Varun Beverages Ltd (VBL) Q3 FY23 Earnings Concall Transcript

Varun Beverages Ltd (NSE: VBL) Q3 FY23 Earnings Concall dated Feb. 06, 2023

Corporate Participants:

Ravi Jaipuria — Chairman

Raj Gandhi — Group Chief Financial Officer and Whole-Time Director

Analysts:

Anoop Poojari — CDR India — Analyst

Chirag Shah — CLSA — Analyst

Nihal Jham — Nuvama — Analyst

Vivek M — Jefferies — Analyst

Percy Panthaki — IIFL — Analyst

Devanshu Bansal — Emkay Global — Analyst

Sumant Kumar — Motilal Oswal — Analyst

Sanjaya Satapathy — Ampersand Capital — Analyst

Jaykumar Doshi — Kotak — Analyst

Sparsh Jain — Intrinsic Value Compounding — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Varun Beverages Limited Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you and over to you, sir.

Anoop Poojari — CDR India — Analyst

Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q4 and CY 2022 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Chairman of the Company; Mr. Varun Jaipuria, Executive Vice Chairman and Whole-Time Director; and Mr. Raj Gandhi, Group CFO and Whole-Time Director of the Company. We will initiate the call with opening remarks from the management, following which we’ll have the forum open for a question-and-answer session.

Before we begin, I would like to state that some statements made in today’s call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. I would now request Mr. Ravi Jaipuria to make his opening remarks.

Ravi Jaipuria — Chairman

Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope all of you had the opportunity to go through our results presentation that provides details of our operational and financial performance for the fourth quarter and full year ended December 31, 2022.

We are pleased to close the year on a strong note with exceptional operational and financial performance reported throughout CY 2022. The strong recovery in demand post the pandemic and our continued efforts towards expanding the distribution network across markets resulted in a 41% growth in consolidated sales volume. Additionally, we achieved growth in realization per unit through strategic measures such as selective price hikes, rationalized discounts and incentives and improved product mix. This allowed us to deliver revenue growth of 49% and PAT growth of 108% year-on-year on a consolidated basis CY 2022. We are excited to share that our energy drink Sting had a remarkable year contributing significantly to both volumes and realization growth. As the product is in the expanding category, we anticipate this strong performance to sustain in the coming years. Our recent launches in the value-added dairy segment have also been well received by consumers. And we are confident that these products will continue to drive growth in the future.

As a leading beverage serving over 1.3 billion customers globally through our extensive network of over 3 million retail outlets, we take our responsibility to the environment seriously. We are committed to sustainable and responsible operations and have taken a proactive stance in promoting sustainability in the beverage industry. Our aim is to minimize our impact on the environment and foster sustainable practices throughout our supply chain. Looking forward, we aim to further strengthen our position as a key player in the beverage industry by leveraging our strong presence in fast-growing markets, solid infrastructure and well-established distribution network. Our focus remains on delivering high-quality products further expanding our reach in key markets and capitalizing on new opportunities to create sustainable long-term value for all stakeholders.

I would now invite Mr. Gandhi to provide the highlights on the operation and financial performance. Thank you very much.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Thank you, Mr. Chairman. Good afternoon and a warm welcome to everyone joining us today. Let me provide an overview of the financial performance for the fourth quarter and year ended 31st December 2022.

Revenue from operations adjusted for excise/GST grew by 27.7% year-on-year in Q4 of calendar year 2022 to the level of INR22,142 million. Sales volume grew by 17.8% in Q4 CY ’22 to the level of 132 million cases and for the year 2022, total sales volume grew by 40.9% to a level of 802 million cases, driven by strong performance in India as well as international territories. In the calendar year 2022, net realization per case improved by 6% to the level of 164 [Phonetic], primarily driven by price hike in select SKUs, rationalized discount and incentives and improvement in mix of smaller SKUs, especially the energy drink Sting, which has a higher mix realization. The mix of Sting in our sales volumes continues to grow exponentially to about 9.6% of total mix in India for the year. This is leading to improvement in net realization as well. On the other — on the profit front, despite inflationary pressures in raw material costs, gross margins were minimally impacted during the year due to early stocking of crucial raw materials and an increase in realization. During the year, gross margins declined by 180 basis points to the level of 52.5%, primarily due to a surge in preform prices by more than 30%. However, EBITDA still increased by 68.5% to reach at INR27,081 [Phonetic] million year-on-year. This improvement was driven by a rise in realization and operating leverage from increased sales volume, which resulted in an improvement in EBITDA margins by 241 basis points to 21.2% in CY 2022.

