The Backstory:
Varun Beverages Ltd. is the world’s second-largest franchisee of carbonated soft drinks and non-carbonated beverages sold under PepsiCo trademarks. The Company also manufactures and distributes CSDs, NCBs, & packaged drinking water⤵️
Varun Beverages Ltd. is the world’s second-largest franchisee of carbonated soft drinks and non-carbonated beverages sold under PepsiCo trademarks. The Company also manufactures and distributes CSDs, NCBs, & packaged drinking water⤵️
The Company's operations are spread across six countries: three in the Indian Subcontinent (India, Sri Lanka, and Nepal) and three in Africa (Morocco, Zambia, and Zimbabwe)⤵️
Varun Beverages has a 29-year strategic relationship with PepsiCo and accounts for more than 80% of PepsiCo’s beverage sales volume in India⤵️
The Company has increased the number of PepsiCo licensed territories and sub-territories, produced and distributed a wider range of PepsiCo beverages, introduced new SKUs to its portfolio, expanded its distribution network, and is now present in 27 states and seven territories⤵️
Let us understand the Business Model of Varun Beverages!
Varun Beverages’ business model entails end-to-end execution responsibilities,including everything from manufacturing,distribution,& warehousing to customer management & in-market execution & managing cash flows & growth⤵️
Varun Beverages’ business model entails end-to-end execution responsibilities,including everything from manufacturing,distribution,& warehousing to customer management & in-market execution & managing cash flows & growth⤵️
PepsiCo provides Varun Beverages with brands, concentrates, & ATL marketing support before handing over complete control of the manufacturing and supply chain processes,driving market share gains through BTL marketing,improving cost efficiencies,& managing capital allocation⤵️
Varun Beverages obtains raw materials (PepsiCo concentrate and sugar/other raw materials from approved suppliers), manage manufacturing, bottling, and packaging at its production facilities⤵️
transports finished goods to warehouses in trucks and deliver them to retail outlets via its extensive distribution network, and in some cases directly. The products are kept in visi-coolers provided by VBL and owned by the retailer⤵️
Varun Beverages’ distribution network serves urban, semi-urban, and rural markets, meeting the needs of a diverse range of customers⤵️
India’s distribution network is strategically placed to maximize market penetration across licensed sub-territories, emphasizing higher growth markets such as semi-urban and rural sub-territories⤵️
Apart from providing the concentrate, consumer marketing, and brands to Varun Beverages, PepsiCo has complete control over the manufacturing and supply chain processes, which drives market share and cost efficiencies⤵️
The various PepsiCo brands manufactured and distributed by Varun Beverages include Pepsi, Pepsi Black, Diet Pepsi, Pepsi Max, Mirinda Lemon, Mirinda ⤵️
Orange, Mountain Dew, Mountain Dew Ice, Slice Fizzy, Seven-Up, Seven-Up Nimbooz Masala Soda, Teem, Sting, Evervess, Tropicana Slice, Tropicana Juices (100%, Delight and Essentials),Seven-Up Nimbooz, Gatorade, as well as packaged drinking water under the brand Aquafina and more⤵️
What are the key growth drivers of the Company?
Over the last few years, the Indian soft drink market has seen significant growth as consumption in India has gradually improved, owing to a variety of factors such as: ⤵️
Over the last few years, the Indian soft drink market has seen significant growth as consumption in India has gradually improved, owing to a variety of factors such as: ⤵️
Favorable Demographic Profile: India is a young country, with people aged 15 to 64 accounting for most of the population, providing the country with a large workforce to support economic growth⤵️
In India, soft drink consumption is expected to increase due to changing population demographics, higher spending capacity of young consumers, rapid urbanization, and growing rural consumption⤵️
Rapid Urbanization and Rising Income: With more than half of India’s working-age population, disposable income has increased, resulting in a shift in spending patterns. Furthermore,the positive trend of female employment in India has resulted in higher family disposable income⤵️
Increased Average Spend Per Household: Over the last decade, there has been a significant increase in the absolute average spend per household. Indian consumers are increasing their discretionary spending on non-essentials such as food, beverages, and consumer durables⤵️
Demand for carbonated soft drinks is influenced by increased disposable income, consumer preferences, and a growing population.
Electrification: With a good monsoon and better agro-economics, India’s rural sentiment is expected to maintain a healthy momentum, bode well for the country’s overall economic revival⤵️
Increased electrification of Indian villages, combined with improved electricity supply quality, will aid in the penetration of cooling infrastructure in these regions, thereby supporting industry growth⤵️
Location: India has a hot tropical climate. Summer in most parts of India is extremely hot and dry. It begins in April and lasts until the beginning of October, with temperatures peaking in June. Hence, the demand for beverages surges⤵️
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