Varun Beverages Limited (VBL) has expanded rapidly, both in India and internationally, with strong financial performance and strategic acquisitions. It is known for being the largest bottler for PepsiCo products outside the US.
Although apart from the success, VBL fluctuates with an increase in demand and competition in the market. However, it is still able to strengthen its position in the market.
With its focus on expanding distribution, increasing production capacity, and tapping into new markets, the big question remains can VBL sustain its success story in the long run? This article will highlight the reasons impacting VBL’s sustainability.
How Has Varun Beverages Performed?
Varun Beverages Limited reported strong financial performance in the fourth quarter of 2024, with revenue from operations increasing by 39.8% year-over-year to ₹3,817.61 crore, up from ₹2,730.98 crore in the same period last year.
This growth was driven by a 23.2% rise in consolidated sales volumes, largely attributed to the company’s expansion into new territories, including South Africa, Namibia, Botswana, Mozambique, Madagascar, and the Democratic Republic of Congo.
Domestic volumes also saw an 11.4% increase, reflecting the strength of VBL’s distribution network and operational execution.
However, the company faced higher raw material costs, including sugar, flavorings, glass bottles, and packaging, leading to a 41.3% increase in total expenses.
Despite these challenges, net profit rose by over 40% to ₹185 crore, up from ₹131.97 crore in the previous year. Though the number was lower than what analysts predicted of ₹211 crores. Following the earnings release, the Varun Beverages share price experienced a decline of approximately 1.8%, reflecting market reactions to the profit figures.
Strategic Acquisitions and Expansion
Varun Beverages Limited has been expanding its business by acquiring companies and opening new offshore operations, particularly in Africa. Let’s review two of their recent developments.
1. Acquisitions in Africa
VPL has strategically expanded its African footprint through key acquisitions. In November 2024, VBL acquired full ownership of SBC Tanzania for ₹1,304 crore and SBC Beverages Ghana for ₹127 crore, enhancing its presence in East and West Africa, respectively.
In December 2023, VBL completed the acquisition of South Africa’s BevCo, valued at approximately ₹1,320 crore, thereby extending its operations into South Africa, Lesotho, and Eswatini, with distribution rights in Namibia and Botswana.
2. Expansion Initiatives
VBL has been enhancing its production capabilities by commissioning new greenfield production facilities. In 2024, the company established three new plants in India and one in Kinshasa, Congo, to meet the growing demand for its products.
The company has also ventured into snack manufacturing. In Morocco, VBL agreed to manufacture and package Cheetos, enhancing its snack portfolio in the region.
On top of that, VBL began distributing Simba Munchiez in Zimbabwe and Zambia, further diversifying its product offerings.
Can Varun Beverages Maintain Its Momentum?
Varun Beverages Limited has demonstrated remarkable growth in recent years, with a 24.7% year-on-year revenue increase in CY2024, reaching ₹20,007.65 crore. This growth is attributed to strategic expansions into new markets and the introduction of low-sugar products, now accounting for 53% of sales volumes.
Analysts project a 19% compound annual growth rate (CAGR) in sales over CY24-26E, driven by an expected 16% rise in sales volume and favorable demand from an extended summer season.
While Varun Beverages operates exclusively in the non-alcoholic beverage sector, its impressive performance contrasts with the often volatile nature of alcohol stocks, highlighting the company’s solid position in the beverage industry.
Conclusion
Varun Beverages Limited (VBL) has demonstrated impressive growth, with significant revenue and profit increases in recent years. Its strategic expansion and diversification have strengthened its market position. With its current trajectory, VBL appears poised to sustain its success.
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