Depreciation increased by 16.2% to the level of INR6,172 million as compared to INR5,313 million in CY ’21. This is on account of capitalization of assets. Finance costs remained almost flat in calendar year ’22. PAT increased by 150.2% to the level of INR815 million in Q4 of 2022 from INR326 million in Q4 of ’21. For the calendar year ’22 full year basis, PAT grew by 107.8% to the level of INR15,501 million, driven by a high growth in revenue from operations, improvements in margin and transition to lower tax rate in India.

On the balance sheet front, net debt stood at INR34,096 million as on 31st December 2022 as against INR30,053 million as on 31st December ’21. This increase was due to a greenfield expansion under implementation in the states of Rajasthan and Madhya Pradesh as well as brownfield expansion at six plants in India for CY ’23. Our debt-to-equity ratio stood at a healthy level of 0.65 [Phonetic] and debt-to-EBITDA ratio of 1.23% — 1.23 times as on 31st December 2022. Working capital days have stayed at the same level of 36 days as on 31st December ’22 [Phonetic] as were in ’21. The inventory of finished goods has increased in preparation for the next season in order to avoid any stockout situation.

During ’22, the Company invested in various expansion projects, including INR6,300 million primarily for greenfield expansion in Bihar and Jammu and brownfield expansions in India and INR2,500 million in brownfield expansion in Morocco and Zimbabwe, additionally INR3,700 million for purchasing land for future capacity expansions for the year 2024, ’25. As of 31st December 2022, the Company had a CWIP of approximately INR6,066 million for further greenfield expansion in Rajasthan and Madhya Pradesh, that’s for ’23 and brownfield expansion at six existing plants in India. The net capex estimated for ’23 is around INR15,000 million. This growth-oriented capex will be primarily funded through internal approvals, further reinforcing our financial position.

In line with the guidelines of dividend policy, the Board of Directors recommended a final dividend of INR1 per equity share. With this, total dividend declared for the year of ’22 stands at INR3.50 per equity share. The total cash outflow for dividend payout will be INR2,273 million [Phonetic] for the year ’22. This includes the interim dividend already paid.

In continuation, we are pleased to report a successful year for Varun Beverages marked by a robust balance sheet, strong cash flow generation, solid growth momentum, our commitment to delivering value to all stakeholders and capitalizing on our opportunities will continue to drive sustainable long-term growth for the Company.

On that note, I come to an end of the opening remarks and would like to now ask the moderator to open the forum for any questions or suggestions that you may have. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions]. The first question is from the line of Chirag Shah from CLSA. Please go ahead.

Chirag Shah — CLSA — Analyst

Yeah. Hi. Thank you very much. Encouraging to see a strong Q4. My first question is to Mr. Jaipuria. Sir, it’s good to hear about the development on the snacks business. Can you elaborate on our vision and the broader terms of the snacks business relationship with Pepsi in Morocco, where we are also taking over the distribution responsibility? Would you say that we are incrementally getting more confident of managing the snacks business that we’ve just started? And will we be looking at setting up manufacturing capabilities in these markets? And lastly, in India, where Pepsi already has a distribution setup for snacks, can Pepsi consider giving us distribution rights in these markets as well?

Ravi Jaipuria — Chairman

Well, I hope one day they do, but I don’t — at the moment, no. I don’t think in India, they are looking for any distribution or accept [Phonetic] setting up plants. Maybe we can expand setting up plants, but for only co-packing and giving it to Pepsi. But in Morocco, definitely, we have started the operations in January. We have started distribution and they have a complete range of products. We hope we want to stabilize that business in the next three to six months. And maybe once we stabilize it, we will talk to Pepsi if we can start manufacturing there.

Chirag Shah — CLSA — Analyst

So as of now, it will be imports, which will go into the Morocco market?

Ravi Jaipuria — Chairman

That’s right. It’s already — it used to be imported, but now it’s under us, and we are importing from two countries, Egypt and Portugal.

Chirag Shah — CLSA — Analyst

Sure. And I see that even in India, the manufacturing facility has started, are there any key — obviously, it’s early days, but are there any learnings from that? And are we now looking at further expanding that business?

Ravi Jaipuria — Chairman

Yes. I think — I mean, we’ve had a good start. There has been no hiccups, and our production started, I think, in end of November or early December. And we are producing to full capacity, and I think Pepsi is looking to asking us to expand this operation.

