❑ Varun Beverages Limited (VBL or the Company) is a significant entity in the beverage sector and one of the largest franchisees of PepsiCo globally (excluding the USA). VBL has partnered with PepsiCo since the 1990s and, over more than 25 years, has strengthened its business relationship with PepsiCo. The company has expanded its licensed territories and sub-territories, diversified the range of PepsiCo beverages produced and distributed, introduced various SKUs into its portfolio, and extended its distribution network.
❑ The Company produces, distributes, and markets an extensive range of carbonated soft drinks (CSDs) and a broad selection of non-carbonated beverages (NCBs), including packaged drinking water under PepsiCo’s trademarks. The CSD brands manufactured and sold by VBL include Pepsi, Pepsi Black, Mountain Dew, Sting, Seven-Up, Mirinda Orange, Seven-Up Nimbooz Masala Soda, and Evervess. The NCB brands produced and sold by VBL comprise Tropicana Slice, Tropicana Juices (100% and Delight), Seven-Up Nimbooz, Gatorade, and Aquafina packaged drinking water.
❑ VBL holds franchise rights for various PepsiCo products across 27 states and 7 Union Territories in India, accounting for approximately 90% of PepsiCo India’s beverage sales volume. Additionally, VBL holds franchises for territories in Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe. India remains the largest market, contributing about 80% of the net revenue from operations in Fiscal 2022.
❑ VBL is part of the RJ Corp group, a diverse business conglomerate with interests in beverages, quick-service restaurants, ice creams, and healthcare. VBL’s Promoter and Chairman, Mr. Ravi Jaipuria, is recognized as a distinguished entrepreneur and business leader. He is the only Indian recipient of PepsiCo’s International Bottler of the Year award, which he received in 1997. He also received the ‘Distinguished Entrepreneurship Award’ at the PHD Annual Awards for Excellence in 2018.
❑ Sustainability Initiatives: At VBL, company’s dedication to sustainability permeates every aspect of their operations. Their sustainability strategy encompasses environmental, social, and economic considerations. Company is committed to reducing their environmental impact by investing in PET recycling, improving energy efficiency, and implementing water conservation measures in their manufacturing processes. These initiatives not only aim to achieve a positive environmental outcome but also align with PepsiCo’s global PEP+ goals. A notable sustainability initiative this year involves their collaboration with PepsiCo India on a groundbreaking project.
❑ We expect VBL to see strong growth going forward due to many factors such as: 1) Strategic investment in enhancing production capabilities and making new acquisitions which have significantly strengthened their global presence, 2) Successful completion of the strategic acquisition of the Beverage Company (BevCo) in South Africa marking their entry in African region, 3) Increasing its presence in the domestic market and looking for exports opportunities, 4) Strong heatwaves prevailing across India during the summer quarters. We re-initiate a ‘BUY’ coverage with a target price of Rs 1,900.
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