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Varun Beverages to expand capacities of juices, value-added dairy items in 2024

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Varun Beverages, leading bottler of beverage major PepsiCo, is expanding its production capacities in the juices and value-added dairy products segments in 2024, according to the latest annual report of the company. Besides, Varun Beverages Ltd (VBL) is strengthening its distribution network and chilling infrastructure, which is essential to enhance presence in the existing and under-penetrated markets, its promoter & Non-Executive Chairman Ravi Jaipuria told shareholders.

“Central to our expansion strategy for CY 2024 is the further development of manufacturing facilities, with a focus on adapting to evolving consumer preferences and market trends. We are particularly concentrating on increasing our production capacities in the juices and value-added dairy products segments,” he said. The company operates across six countries. Three markets of the Indian Sub-continent, India, Sri Lanka and Nepal, contributed 83 per cent of its net revenues, while three African countries, Morocco, Zambia and Zimbabwe, contributed to the remaining 17 per cent in 2023.

VBL accounts for more than 90 per cent of PepsiCo’s beverage sales volume in India. It manufactures, markets and distributes a range of PepsiCo-owned products, which include carbonated soft drinks, carbonated juice-based beverages, juice-based beverages, energy drinks, sports drinks, and packaged drinking water.

According to VBL, the soft drinks market in India is poised for substantial growth, led by factors such as youthful demographics, accelerated urbanisation and rising incomes, increased household spending and rural advancements and enhanced electrification. “The sector adeptly adjusted to evolving consumer preferences and maintained a steady growth trajectory. This resilience was particularly evident in the energy drinks segment, which, after emerging as a growth category in 2022, continued its expansion through 2023,” the annual report said.

The broader soft drinks market encompassing carbonates, juices, and bottled water, also sustained growth in 2023, which was a “challenging yet progressive year” for the beverage industry. “Industry growth was fueled by expanding demographic profiles and burgeoning middle-class population. These demographic shifts, coupled with an increase in disposable income, spurred higher demand,” it said.

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Urbanisation played a pivotal role as well, with more individuals relocating to urban areas, leading to greater exposure to and demand for diverse soft drink options. VBL, which follows the calendar as a financial year, had posted its net revenues of Rs 16,042.58 crore, up 21.8 per cent in 2023.

Its association with PepsiCo is over three decades old. It is increasing the number of licensed territories and sub-territories to expand its business. In December, the company announced the acquisition of South Africa-based Beverage Company (Bevco) along with its wholly-owned subsidiaries at an enterprise value of Rs 1,320 crore, which will help it expand its geographical footprint in the African market.

Bevco holds franchise rights of PepsiCo in South Africa, Lesotho and Eswatini. Currently, VBL is collectively serving over 1.4 billion customers. However, 79 per cent of its revenue, a substantial part originates from its India business.

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