Chirag Shah — CLSA — Analyst

That’s encouraging. My second question is to Mr. Gandhi. Sir, there’s been a very sharp increase in inventory for the quarter. Of course, you explained by saying that you are preparing for the festive — peak season. But typically, we use Q1 to prepare for the peak season. But this time around, we have done that in December itself, suggesting that there could be serious capacity constraints that we may be facing. Is that understanding correct?

Ravi Jaipuria — Chairman

Let me answer this to you instead of Mr. Gandhi. So, [Speech Overlap].

Chirag Shah — CLSA — Analyst

Sure.

Ravi Jaipuria — Chairman

We have — like anywhere, all deliveries for most of the equipment are slightly delayed. And we don’t want to take any chance by running out of stock. So, we have pre-stocked much earlier this year than we normally do. So, we have safeguarded ourselves. And as most of our lines will become operational in the next month, actually most of them this month and next month, but still, if there are some slight delays, we have safeguarded ourselves and taken that instead of starting prebuilding in January and February, we have started prebuilding in December itself. Secondly, our rising [Phonetic] prices are always at the lowest in November and December. So, we like to pre-stock it as much as possible what we are able to get from the suppliers. And that is another reason, and that also safeguards us from the price increases, and that’s how we got partly saved in 2022 also. So, we have done that again this year to safeguard ourselves.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

And Chirag, just to add what Chairman has just said, the season reaches the peak near around Holi. This year, Holi, I think, is going to be about 15 days prior to last year, which necessitated building the stock, which we used to start from January, from December itself, we started.

Ravi Jaipuria — Chairman

Also, Chirag, one more reason. Now South and West are becoming more important to us as we are consolidating and going — improving our go-to-market. And those seasons start much earlier than North. So, those seasons actually start in February, not after Holi also.

Chirag Shah — CLSA — Analyst

That’s very helpful. In fact, that brings me to my second question that now do you feel with the South and West territories also growing faster, the seasonality that we have in our business, is that structurally coming down?

Ravi Jaipuria — Chairman

Well, you have seen that already, Chirag. That’s why you see the quarter four numbers much stronger than last year’s. So, it is because the new territories South and West are performing well for us. And the numbers are becoming much better. So, the quarter four numbers are becoming much better.

Chirag Shah — CLSA — Analyst

Right. And in terms of distribution, we — our products are now hitting about 3 million odd outlets. What according to you is the scope for us to — in terms of further distribution expansion? And how do we reach there both in terms of number of outlets and then the visi cooler infrastructure?

Ravi Jaipuria — Chairman

So, we are looking at about 10% to 15% at least expansion in the number of outlets. That’s what we aim at about 15%, and we hope we can reach that. So, our target, again, this year is also to try and reach anywhere close to 3.5 million outlets, if we can, with the expansion of the distribution and — so the trucks, the distributor, the visi coolers, they are all being added proportionately to what it is.

Chirag Shah — CLSA — Analyst

I understand. And one last question, if I may. On the dairy business, is there enough time to at least share the grand plan with us as to when do we do a national rollout? And how do we take those products forward?

Ravi Jaipuria — Chairman

I think the national rollout will only happen in ’24 because our production lines are only going to be ready by end of this year. So, we will be tripling our capacity by end of this year. So, I think for 2024, we’ll be ready to expand in a much bigger way. And it will be a national rollout.

Chirag Shah — CLSA — Analyst

Right. And as we prepare for the national rollout, do you think the sourcing for dairy is pretty much in place for all the regions?

Ravi Jaipuria — Chairman

Yes. Sourcing will not be a problem.

Chirag Shah — CLSA — Analyst

Sure. Thank you very much. And all the best.

Ravi Jaipuria — Chairman

Thank you.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Thank you, Chirag. Do we have [Technical Issues] question?

Operator

Yeah. It’s from the line of Nihal Jham from Nuvama. Please go ahead.

Nihal Jham — Nuvama — Analyst

Yes. Good evening and congratulations on your strong performance. Sir, three questions from my side. The first is specifically for this quarter, what was the contribution of Sting? I think the 10% number was for CY. So, if you could just give the number for this quarter.

Ravi Jaipuria — Chairman

I can’t hear you properly. Can you just repeat?

Nihal Jham — Nuvama — Analyst

I am so sorry. I was asking the contribution of Sting for this quarter?

Operator

Mr. Jham, I think if you’re on a speaker mode, could you please [Speech Overlap].

Nihal Jham — Nuvama — Analyst

Am I audible? I’m so sorry for that.

Ravi Jaipuria — Chairman

Yeah. The Sting contribution was much higher than the full year contribution. It went up to as high as 16%.

