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Informist, Wednesday, Oct. 29, 2025

By Avishek Rakshit

MUMBAI -  The early onset of the monsoon and a short summer season hit Varun Beverages Ltd.'s sales in India, which account for 73% of its total sales volume, but a healthy performance in Africa helped the company's profit growth in the September quarter beat the Street's estimate. 

One of the largest global franchisees of PepsiCo, which sells PepsiCo-licensed products in India and Africa, Varun Beverages reported 19.6% on-year growth in its consolidated bottom line for the September quarter at INR 7.4 billion, against the Street's estimate of INR 6.5 billion. The top line, inclusive of taxes, rose 2.4% on year to INR 50.5 billion. Excluding taxes, the revenue for the September quarter was up 1.9% on year at nearly INR 49 billion, against the Street's projection of INR 48.8 billion. 

In the quarter under review, while sales volume in India remained flat on year, it grew 9% on year in international markets. Effectively, consolidated sales volume increased 2.4% on year to 273.8 million cases. The revenue growth, however, fell below the volume growth as Varun Beverages' net realisation per case fell to INR 178.8 in the September quarter from INR 179.6 in the year-ago quarter as sales of water increased faster than carbonated beverages. 

"Performance in international territories continued to be healthy, with South Africa delivering another quarter of strong growth. In South Africa, we see significant potential to further strengthen our market position, and we continue to put in place the building blocks to support sustained growth in the region," Chairman Ravi Jaipuria said in a statement. "Our ongoing backward integration initiatives across key locations are driving higher efficiency and operational resilience."

The company's consolidated earnings before, interest, tax, depreciation, and amortisation more or less remained flat at INR 11.5 billion, but the EBITDA margin contracted 53 basis points on year to 23.4%. 

In global markets, there is a shift of expenses from purchase of raw materials to employee cost, power and fuel and other manufacturing overheads because of increased in-house backward integration initiatives, which had a negative bearing on the EBITDA margin, the company said.

However, higher sales of water in global markets led to an improvement in the gross margin, which went up by 119 basis points on year to 56.7%. The company's consolidated other income rose significantly in the September quarter to INR 1.5 billion from INR 242.5 million in the year-ago quarter, mainly due to the interest on deposits the company earned in India.

"While the extended monsoon season impacted consumption trends in India, we remain confident in the significant long-term potential of the domestic beverage industry. With low per capita consumption and rising penetration in semi-urban and rural markets, the opportunity for growth continues to be immense," Jaipuria said. "Our ongoing investments in capacity expansion, distribution reach, and cold-chain infrastructure are further strengthening on-ground execution, ensuring we are well-prepared to capture demand recovery in the upcoming season and deliver sustainable growth for all stakeholders."

For Jan-Sept, Varun Beverages' consolidated net profit increased 15.6% on year to INR 27.9 billion and consolidated revenue increased 7.4% on year to INR 178.9 billion. The company follows the calendar year as its financial year.

NEW VENTURES

Varun Beverages said it has incorporated a new subsidiary in Kenya to further expand operations in the African continent. The new subsidiary, proposed to be christened Varun Food and Beverages (Kenya) Ltd., will foray into the business of manufacturing, distribution, and selling beverages.

The company also changed its memorandum of association to diversify its product portfolio. In response to the growing popularity of ready-to-drink and a variety of alcoholic beverages, Varun Beverages sees an opportunity for expansion into these areas, the company said in the statement. As a result, it modified the memorandum, which allows it to foray into the business of ready-to-drink and alcoholic beverages product categories of any type or description, including beer, wine, liquor, brandy, whisky, gin, rum, and vodka in India and abroad.

"We are also diversifying our product offerings and certain African subsidiaries of Varun Beverages shall test market beer in their territories through an exclusive distribution agreement with Carlsberg Breweries A/S for their Carlsberg brand," Jaipuria said.

The company has also formed a joint venture - White Peak Refrigeration Pvt. Ltd. – in India in partnership with Everest International Holdings Ltd. to carry out the business of manufacturing of visi-coolers and other refrigeration equipment in the country.

At 1329 IST, shares of Varun Beverages were up 9.3% at INR 496.40 on the National Stock Exchange.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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