VBL - Varun Beverages

📊 NSE: VBL 🏢 Food - Processing - Indian 📅 Last Updated: 12/14/2025 14:57

💰 Financial Performance

Revenue Growth by Segment

Consolidated net revenue grew 24.7% YoY to INR 20,007.65 Cr in CY2024. This was driven by an 11.4% volume growth in the Domestic segment (821 million cases) and a massive 72.3% volume growth in the International segment (303 million cases) following the BevCo acquisition.

Geographic Revenue Split

India remains the primary market contributing 73% of total sales volume (821 million cases), while International territories (including Nepal, Sri Lanka, Morocco, Zambia, Zimbabwe, and the newly integrated South Africa/DRC) contribute 27% of volume (303 million cases).

Profitability Margins

Net Profit After Tax (PAT) grew 25.3% to INR 2,634.28 Cr in CY2024. PAT margins improved slightly to 13.2% from 12.9% in CY2023. Standalone PAT stood at INR 2,320.36 Cr, up from INR 1,775.13 Cr.

EBITDA Margin

Operating margins improved to 23.5% in CY2024 from 22.5% in CY2023, a 100 bps increase driven by better operating leverage and cost optimization. EBITDA margins are expected to sustain around 21-21.5% over the medium term.

Capital Expenditure

VBL incurred a large capex of approximately INR 2,500 Cr in CY2023 focused on CSD, juice, and dairy segments. In CY2024, the company established two greenfield plants in Supa (Maharashtra) and Gorakhpur (UP) to expand the carbonated and non-carbonated portfolio.

Credit Rating & Borrowing

The company maintains a strong credit profile with a 'Stable' outlook from CRISIL. Borrowing costs are managed through a debt-to-EBITDA ratio that improved significantly to 0.5x in Dec 2024 from 1.4x in Dec 2023, following a INR 7,500 Cr QIP issuance.

⚙️ Operational Drivers

Raw Materials

Key raw materials include PET chips (used for bottles), sugar, beverage concentrates, crown corks, PET pre-forms, corrugated boxes, and shrink wrap sheets. Cost of materials consumed was INR 8,293.74 Cr in CY2024, representing 41.4% of net revenue.

Import Sources

Not specifically disclosed by country, but sourcing is centralized to leverage scale. Operations in Africa utilize local currency for expenditures to create a natural hedge.

Key Suppliers

VBL operates as a franchisee for PepsiCo Inc., which is the primary supplier of beverage concentrates and brand licensing.

Capacity Expansion

Current expansion includes two new greenfield plants in India (Supa and Gorakhpur) operational in CY2024. The company is also incorporating a new subsidiary in Kenya for manufacturing and distribution of dairy and beverages.

Raw Material Costs

Raw material costs grew 18.0% YoY to INR 8,293.74 Cr, which is lower than the 24.7% revenue growth, indicating improved procurement efficiency and a decrease in the cost of PET chips.

Manufacturing Efficiency

Operating efficiency is driven by presence in contiguous territories which reduces logistics costs. Working capital days improved to 31 days in CY2024 from 34 days in CY2023 despite inorganic expansion.

Logistics & Distribution

VBL utilizes a vast distribution network across 27 States and 7 Union Territories in India. Logistics are optimized by clustering production facilities in contiguous territories to maintain economies of scale.

📈 Strategic Growth

Expected Growth Rate

17.90%

Growth Strategy

Growth will be achieved through: 1) Geographic expansion in Africa (BevCo integration, DRC, Tanzania, Ghana, and Kenya); 2) Increasing penetration in under-penetrated rural Indian markets via Visi-cooler placements; 3) Product diversification into value-added dairy, juices, and the PepsiCo snacks business; 4) Strategic acquisitions of new territories.

Products & Services

Carbonated Soft Drinks (CSD), Juice-based drinks, Value-added dairy beverages, Packaged drinking water, and Snacks. The company is also test-marketing Beer in certain African territories.

Brand Portfolio

Pepsi, Mountain Dew, 7UP, Mirinda, Sting, Gatorade, Tropicana, Aquafina, Cream Bell (dairy), and BevCo owned brands.

New Products/Services

Expansion into the snacks business under PepsiCo partnership and test-marketing of beer in Africa. New greenfield plants in CY2024 are dedicated to value-added dairy and juices.

Market Expansion

Acquisition of BevCo in South Africa (Enterprise Value INR 1,320 Cr) and expansion into DRC, Tanzania, Ghana, and Kenya. Domestic expansion focuses on lower-penetrated rural territories.

Market Share & Ranking

VBL is the lead franchisee for PepsiCo in India, accounting for 90%+ of PepsiCo's beverage sales volume in the country.

Strategic Alliances

Exclusive franchisee rights with PepsiCo Inc. for various territories in India and Africa. Exclusive distribution agreement for beer test-marketing in Africa.

🌍 External Factors

Industry Trends

The industry is shifting toward healthier, low-sugar, and zero-calorie options. VBL is positioning itself by expanding its juice and value-added dairy portfolio and aligning with PepsiCo’s healthier product plans.

Competitive Landscape

Primary competition includes The Coca-Cola Company and local regional beverage players. VBL competes through aggressive distribution and a diversified portfolio including energy drinks (Sting).

Competitive Moat

Durable advantages include: 1) Exclusive long-term franchise rights from PepsiCo; 2) Massive scale and backward integration (cost leadership); 3) Extensive cold-chain distribution network (Visi-coolers) that creates high entry barriers.

Macro Economic Sensitivity

Highly sensitive to summer temperatures and rainfall patterns in India, as a significant portion of revenue accrues in the April-June quarter (bell-curve performance).

Consumer Behavior

Increasing consumer preference for 'on-the-go' consumption and healthier beverage alternatives is driving growth in the non-CSD segment.

Geopolitical Risks

Concentration in African regions poses risks of political instability; however, VBL operates in regions not subject to US sanctions and has a track record in Morocco, Zambia, and Zimbabwe since 2018.

⚖️ Regulatory & Governance

Industry Regulations

Subject to environmental norms regarding plastic waste disposal and water usage. Evolving regulations on single-use plastics (like straws) impact the ready-to-drink beverage segment.

Environmental Compliance

VBL recycled 88% of used PET bottles in CY2024, with a target of 100% by 2025. The company earned a CDP 'A' list rating for Climate and 'A-' for Water Security.

Taxation Policy Impact

Effective tax rate is approximately 23.3% (INR 7,988.04 Cr tax on INR 34,330.89 Cr PBT).

Legal Contingencies

The company maintains a 100% resolution rate for sexual harassment cases. Specific values for pending litigation in High/Supreme courts were not disclosed in the provided text.

⚠️ Risk Analysis

Key Uncertainties

Integration risk of newly acquired African territories (BevCo, DRC) could impact margins if cost efficiencies are not realized. Geopolitical instability in Africa remains a monitorable.