Nihal Jham — Nuvama — Analyst

Sir, that was helpful, Mr. Jaipuria. The second question was that in your presentation, you alluded to the aspect of taking some price hikes in select SKUs and also on reducing discounts. Now historically, VBL is a business, which has seen significant volume growth. And just given the kind of competitive intensity that the beverage business has, I wanted to understand the reason of thinking of this as an additional lever for growth in the coming year or maybe years ahead?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Well, of course, we have grown the market share and the penetration. So, definitely, we have used that. And apart from that, whatever the opportunity came in reduction of discounts, etc., we have there [Phonetic]. So, we have done — performed on both sides actually. And more than that, basically, as price increase on SKUs, also the mix has helped us including the Sting, which is mostly in the smaller packs on a blended basis, [Technical Issues] contribute highest margins.

Nihal Jham — Nuvama — Analyst

Sure, absolutely. But looking ahead, would we want to use this lever or this is just specifically this year that we’ve tried targeting reducing the discount technique?

Ravi Jaipuria — Chairman

No. Discounting is a very relevant situation. It depends how the competition also behaves. So, I think the key issue is our job is to keep on expanding the distribution network and keep on making new products available, which like Sting, for example, is a product where we don’t find that much competition. So, obviously, in our dairy products, there is no competition as far as our main competitor is concerned. So, wherever we get an opportunity, wherever — there we try and reduce some discounts and also always single-serve, the margins are much better than large multi-serves. And our single-serve business is growing at a much faster pace than the multi-serve business.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Moreover, that remark was with reference to the commodity prices going up, the input cost. So, part of that, how we retained our margin was by reducing the discounts and — which you can see from our P&L.

Nihal Jham — Nuvama — Analyst

Got that. Last question was for CY ’23. Could you highlight which those six plants are, I think Rajasthan and MP would be two, the other four and debt target for CY ’23 and if you have one?

Ravi Jaipuria — Chairman

So, they’ll be Rajasthan, Madhya Pradesh as well as six brownfields. So, it will be over and above the two.

Nihal Jham — Nuvama — Analyst

It will be over and above the two.

Ravi Jaipuria — Chairman

Yeah.

Nihal Jham — Nuvama — Analyst

And on the debt target?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Debt, we don’t work with a target. Always target is to reduce it. What happens is our balance sheet is mailed in the month of December when the capex is going on. And [Technical Issues] sometime in the you will see it will be at the lowest because then it starts paying off for itself and comes down and it should come down substantially even lower than the last year’s H1.

Nihal Jham — Nuvama — Analyst

Understood that. Thank you so much [Indecipherable] all the best.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Thank you.

Operator

Thank you. We’ll take our next question from the line of Vivek M from Jefferies. Please go ahead.

Vivek M — Jefferies — Analyst

Hi, good evening. A few questions. First is on Sting. So, for this year, it was 10% for the quarter, it was about 16%, you mentioned. And I’m guessing there will be some seasonality in — to the portfolio, so number may be exaggerated. But where do you think this number settles down in the next few years? Do you think that the exaggerated growth over here is like — is going to moderate as we go forward? And can you also respond to this in the context of competition that has also launched a product, which is quite similar to yours?

Ravi Jaipuria — Chairman

So, I think, first of all, Vivek, energy drink in the growing markets is actually becoming between 10% to 15% of the total mix. So, there is no reason why Sting, our energy drink should be between 10% and 15% in India. Now it would — after total beverage mix, now it would depend what mix our competitor’s energy drink maintains. So, our energy drink’s percentage would differ based on some of their — how their people perceive their energy drink. Otherwise, between 10% to 15% should be the energy drink market as such.

Vivek M — Jefferies — Analyst

Got it. Okay. The other thing is, your presentation doesn’t talk about it, but this India 1 billion volumes, which you have had — come up or have had given in social media yesterday, can you just talk about that number by 2025?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

That is basically reason of the Company, that number because this year, our — we — India already, we have reached 652 million cases out of this 816 million, so making another about 50% growth over a period of three years, that’s the internal reason, which to our sales team we have given.

Vivek M — Jefferies — Analyst

Okay. That’s very interesting and very strong number. Mr. Gandhi, on the capex side, I have a doubt. Your cash flow shows about INR1,800 crores. And if you look at on the gross block and CWIP changes, that number is about INR1,350 crores. So, can you just talk about where is the rest INR450 crores?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Our CWIP? Yeah. Capital work in progress or capital advances is sitting there.

