Varun Beverages Ltd’s (VBL) strategy is clear: aim for double-digit volume growth in India, focus on international expansion, and strengthen the distribution network. Despite facing new competition from Campa Cola and the complexities of global markets, management remains confident amid strong demand tailwinds and robust execution.
The numbers support this optimism. The company, which follows January-December financial year, saw 11.4% organic growth in its India volumes in 2024. VBL, one of the largest franchisee of PepsiCo in the world (outside the US), appears to want to avoid price wars and boost its retail reach. With just four million of India’s 12 million retail outlets tapped, increasing coverage by 10% annually offers significant headroom for growth. The plan is to expand presence, strengthen pricing power, and stay ahead of competition.
Capacity expansion is also in full swing. After boosting capacity by 45% from 2022 to 2024, VBL plans to add another 25% by March 2025 with four new plants. This positions the company well for peak season demand. Sting, the company’s energy drink, remains a star performer, contributing 15% to total volumes—an impressive feat in a category still underpenetrated in India. The launch of Sting Gold as a permanent variant could add more spark to this growth.
Internationally, VBL’s story is mixed. Overall international volumes surged 12.5% in 2024 and 125.4% in Q4CY24 on a year-on-year basis, thanks to new markets like South Africa and the Democratic Republic of Congo (DRC). However, organic growth was 6.3% for the year and below 10% for the quarter, affected by a shift to zero-sugar products in Zimbabwe due to a sugar tax. South Africa remains a challenge, with a heavy reliance on modern trade dragging down margins. VBL is now focusing on expanding general trade, targeting smaller outlets for higher-margin sales.
In Africa, opportunities vary. PepsiCo has an established presence in Tanzania, where VBL is sharpening execution strategies. Ghana, on the other hand, offers a blank slate with little existing competition—making it a high-potential market. Management remains optimistic about achieving strong double-digit growth across African markets.
Also Read: How a re-energized PepsiCo stung Red Bull with Sting
On the profitability front, while India business margin was solid at 16%, international margins fell short due to South Africa’s weaker performance and recent acquisitions. Overall margins held steady at 15.7%, with Ebitda growing by 39% year-on-year. Per-case profit was flat at ₹27.
VBL’s strengthened balance sheet is an advantage. Thanks to a recent qualified institutional placement (QIP), the company is now net debt-free—an impressive feat given the aggressive expansion plan. The ₹3,100 crore capex planned for 2025 will primarily fund greenfield plants in India, with additional investments targeted at international markets and capacity enhancements.
Meanwhile, the competitive landscape is heating up with Campa Cola’s re-entry, but VBL isn’t flinching. Management believes its focus on premium segments shields it from price wars, allowing it to maintain its strategy without compromising margins.
Despite a 31% correction from its peak in July, the stock trades at a hefty 38.5x 2026 estimated earnings, which is not exactly cheap. Yet, with strong demand, clear growth levers, and an expanding international footprint, VBL’s growth story can appear promising to investors.
