FMCG, Food and Beverages, Trending in the Economy

Varun Beverages: Growth Ahead for Largest PepsiCo Franchisee

VBL is one of the largest franchisee in the world (outside USA) of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs).
Watch our detailed stock research video

Quick Links Click to Navigate directly to the paragraph in detail:

(A) About Varun Beverages Ltd

Varun Beverages Ltd-Logo

Varun Beverages is key player in beverage industry and one of largest franchisee of PepsiCo in the world (outside USA).

Further, The Company produces and distributes a range of Carbonated Soft Drinks (CSDs), Non-carbonated beverages (NCBs), including packaged drinking water.

Moreover, VBL produces and sells all Popular Beverages of PepsiCo Portfolio which includes Pepsi, Diet Pepsi, Seven-Up, Mountain Dew, Slice and many others.

It also produces and sells Tropicana Juices, Nimbooz, as well as packaged drinking water under the brand Aquafina.

Apart from this, Varun Beverages also sells Flavored Dairy Beverages and Green Tea with brand name Cream Bells and Lipton.

(B) About the RJ Corp Group

RJ Corp Group

RJ Corp Group is a diversified conglomerate that is focused on Food & Beverages sectors.

In addition, It is currently engaged in running franchise of a sports brand, trading in ice-cream and milk products, and investment activities in group and other companies.

The group has also made pioneering forays into emerging sectors like stem cell banking and modern healthcare.

Moreover, RJ Corp has recently added two new verticals with Retail, which has Nike and J Mart as its integral part. J Mart is under Alisha Retail Pvt. Ltd. 

(C) Journey since inception - Varun Beverages

Varun Beverages Ltd - Journey Since Inception Milestone

(D) Executive Management of the company

1) Mr Ravikant Jaipuria - Promoter & Chairman

Mr Ravi Jaipuria is the promoter and current Chairman of the company. He is also the Chair person of the group RJ Corp. As of Now, RJ Corp is running some of the prominent food and beverages business such as KFC Outlets, Pizza Hut & Costa coffees and many others.

He has completed higher secondary education from Delhi Public School, Mathura Road, New Delhi.

Moreover, He has 30+ Years of experience in conceptualizing, executing, developing and expanding food, beverages and dairy business in South Asia and Africa.

Apart from that Mr Ravi holds the distinction of being the only Indian to receive PepsiCo’s award for International Bottler of the Year, awarded in 1997.

2) Mr Varun Jaipuria - Promoter & Whole Time Director

Mr Varun Jaipuria is Promoter and Whole-time Director of the Company. Mr Varun Jaipuria is the son of Mr Ravi Jaipuria.

He has been with the Company since 2009 and also responsible for the development of Company’s new business which includes sales automation tools.

Furthermore, He had attended Millfield School, Somerset, England and holds a degree in international business from the Regent’s University, London.

Apart from that, He has 13 years of experience in the soft drinks industry and has also completed a program for leadership development at the Harvard Business School.

In FY21, Mr Ravi Received a remuneration of Rs 4.83 Crore which is 0.00% of sales and 0.00% of profit.

3) Mr Raj Gandhi - Whole Time Director

Mr Raj Gandhi is at the position of Whole time Director in the company. Interestingly, He has been with the Group since 1993.

Although, He enjoys a rich relationship with institutional investors and lenders because of instrumental in formulation of business policies and growth plans.

He is a commerce graduate from University of Delhi, qualified chartered accountant, and has 30+years of of rich experience in the field of finance, strategy, legal and M&A.

Prior to this, Mr Gandhi is associated with a public sector undertaking under the department of electronics, Government of India.

In FY21, Mr Ravi Received a remuneration of Rs 6.34 Crore which is 0.00% of sales and 0.00% of profit.

4) Mr Kapil Agarwal - CEO

Mr Kapil Agarwal is Executive Director and heads the position of CEO in the company.

Furthermore, Mr Agarwal has been working with the Group since 1991 and currently heads the operations and management as CEO.

Apart from this, He is a commerce graduate from Lucknow University and holds a post-graduate diploma in business management from the Institute of Management Technology, Ghaziabad.

Similarly, He has nearly three decades of experience in sales and marketing.

In FY21, Mr Ravi Received a remuneration of Rs 7.8 Crore which is 0.00% of sales and 0.00% of profit.

(E) Shareholding Pattern of Varun Beverages Ltd

Varun Beverages Ltd - Shareholding Pattern
Varun Beverages Ltd - Shareholding Pattern more than 1%
Varun Beverages Ltd - Shareholding Pattern more than 1%

(F) Product Portfolio of the company

Varun beverages Ltd - Product Portfolio  
Pepsi, Sting, Slice, mountain dew
  • Carbonated Soft Drinks
  • Fruit Pulp/Juice-based Drinks
  • Sports Drink
  • Packaged Water
  • Energy Drink
  • Ice Tea
  • Dairy-based Beverages

Varun Beverages Limited, along with its subsidiaries, operates as the franchisee of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) sold under trademarks owned by PepsiCo.