Vivek M — Jefferies — Analyst

No. So, capital work in progress is something I have taken. So, I’m saying the delta change in gross block, delta change in CWIP, that number comes to about INR1,350 crores, and cash flow is about INR1,800 crores.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

[Indecipherable] sitting under two heads. One is the capital work in progress. Second is the advances to the equipment suppliers.

Vivek M — Jefferies — Analyst

So that is the INR450 crore number?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Both together. Yes, that’s right.

Vivek M — Jefferies — Analyst

No. Not both together, right? INR450 crores is the differential, right? So, that is the capital advance number because CWIP I have adjusted, the delta change in CWIP is about INR100 crores.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Yes. The differential of INR450 crores is sitting under the advances to the equipment suppliers. So, [Technical Issues] these two.

Vivek M — Jefferies — Analyst

Perfect. Okay. And Mr. Gandhi, when you talk about INR1,500 crore number for next year, that’s the cash outflow or the capitalization?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

That’s the capitalization.

Vivek M — Jefferies — Analyst

So, of that capitalization of INR1,500 crores, INR450 crores [Technical Issues] and — sorry about it. And INR600 crores in the CWIP, right?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Yeah. Those and the balance will be funded in this quarter. And then from the next quarter on, like Chairman mentioned, to more lines for the [Indecipherable] launch, which will be ready by the year end of January next year, which will be one in Maharashtra, another in UP for the national launch of the dairy beverages. So, the CWIP for that will start.

Vivek M — Jefferies — Analyst

Okay. So, — but going by this math, INR1,500 crore capitalization for next year, of which INR600 crores right now sitting in CWIP, INR450 crores capital advances, that makes it INR1,050 crores. So, INR450 crores is what needs to be spent on these projects plus you are seeing [Indecipherable]?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Plus — yes, you’re right. For the [Indecipherable] capex, INR450 crores only is to be funded and the balance will again, they will be built up on CWIP for the calendar ’24. That’s right.

Vivek M — Jefferies — Analyst

Okay. Perfect. Okay. And another question is, if I look at your — and in fact, you have alluded to that, gross margins, which have contracted in calendar ’22 and the way in which EBITDA margins have behaved. I mean if we just do the extrapolation of what you are doing in terms of growth and what your guidance is, what you have spoken about 1 billion cases, doesn’t it look like that your margins will actually at EBITDA level with the operating leverage that you will get and gross margins coming back, you can actually end up hitting more like 22.5%, 23%? Where is this math wrong? Yeah.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Vivek, well [Speech Overlap].

Ravi Jaipuria — Chairman

We don’t like to give guidance better than what we are, 21% already is a very high because it always depends, sometimes sugar is higher or the raisin is higher. So, we want to keep that safety. And it could be, but we don’t want to project that because we keep — want to keep some leverage with us.

Vivek M — Jefferies — Analyst

Sure, sure, sure. I understand. And lastly, on the foods business, what are the commercials on the foods business in India when you talk about expansion, Mr. Jaipuria, will it contribute, let’s say, meaningfully to the base beverage business?

Ravi Jaipuria — Chairman

No, no. I think it will be very small. We have just started one line with them, and we are co-packing with them. And there is a possibility we might add one more line. So, it will be very miniscule to the whole thing.

Vivek M — Jefferies — Analyst

Got it. Got it. Thank you and wishing you all the best.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Vivek, in fact we borrowed a statement out of your report, it’s a foot in the door. It’s very small [Speech Overlap].

Vivek M — Jefferies — Analyst

No. Because I was asking this question because this time around, Mr. Jaipuria did mention about more lines. So, I was hoping that it is more beyond what we wrote [Speech Overlap].

Ravi Jaipuria — Chairman

[Speech Overlap] not that many more. Maybe one more line. We are discussing with that.

Vivek M — Jefferies — Analyst

Thank you, sir, and wish you all the best.

Ravi Jaipuria — Chairman

Thank you.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Thank you, Vivek.

Operator

Our next question is from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL — Analyst

Hi, sir. A couple of questions. So, firstly, if you can give some flavor on the geographic growth this quarter as well as for the full year as in which states are clearly growing above your company average and which are really pulling the overall growth for the Company. And also on South and West, I think when we had acquired, we had said that the cases are about 135 million cases in that geography, but the peak cases were over 200 million cases. And the objective was to reach to that as the first marker. So, have we reached that first marker or not? Yeah, that’s my first question, please.

