Is Varun Beverages expanding its business into alcohol industry? Here’s what you need to know

Synopsis:
Varun Beverages plans to expand globally by setting up a subsidiary in Kenya and entering the alcoholic beverages market through a Carlsberg partnership, while maintaining steady growth despite rainfall impacting domestic sales.

This company has been a major partner of PepsiCo since the 1990s, and one of its largest bottlers globally is in the spotlight after announcing its latest financial results. The company also revealed plans to set up a new business in Kenya and is exploring entry into the alcohol industry, marking a big step in expanding its operations.

With market capitalization of Rs. 1,67,510 cr, the shares of Varun Beverages Ltd are currently trading at Rs. 490 per share, surging more than 10 % in today’s market session making a high of Rs. 500.80, from its previous close of Rs. 453.85 per share.

Financial and Operational Highlights

Revenue from operations slightly rose by 2.3% from Rs. 4932 cr in Q3CY25 to Rs. 5047.7 in Q3CY25.  EBITDA is slightly down to Rs. 1147.4 cr from Rs. 1151.1 Profit before tax rose to Rs. 940 cr from Rs. 800 cr over the same period. Net profit soared by 18.5% from Rs. 628.8 cr to Rs. 745.1 cr. EBITDA margins declined slightly by 53 bps to 23.4% in Q3 CY2025 compared to 24.0% in Q3 CY2024.

The company’s total sales volume increased by 2.4% to 27.38 crore cases. This was mostly a result of a 9% increase in the international markets, particularly South Africa, while India’s volumes remained stagnant.

The product mix was made up of 74% carbonated soft drinks (CSD), 4% non-carbonated beverages (NCB), and 22% packaged water. The gross margin increased to 56.7% due to more production done in-house and a higher proportion of water sales made abroad. The company also disclosed that low/no-added-sugar drinks accounted for 56% of total sales, which indicates that it is concentrating on healthier options.

Key Developments of the company

New Company in Kenya

Varun Beverages Limited (VBL) is establishing a new wholly-owned subsidiary in Kenya, which will locally produce, distribute, and sell the company’s beverages, thus facilitating the company’s expansion in Africa.

Tie-up with Carlsberg for Beer Sales

VBL’s African subsidiaries have entered into an exclusive contract with Carlsberg Breweries to sell Carlsberg beer in their markets. Faced with the growing demand for ready-to-drink and alcoholic beverages, VBL is also considering a move into this segment by covering the production of beer, wine, whisky, rum, vodka, and the like, in India as well as internationally.

New Refrigeration Joint Venture in India

The senior managers at VBL decided to form a joint venture called White Peak Refrigeration Private Limited along with Everest International Holdings Limited. The partnership will make visi-coolers and other refrigeration devices in India. In turn, it will help the beverage industry’s distribution and storage requirements.

Management commentary

Mr. Ravi Jaipuria, Chairman of Varun Beverages Limited (VBL), said the company maintained stable performance in Q2FY26, with an overall volume of sales increasing by 2.4%, mainly due to a 9% growth of the international markets. He also mentioned that domestic sales were weak because of the prolonged rainfall that took place across India and as a result, the consumption of beverages was negatively affected.

He pointed out that South Africa keeps on doing great, and the firm sees large growth opportunities there. In order to widen beverage production and distribution, VBL is also launching a new subsidiary in Kenya. Besides this, several of its African subsidiaries will be able to test-market Carlsberg beer as part of an exclusive agreement with Carlsberg Breweries, which will be the first step for VBL in the alcoholic beverage business.

Additionally, VBL’s snack factory in Morocco is now up and running, and a new plant in Zimbabwe is almost ready. Mr Jaipuria is still optimistic about India’s long-term growth potential despite the temporary difficulties caused by the prolonged monsoon. Some of the reasons he mentions for his optimism are low per capita consumption and growing rural areas. He says that the company’s ongoing investments in production capacity, distribution, and cold-chain infrastructure will allow it to meet future demand and achieve sustainable growth.

About the company

Varun Beverages Limited is a leader in the beverage industry and one of the largest bottlers of PepsiCo in the world (outside the USA). The company manufactures and distributes a wide array of carbonated soft drinks (CSDs). In addition, it offers a sizable selection of non-carbonated beverages (NCBs) among which are packaged drinking waters that are sold under the trademarks owned by PepsiCo. PepsiCo CSD brands made and sold by VBL include Pepsi, Pepsi Zero, Mountain Dew, Sting, Seven-Up, Mirinda, Seven-Up Nimbooz Masala Soda, and Evervess.

Written by Manideep ​‍​‌‍​‍‌​‍​‌‍​‍‌Appana

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