Moreover, The company manufactures bottles and Processed almost all popular drinks such as Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Seven-Up Nimbooz Masala Soda, any many others under the CSD Segment.

Also, It produces and distributes Tropicana Slice, Tropicana Frutz, Seven-Up Nimbooz, Gatorade, and Quaker Oat Milk brand names, as well as packaged drinking water under the Aquafina brand.

In addition, the company holds the franchise for Ole brand of PepsiCo products in Sri Lanka.

Moreover, It sells its products to retail outlets directly and through distributors in India, as well as territories of Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe. 

PepsiCo is one of the biggest names after The Coca-Cola Company in the beverages industry at Global Level. PepsiCo not only Produces Soft Drinks but also produces many famous snacks items such as Lays, Cheetos, Doritos etc.

(G) Revenue segmentation of the company

(i) Segment wise Sales Volume

Varun Beverages Ltd - Segment wise sales volume

In CY21, CSD Segment contributed ~70%, NCB contributed ~7% and 23.30% in sales Volumes. Its CSD segment contains drinks such as Mountain Dew, Pepsi, 7up, Sting and many others.

However, NCB segment comprises almost all types of Juice produced under the Brand of Tropicana and Dairy Beverages which comprises a well known Brand name Creambells. Company offers Dairy products through Its Cart Service mainly at Busy area or centric area of the city to engage more and to sell more.

The Water segment comprises Brand Aquafina catering in all packings from PET bottles to Packaged Glass SKU.

(ii) Quarter wise Sales Volume

CSD = Carbonated Soft Drinks

(iii) Geography revenue contribution

The Larger section of sales volumes is coming from Indian Geography and remaining sales is coming from International geography.

(H) Manufacturing Facilities and Capacities

Varun Beverages Ltd - Manufacturing facilities

The company has total of 37 Manufacturing Facilities across Globe, in which 6 in the international Geographies and 31 in Indian Geography.

However, VBL has robust supply chain of 100+ Depots, 2,500 Owned Vehicles and has a network of more than 2,000 Primary Distributors.

Furthermore, To operate effective operations on the ground level, Company had installed 8.40 Lakh+ Visi Coolers at its Associated retailers.

(I) Cost Structure

(i) As % of Net Sales

Varun Beverages Ltd - cost structure of the company

(ii) Operational expense as % Net Sales

Varun Beverages Ltd - Operational expense

In CY21, Distribution expense has sharply increased mainly due to rise in the Fuel prices. Furthermore, operational activities were disrupted due to ongoing lockdown and Covid situations.

(iii) Advertisement expense as % of Net sales

Varun Beverages Ltd - Advertisements and promotional expense
  • Over the years, VBL Advertisement and Promotion expense has been in the range of 1-2% of net sales.
  • Company mainly spent on the Shops/outlet Hoardings, and on other promotional activities.
  • In Fact "Management of Marketing" is responsible for reaching out to every 6th person in the word.

(iv) Royalty Fees

Varun Beverages Ltd - Royalty Fees paid to PepsiCo

Over the years, Varun Beverages is paying a stagnant % of royalty fees to PepsiCo. In CY21, company paid merely 0.14% of Net sales as Royalty fees.

Apart from this, Royalty fees may increase because Company signed an agreement with PepsiCo India Holding to manufacture popular Kurkure Puffcorn snack which would be Non beverages segment for the company.

(J) Financial Parameters

  • The sales value was up in Dec-21 by 37% YoY. This was largely driven by newly launched Drink in the CSD segment "Sting "and upliftment of the Covid Restrictions.
  • Further, Realization/case improved in Zambia and Morocco because of improvement in currency and reduction in the discounts.
  • Realization per case improved by 6.3% to Rs. 157.3 in Q1 2022 led by price high in selects SKUs, change in SKU mix, and higher realization in international markets.
  • Moreover, company is working aggressively on reducing its debt. The net Debt was Rs 2550 crore in Jun 21, whereas in Sep it has been reduced to Rs 2400 Cr.