Ravi Jaipuria — Chairman

I think exact numbers, we would not like to give territory wise. But I think overall, as we are seeing the growth, if we have grown 41%, so, mostly, it’s been throughout the territory. Obviously, some of the territories, which we have acquired, where our presence was very low, our growths are much higher. And we hope, as we are increasing our go-to-market that the markets where we are very lowly penetrated or were lowly penetrated, those markets are going to grow much faster than — and which is what is showing the difference in our seasonality.

Percy Panthaki — IIFL — Analyst

Understood. Understood. Secondly, just wanted to understand on Sting. What is the profile of a typical consumer of Sting? And secondly, when he is consuming Sting, is it a completely new consumption occasion for a soft drink? Or is he actually just sort of switching from some other type of soft drink into an energy drink?

Ravi Jaipuria — Chairman

Very difficult to answer that. I mean, of course, there is some switching and some [Technical Issues] coming in. But as the markets are changing globally, we are seeing that about — in the emerging markets, about 15% energy drinks are — energy drinks are becoming 15% of the beverage business. So, that is what is happening everywhere in the emerging markets. You take Pakistan, you take Vietnam, you take Africa, you take all the surrounding countries and the emerging markets. This is what the new thing is happening, and that’s where Sting is fitting in perfectly.

Percy Panthaki — IIFL — Analyst

Is this relatively a new phenomenon in these emerging markets? Or were energy drinks sort of a decent part of the market even 10, 15 years ago?

Ravi Jaipuria — Chairman

Well, energy drinks were always a part of the market, but they were always very expensive. So, they used to be — like you had Red Bull here, for example. So, there was always a market for it, but it was a very niche market. Now since it’s been line price, the market has just gone out of proportion. And [Speech Overlap].

Percy Panthaki — IIFL — Analyst

So, basically, the failure [Phonetic] has increased over the last 10 years or so.

Ravi Jaipuria — Chairman

I would say, even less than that. It has really taken off in the last five, seven years, I would say.

Percy Panthaki — IIFL — Analyst

So, for these markets, when this energy drinks explosion has opened — happened over the last seven years or so, has it resulted in the overall soft drink market sort of growing at an accelerated pace? Or has there largely been a shift between other types of soft drinks and energy drinks and the overall market has grown at the same rate as before, but with a higher energy drink percentage contribution?

Ravi Jaipuria — Chairman

But if you look at it yourself, if we have grown at 41% and this is only 10% of our mix, then our weather products have grown at 31% also now. So, the whole market is growing.

Percy Panthaki — IIFL — Analyst

Right, right. So, what in your view is resulting in this really breakneck kind of growth? And does this seem like a sustainable growth, I mean, the ex Sting growth that you have seen? Does it seem to sustainable or is there something that is really [Speech Overlap].

Ravi Jaipuria — Chairman

Overall growth, I mean, we can only hope, but this kind of growths don’t happen every day. So, I don’t want to commit anything on it.

Percy Panthaki — IIFL — Analyst

So, like any two or three drivers which are resulting in this super normal growth that we are seeing right now?

Ravi Jaipuria — Chairman

What is your question? I mean, I’m not clear. [Speech Overlap].

Percy Panthaki — IIFL — Analyst

I just want to know what are the reasons when you said that this growth cannot probably sustain for a long period of time, what is the reason that we are seeing the growth right now?

Ravi Jaipuria — Chairman

I’m not saying it won’t happen, but I’m not saying I want to predict all that because this is an over exceptional growth, and these growths don’t happen every year. So, I hope it can happen. But I’m not willing to commit on that, and I hope we have a decent good year this year also.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Percy, see, as of now, the base is very small. And high growth on that is possible. Once the base [Speech Overlap].

Ravi Jaipuria — Chairman

No, no. He is not talking on Sting. He’s talking overall.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Okay.

Percy Panthaki — IIFL — Analyst

Yeah, I was talking overall.

Ravi Jaipuria — Chairman

I definitely believe we’ll grow. But overall, we should have a decent growth, but I don’t want to give any numbers on it.

Percy Panthaki — IIFL — Analyst

Understood, sir. Very clear. Thanks and all the best.

Ravi Jaipuria — Chairman

Yeah.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Thank you, Percy.

Operator

Thank you. Our next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.

Devanshu Bansal — Emkay Global — Analyst

Yeah, sir. Thanks for the opportunity and congrats on a good set of numbers.

Operator

Mr. Bansal, sorry to interrupt. Could you please switch to handset mode and talk, please? We can’t hear you that clearly.

Devanshu Bansal — Emkay Global — Analyst

Yeah, sorry. Is it better now?

Operator

Yeah. Thank you.

