Varun Beverages has invested ₹4,128.04m by subscribing ordinary shares of its subsidiary company, The Beverage Company Proprietary Limited (BevCo).
The South African business is the largest bottler of PepsiCo outside of the US, with a consolidated turnover of ZAR 4,090m for the financial year ended June 30, 2024.
After agreeing a partnership with PepsiCo in 2018, BevCo has been the exclusive manufacturer of the drink for South African consumers, this includes Pepsi, Pepsi Max, Pepsi Light, Mountain Dew, 7UP Free and Mirinda.
The PepsiCo shares have been increasing steadily; between 2011 and 2024, Varun Beverages is said to have expanded its shares in PepsiCo’s soft drinks volume by 60%.
In its Q3 2024 investors and analysts conference call, the business reported that PepsiCo brands grew faster than its own brands portfolio, at 12% vs 20% in Q2. However, the business said it is scaling up the entire portfolio.
Brokerage firm JM Financial Services believes the PepsiCo partner has room for buoyant growth, propelled by its strong geographical reach and robust supply, in particular Africa has been highlighted a key driver for growth.
Recent geographical expansions for the company include roll outs into South Africa and Tanzania, as well as capacity increases in Cong.
The company also has three plants in development in Zimbabwe, Zambia, and Morocco and is expected to make $100m in revenues. The total market is around $800m, with JM Financial Services indicating opportunities to increase territory rights.
“Looking ahead over the next 20 years, Africa appears very bullish,” said Ravi Jaipuria, Varan Beverages chairman during the call.
“There are some challenges, but that’s why we don’t put all our eggs in one basket. We are going into different countries. Each country might represent 2%, 3%, 5% of our turnover. If one of the country has an issue, it will not affect us.”
The brokerage said the beverage company’s strong track record and fast growth opportunities, alongside a debt-free balance sheet will promote confidence in its earnings growth and return on capital employed.
