit growth** achieved in first year in South Africa; margin improvement expected with backward integration. - Regulatory approvals for Tanzania and Ghana acquisitions pending. --- ### **Financial & Capital Allocation** - **Revenue Growth**: ~24.7%, EBITDA growth: ~30.5%, PAT: ~25.3% (driven by Africa and new facilities). - **Sales Volume CAGR**: ~18% (FY2019–FY2024). - **Unit Benchmark**: One unit case = 5.678 liters (~24 bottles of 237ml). - **Capital Expenditure**: - **INR 25,000–26,000 crore** planned for CY2025. - Focus: Greenfield plants, snack manufacturing in Africa, backward integration. - Funded via internal cash flows—**zero debt** balance sheet; generates interest income from surplus cash. - **Funding & Liquidity**: - Raised ~Rs 7,500 crore via **QIP (Oct 2024)** to fund expansion, acquisitions, and balance sheet strengthening. - Localized financing used (e.g., South Africa) to hedge forex risk. --- ### **Operational Efficiency & Sustainability** - **Backward Integration**: - 17+ plants integrated for packaging materials (preforms, crates, closures, films). - Reduces input costs, ensures supply security, improves margins. - **Production Efficiency**: - New bottling lines: **800–900 bottles per minute (vs. 100–200 in older plants)**. - Better fixed cost absorption as volumes ramp up. - **Cold Chain & Distribution**: - Over **1.15 million visi-coolers** installed—critical for product visibility and chilled availability. - Deployed more in South Africa in one year than entire prior period. - **Supply Chain Agility**: - Multi-line, large-scale plants allow product switching and operational flexibility. - Improved last-mile delivery, cold storage access, and route optimization.