Devanshu Bansal — Emkay Global — Analyst

Yeah, sir. Thanks for the opportunity and congrats on a good set of numbers. My question is, sir, we are doing relatively higher capex as well as working capital seems to be slightly on a higher side versus what we have done in the past. So, I just wanted to take a sense on the expected growth. So, previously, we used to guide around 10%, 11% sort of volume growth, but that was obviously on a much lower invested capital. And now since we are also doing a relatively higher amount of capex. So, what is your sense on the expected growth going ahead?

Ravi Jaipuria — Chairman

Well, I can’t be very sure, but — and I don’t want to give numbers, but we definitely are looking at very good growth, and I hope we can do at least double-digit numbers.

Devanshu Bansal — Emkay Global — Analyst

All right, sir. Just qualitatively, can we expect that since we are investing relatively higher amount. So, can that growth be qualitatively higher than what you were guiding earlier?

Ravi Jaipuria — Chairman

I think so, and that’s what we are investing, but we would not like to comment on it. I mean we are preparing ourselves for higher growth, and we are putting investments based on that. But till they happen, we would not like to comment.

Devanshu Bansal — Emkay Global — Analyst

Got it, sir. And on visi cooler addition front, this time around, I guess, you have added some 85,000 visi coolers versus 40,000, which we used to do. So, you in your remarks also mentioned that you expect about 0.5 million increase in the number of outlets as well. So, can we expect similar number of visi cooler additions this year as well?

Ravi Jaipuria — Chairman

Well, there will be — I mean, we will be having to invest more on visi coolers because we are expanding the number of outlets at much larger scale. So, at least 15% to 20% number of outlets we expand has to be with busy coolers and the rest can be without visi coolers. So, if we are looking at 400,000 or 500,000 new outlets, about 70,000 to 80,000 visi coolers need to go in approximately.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

In fact, part of this year’s visi target has been achieved by December itself, therefore, you are finding that number slightly higher.

Devanshu Bansal — Emkay Global — Analyst

Okay. Okay. And sir, there has been an increase in the interest rate. So, what is the expected rising interest rate for our debt?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Will — still, it’s not that exceptional increase. And moreover, we have to manage our debt in the next couple of months once the season has started in the reduction of the debt. And hopefully, we don’t expect interest rate — interest payout going up any substantially. You might have seen already between ’21 and ’22 in spite of new plants, such an expansion, interest cost has not gone up. We expect the same for ’23 also.

Devanshu Bansal — Emkay Global — Analyst

Got it, sir. Sir, two bookkeeping questions from my end. If you could provide the carbonate, noncarbonate and water volumes for India specifically for this year?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

We have given the percentage. 70% is [Speech Overlap].

Devanshu Bansal — Emkay Global — Analyst

For India, I am asking sir. For India.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Only for India, Okay.

Devanshu Bansal — Emkay Global — Analyst

Yeah.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Okay. 71% is CSD; 8.1% is juice and 20.9% is water.

Devanshu Bansal — Emkay Global — Analyst

Okay. And second is, if you could also give me a country-wise volumes for CY ’22.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

By what you’re needing or [Speech Overlap].

Ravi Jaipuria — Chairman

Country-wise, we’ll give you international numbers. Otherwise, it becomes too long.

Devanshu Bansal — Emkay Global — Analyst

Yeah, just if you could give me numbers for good-performing countries like Zimbabwe, Morocco, etc. [Speech Overlap].

Ravi Jaipuria — Chairman

Sir, all performing well for us. So, I don’t know [Speech Overlap] I don’t know which one is not performing so. They’re all performing. We would not like to give individual numbers [Speech Overlap].

Devanshu Bansal — Emkay Global — Analyst

Sure. Sure. Sure. Okay. Thanks. That’s it from my end.

Ravi Jaipuria — Chairman

Thank you.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Thank you.

Operator

Thank you. We’ll take our next question that’s from the line of Sumant Kumar from Motilal Oswal. Please go ahead with your question.

Sumant Kumar — Motilal Oswal — Analyst

Can you talk about the South market and West market we acquired? And how — so how is the distribution growth we have done post the acquisition?

Ravi Jaipuria — Chairman

See, Sumant ji, just because we are expanding our distribution, that is why you are seeing partly our seasonality changing. And if we have grown at 41% overall, our South and West markets are doing as good or better than that. So, that’s a huge growth, which is coming and we are very pleased with our new go-to-market system, and we are now trying to slowly get back our market share, which we had lost.

