On an Expansion Spree: Varun Beverages Strengthens International & Domestic Presence Varun Beverages Limited is reportedly expanding its production in Zimbabwe and Zambia for PepsiCo
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Varun Beverages, a franchise partner of PepsiCo, has recently announced that the company will be expanding its presence in Zimbabwe and Zambia. As per regulatory filings with BSE and NSE, Varun Beverages is in talks with local companies to manufacture, distribute and sell products under the name of "Simba Munchiez". The deal will be done through its subsidiary companies, Varun Foods (Zimbabwe) (Private) Limited (wholly-owned subsidiary of the Company) and Varun Beverages (Zambia) Limited (subsidiary of the Company), joining hands with Premier Nutrition Trading LLC, Dubai (subsidiary of PepsiCo Inc.) in both Zimbabwe and Zambia. This further strengthens the relationship with PepsiCo and expands the footprint in PepsiCo snacks portfolio.
As per the filing, an estimated investment in the manufacturing facility would be around $7 million, or around INR 60 crore, for an annual capacity of 5,000 MT for manufacturing of Simba Munchiez in multiple SKUs (stock keeping units) at each location of Zimbabwe and Zambia.
"As agreed, the appointment will be effective on or before 1st Oct, 2025 for Zimbabwe and 1st Apr, 2026 for Zambia, once the respective manufacturing facilities come into operation. VBL subsidiaries shall leverage its distribution prowess to introduce the new affordable range of snacks products from the house of PepsiCo. As part of the understanding, PepsiCo shall give a strong push in certain fast-moving SKUs through price initiatives," the filing said.
The Indian chapter
Varun beverages has a stronghold in multiple states in India as well as a prominent presence in international countries. The company is present in almost all states, including New Delhi, Uttar Pradesh, Rajasthan, West Bengal, Haryana, Uttarakhand, Assam just to name a few. In the international space, the company has presence in Nepal, Sri Lanka, Morocco and now in Zimbabwe and Zambia as well.
In 2023, Varun beverages invested INR 34 billion in expanding its capacities through greenfield and brownfield projects. Consistently outpacing its large-cap FMCG (fast moving consumer goods) peers, the company is poised for robust growth driven by the scaling up of its juices (Tropicana), sports drink (Gatorade), value-added dairy and Sting brands. As per IIFL Securities analysts, the company is projected to achieve an impressive compound annual growth rate (CAGR) of 20 per cent in sales, 19 per cent in EBITDA, and 23 per cent in EPS between 2023 and 2026.
For (calendar year) CY24 season, the company stated it commissioned three greenfield production facilities in India namely, in Supa, Maharashtra on Jan 25, 2024 with total capex outlay of INR 1000 crore; in Gorakhpur, Uttar Pradesh on Apr 13, 2024 with total capex outlay of INR 11,000 crore; and in Khordha, Odisha on Apr 30, 2024 with total capex outlay of INR 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 stated in its results presentation.
Varun beverages' consolidated sales volume saw a significant 7.2 per cent increase in Q1 of CY2024, reaching 240.2 million cases, up from 224.1 million cases in the same period last year. Despite the delayed Holi festival, which impacted the seasonality cycle, the India territory reported a 4.4 per cent growth, while international markets soared by 21.9 per cent.
The average net realisation per case rose by 3.5 per cent to INR 179.7, driven by a favourable product mix in India and higher contributions from international markets, which typically yield higher realisations. Net revenue from operations jumped 10.9 per cent year-over-year (YoY) to INR 43,173.1 million, led by strong growth in both India (7 per cent) and international markets (29.8 per cent). The sales mix comprised 71 per cent carbonated soft drinks (CSD), 7 per cent juice and 22 per cent packaged drinking water during the quarter.