Efficiency Ratios 

(K) Management discussion & Concall highlights


  • Varun Beverages Ltd Covering more than 135 crore people around the world i.e, 1/6th of the population.
  • Company is believing that its out-of-home consumption will return to the normal levels of (~65%) after uplifting of COVID-related restrictions.
  • Realization per case improved by 6.3% to Rs. 157.3 in Q1 2022 led by price high in selects SKUs, change in SKU mix, and higher realization in international markets.
  • Strong demand for newly launched products (Mountain Dew – Ice, Sting, and Dairy Beverages) can continue to grow at a faster pace.
  • Additionally, company is clear cut focused towards reducing its Debt. (Debt as of Dec 2021 - ₹2400 Cr) whereas Rs1000 cr has been paid off.
  • focusing in Increasing portfolio size in the Non-Beverages segment by authorizing license from PepsiCo.
  • Expanding its Distribution networking rural and semi Rural Area through partnering with Retail outlets, and New territories.
  • Apart from this, company stated that except from Bihar State, company will move slower in Indian geography because of already establishment. Now, Africa will be the key Focus area for the company.

Acquisition aspect

  • During the year, Company faced a problem related to acquiring South and west territory because of Covid pandemic. However, Its growing at 37% to gain Market share.
  • In addition, South and West India territory recorded volumes of 135m units v/s 205m units in the preceding two years. VBL has plans to achieve similar volumes over the next one-to-two years.


  • During the year, VBL installed new Manufacturing unit in Bihar State by incurring Rs 285 crore. However, Board expects Bihar is going to be next revenue generator state due to under-penetrated geography and has potential to grow because of wide Population Density of ~13 Cr.
  • In Feb, 22 VBL ties up with PepsiCo India Holding to manufacture popular Kurkure Puffcorn snack Item with capex worth of Rs 20-25 Crore in Uttar Pradesh. This is the first time that it has ventured into the manufacture of Non Beverages.

Concall Highlights - Quarter 3 of Current Year 2021

  • In Q3, Company has reported cut of ~2.10% in Net Sales, against the quarter Q2. During Q3 Company did Net sales of Rs 2398.2 Cr vs Rs 2449.8 Cr of Q2.
  • EBITDA Margins also dropped to 20.6% from 23.3% in Q3, due to Covid-19 Lockdown in Southern western states.
  • Similarly, In Q3 Net Profit also slipped from Rs. 318 Cr to Rs. 257 Cr
  • However, On the volume sides company has reported 153mn unit cases in Q3-2021 vs 152mn unit cases.
  • Over the last Years, Its Energy drink Sting shown 672% growth and expects to grow further because of Small SKUs.
  • Eventually, Q3 has not passed as expected due to Tropical season, but its Dairy Beverages doing extremely good.
  • Moreover, Tropicana Juice grew 40%, Gatorade 53% and Dairy beverages grew by 57%

(L) Strengths and Risk/Concerns

(i) Strengths

Market leadership

The Varun Beverages group is the largest franchisee for PepsiCo in India and has the sole franchisee operations in Nepal, Sri Lanka, Morocco, Zambia and Zimbabwe.

In addition, Consistent ramp-up in operations via organic and inorganic routes has helped significantly strengthen the market position and enhance the geographical diversity.

Geographical diversity

Following the acquisition of the southern and western territories of PepsiCo in 2019, VBL has presence in 27 states and seven union territories in India (except Andhra Pradesh, Jammu and Kashmir and Ladakh), accounting for more than 85% of the beverage sales of PepsiCo in India. 

Strong operating efficiency

The group continues to derive efficiency from backward-integration of operations, with facilities to manufacture crown corks, polyethylene terephthalate (PET) pre-forms, corrugated boxes, shrink wrap sheets, plastic cap closures and plastic shells. Furthermore, presence in contiguous territories helps efficiently manage logistics and other operating costs and maintain economies of scale.

(ii) Weaknesses

Changes in regulations and customer preferences

The domestic beverage industry remains susceptible to regulatory changes regarding the content in soft drinks and increasing environmental concerns over ground water depletion and discharge of effluents by bottling plants in India.

Evolving issues related to disposal of plastic may also impact the industry. VBL had tied up for recycling of ~66% of its PET bottles as on December 31, 2020, and may increase this to 100% over the medium term.

Integration of acquisitions of large territories

VBL follows a growth strategy comprising organic and inorganic capacity expansions in the domestic and international markets. Acquisitions of PepsiCo India (south & west rights) and third-party bottler territories was completed in the first half of 2019, and the full benefit was expected to flow in 2021.

However, the second wave of the Covid-19 pandemic hampered the ramp-up in volume and further penetration in the current year. As things normalise in 2023, VBL should benefit from economies of scale in these contiguous territories. Ability to successfully integrate and increase profitability will be a key monitorable for the group. 

Drop us your query at – or Visit

References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

Leave a Reply

Your email address will not be published. Required fields are marked *


Recent Post

Have Any Question?

Do not hesitate to contact us. We’re a team of experts ready to talk to you.

+91 99882 75566

Connect With Us