Varun Beverages ramps up domestic capacity in Q1

Varun Beverages Ltd (VBL), a major PepsiCo franchisee outside the United States, ramped up its domestic capacity in the first quarter of the current calendar year, with a capital expenditure of ₹2,800 crore. 

The bottling giant commissioned three new greenfield production facilities in Maharashtra, Uttar Pradesh, and Odisha.

The Maharashtra facility, situated in Supa, set up at a capital expenditure of ₹1,000 crore, was inaugurated in January. The second began operations in Gorakhpur, Uttar Pradesh in April, with an investment of ₹1,100 crore. The third was opened in Khordha, Odisha, also in April, with a capital outlay of ₹700 crore. 

"Further, we have set-up-expanded backward integration facilities at Guwahati plant as well as all the three above mentioned greenfield plants," the company said in its earnings announcement on Monday.

“This expansion is designed to meet the rising demand for beverages in India and support our long-term growth trajectory,” Ravi Jaipuria, chairman, Varun Beverages, had said in the company's earnings statement.

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VBL is responsible for producing and distributing PepsiCo's popular beverage brands in India, including Pepsi, Mountain Dew, and Mirinda, among others.

The company also holds the franchise rights for various PepsiCo products across several territories, including Nepal, Sri Lanka, and several African countries, and has distribution rights in Namibia, Botswana, Mozambique, and Madagascar.

Additionally, VBL announced the upcoming launch of a greenfield plant in the Democratic Republic of the Congo (DRC) and said that its wholly-owned subsidiary, Varun Beverages Morocco SA, will start manufacturing and packaging Cheetos in Morocco by May 2025.

Jaipuria explained that the company has initiated three growth engines designed to steadily boost both revenue and profitability. 

The first engine encompasses the combined territories of South Africa, Lesotho, Eswatini, Namibia, Botswana, Mozambique, and Madagascar. The second involves expanding into the Democratic Republic of the Congo (DRC), a new market for PepsiCo, with commercial production set to begin next quarter from a state-of-the-art greenfield plant. 

The third engine focuses on entering the snack food production market in Morocco by May 2025.

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For the March quarter, VBL reported a 7.2% increase in total sales volume, rising from 224.1 million cases in the previous year to 240.2 million cases. The company saw growth of 4.4% in India and 21.9% in international markets, despite a 17-day delay in the Holi festival affecting the seasonal sales cycle.

Profits for the quarter rose 25% to ₹547.98 crore, up from ₹438.57 crore in the first quarter of calendar year 2023, driven by volume growth, higher net realization, and improved profit margins.