Varun Beverages, the leading bottler for PepsiCo in India, is set to capitalise on the growth drivers of rural penetration and capacity gains. With the expansion of refrigeration in rural areas and strategic beverage launches, Varun Beverages is well-positioned for long-term growth.
The rise in refrigerator sales in rural areas is driving the growth of the Indian beverage industry. Consumers can now store beverages for longer, leading to increased sales for beverage companies like Varun Beverages. The market for refrigerators in India is expected to grow at a compound annual growth rate (CAGR) of 9.3 percent over FY 2023-28. This growth is fueled by increasing household income, improving living standards, rapid urbanisation, and a largely untapped market.
In the near term, Varun Beverages is expected to leverage its recent successful beverage launches, including Sting, Gatorade, and Pepsi Black. These launches have been well-received by consumers and are set to perform well in the future. The franchisee is tripling its capacity in the dairy-based beverages category, which offers higher realisation compared to other products. The company’s extensive distribution network gives it an advantage in scaling up its dairy segment.
Varun Beverages has set up a subsidiary in South Africa, a market with high per capita consumption of beverages. The company already has a major presence in foreign markets like Nepal, Sri Lanka, Maldives, Morocco, Zambia, and Zimbabwe. It is also setting up a greenfield bottling plant in the Democratic Republic of Congo to further expand its international operations.
RTM Watch’s Take
Varun Beverages’ growth prospects are promising, driven by the expansion of refrigeration in rural areas, strategic beverage launches, and its strong distribution network. The company’s focus on the dairy segment and international expansion further enhances its growth potential. However, it is important to monitor the competitive landscape and consumer preferences to ensure sustained growth in the long term.
