Varun Beverages Limited (VBL), a leading franchisee of PepsiCo, concluded its Q4 and CY 2024 earnings conference call on a high note, showcasing robust growth and ambitious plans for the future. With a strong performance in 2024, the company is poised to sustain its momentum through strategic expansions, portfolio diversification, and operational efficiencies. Below is an SEO-friendly article highlighting the key takeaways from the earnings call regarding VBL’s future outlook and plans, optimized for readability and search engine visibility.
Strong 2024 Performance Sets the Stage for Growth
Varun Beverages wrapped up calendar year 2024 with impressive financials, reporting a 24.7% increase in consolidated revenue, a 30.5% rise in EBITDA, and a 25.3% growth in profit after tax (PAT). This was driven by a 23.2% increase in consolidated sales volume, reaching 1,124 million cases, fueled by organic growth in India (11.4%) and expansion into new international territories like South Africa and the Democratic Republic of Congo (DRC). The company’s ability to deliver double-digit growth amidst competitive pressures underscores its operational resilience and market strength, setting a solid foundation for its future endeavors.
Expanding Global Footprint: Africa and Beyond
A cornerstone of VBL’s future strategy is its aggressive expansion into international markets, particularly Africa. In 2024, the company entered South Africa, Namibia, Botswana, Mozambique, Madagascar, and the DRC, with South Africa alone contributing 43 million cases in Q4. VBL also signed agreements to acquire PepsiCo’s operations in Tanzania and Ghana, pending regulatory approval, further solidifying its African presence.
In South Africa, VBL is shifting focus from modern trade (40-45% of the market) to general trade, aiming to improve margins and reduce reliance on large retailers. The company deployed more visi-coolers in one year than previous operators combined, enhancing last-mile distribution. Backward integration in South Africa, expected to commence within a year, will further boost profitability. Management projects double-digit growth in these markets, with ambitions exceeding the 30% growth seen in Zimbabwe and Zambia over the past 5-7 years.
Capacity Expansion to Meet Rising Demand
VBL is ramping up its manufacturing capabilities to capitalize on growing consumer demand. In 2024, the company increased production capacity by 45% over 2022 levels, with a 25% increase from 2023 alone. For 2025, VBL plans to commission four new Greenfield facilities in India (Prag, Damtal, Buner, and Medalia) and expand capacity in the DRC, with a projected capex of ₹3,100 crores. This will boost capacity by another 25% over 2024, ensuring VBL can meet peak season demand without shortages.
The company’s focus on backward integration—now supported by 3 dedicated and 14 integrated facilities—and renewable energy (16% of total consumption) will enhance cost efficiency and sustainability, key drivers of long-term growth.
Diversifying Portfolio with Healthier Options and Snacks
VBL is adapting to evolving consumer preferences by expanding its portfolio. In 2024, the mix of low-sugar and no-sugar products rose to 53% of sales volume, up from 42% in 2023, with offerings like Pepsi Black, 7UP Zero, and mid-calorie Sting gaining traction. The upcoming launch of Sting Gold, a new energy drink flavor, aims to tap into the growing energy drink segment, which remains underpenetrated in India (5-6% of the mix vs. 15-20% in neighboring markets).
Additionally, VBL ventured into the snack foods business in Morocco, Zimbabwe, and Zambia, with plants set to be commissioned in mid-2025. Initial revenue projections for 2025 range between $25-30 million in Morocco, with margins expected to improve once local production replaces imports. This diversification leverages existing infrastructure and strengthens VBL’s position as a comprehensive FMCG player.
Financial Strength and Shareholder Value
VBL’s financial position was bolstered by a successful ₹7,500 crore Qualified Institutional Placement (QIP) in Q4 2024, making the company net debt-free after loan repayments. This capital infusion provides flexibility for strategic investments and reinforces the balance sheet. The board recommended a final dividend of ₹0.50 per share, signaling confidence in sustained profitability. Management remains committed to delivering double-digit growth while maintaining EBITDA margins above 21% in India, with international margins poised to improve as new markets mature.
Competitive Resilience and Market Penetration
Despite rising competition from players like Campa, VBL remains unfazed, emphasizing the vast untapped potential of the Indian market. With coverage of only 4 million out of 12 million FMCG outlets, VBL aims to add 400,000-500,000 outlets annually, driving deeper penetration into under-served regions. Management views competition as a market expander rather than a threat, confident in sustaining growth through superior distribution and brand strength.
Sustainability and Innovation as Growth Pillars
VBL’s future outlook hinges on sustainability and innovation. The Indorama JV for recycled PET, set to begin production in Q3 2025, will meet nearly 100% of its requirements by FY26, reducing costs and environmental impact. Investments in technology, visi-coolers, and last-mile distribution will ensure VBL stays ahead of demand curves, particularly in underpenetrated rural and semi-urban areas.
Conclusion: A Confident Outlook for Long-Term Value Creation
Varun Beverages is well-positioned for 2025 and beyond, with a clear roadmap for growth through geographic expansion, capacity enhancements, and portfolio diversification. Its focus on operational efficiency, financial discipline, and consumer-centric innovation ensures resilience against competitive and macroeconomic challenges. With a strong foundation in India and a growing international presence, VBL is set to deliver sustained value to stakeholders, making it a standout player in the global beverage industry.