Sumant Kumar — Motilal Oswal — Analyst

So, what works we have done post acquisition, like, say, [Indecipherable] in the rural market or strengthening our distribution channel and upgrading the software system for the newly acquired markets?

Ravi Jaipuria — Chairman

So, what we basically do is increase the number of routes, increase the number of people. So, if we were theoretically going in a market at 20,000 outlets, we have tried to increase it by at least 30% to 40%. And so, if we were going to 20,000 outlets, now we are going to 28,000 outlets. And still, there is a lot of room. So, we will keep on expanding year after year because we were very underpenetrated in a lot of these territories before.

Sumant Kumar — Motilal Oswal — Analyst

Okay. Can we assume whatever the existing market we had pre-pandemic or we can say that prior to the fusion of West and South market, the newly acquired market is growing at faster pace compared to that?

Ravi Jaipuria — Chairman

That’s right. Newly acquired markets, which includes East also, is growing faster. Yeah.

Sumant Kumar — Motilal Oswal — Analyst

Okay. Okay. Thank you so much, sir.

Ravi Jaipuria — Chairman

Thank you.

Operator

Thank you. [Operator Instructions]. We’ll take a next question from the line of Sanjaya Satapathy from Ampersand Capital. Please go ahead.

Sanjaya Satapathy — Ampersand Capital — Analyst

Yeah, sir. Thanks and congratulations on a great set of results. Sir, you have given the guidance about this distributor presence going from 3 million to 3.5 million in this year 2023. Sir, can you give us a color about what will the split of the distributor across different regions be and where the growth will be a lot — I mean, let’s say, West and South where you are focusing more? How — what kind of growth will be [Speech Overlap].

Ravi Jaipuria — Chairman

Let me first answer. We are not only focusing on West and South. We are focusing on the full country. But we were weaker in West and South earlier and East also because these are the three new regions, which we had acquired. So, there is more chances of growth in that area. North has been our original stronghold. So, where we were already going to a reasonable number of outlets, which we were not going in the other three territories. So, we are expanding our distribution in those territories faster than our expansion in the North territories.

Sanjaya Satapathy — Ampersand Capital — Analyst

Yeah. So, can we assume that in this new — this territory like West and South and East, your distribution is growing at, let’s say, 30%, 40%, while in the north, it is growing at possibly around 6%, 7%?

Ravi Jaipuria — Chairman

No, there’s no 6%, 7%. All — the whole country is growing. If I’m growing at 41%, North has always been a very strong hold of us. So, we are growing in North also. But I would say, percentage wise we are going — we are putting more focus on East, West and South.

Sanjaya Satapathy — Ampersand Capital — Analyst

And sir, you had talked about this capex plan in your previous quarter. Though you have kind of given some color with the specifics like are you — the time line about your fruit juices and all those, whether they are coming up in July or they’re happening earlier as well as your beverage segment, whether the capex is over like you are fully ready geared for your next — this year summer season?

Ravi Jaipuria — Chairman

Well, we have planned growth in our capex in — and different lines, what we said, six lines and plus Rajasthan and Madhya Pradesh, we will be ready before season. And our juice and dairy, what we are talking, that is for next year, we’ll be ready by the end of this year, for next year market.

Sanjaya Satapathy — Ampersand Capital — Analyst

So, by end of this year, though earlier, you were looking at something like July, August?

Ravi Jaipuria — Chairman

No, no. I would say, by the end of this year, we’ll be ready for — so it doesn’t really make much changes because we want to be ready before the end of the year for next year.

Sanjaya Satapathy — Ampersand Capital — Analyst

Understood, sir. Understood. So, you are more than ready for beverages and for this year and for the fruit juices and milk and dairy for next year?

Ravi Jaipuria — Chairman

That’s right.

Sanjaya Satapathy — Ampersand Capital — Analyst

Thanks, sir.

Operator

Thank you. We’ll take our next question from the line of Jaykumar Doshi from Kotak. Please go ahead.

Jaykumar Doshi — Kotak — Analyst

Yeah. Hi. Thanks for the opportunity. First question is a couple of quarters back. You called out that there are about 400,000 outlets that sell only Sting and — but no other product [Technical Issues].

Ravi Jaipuria — Chairman

Can’t hear you properly, sorry.

Operator

Yeah. Could you please switch to handset mode, sir? We can’t hear you clearly. And please repeat your question.

Jaykumar Doshi — Kotak — Analyst

Is this better?

Ravi Jaipuria — Chairman

Yes, go ahead please.

Jaykumar Doshi — Kotak — Analyst

Hi, a couple of quarters back, you indicated that about 400,000 outlets that sell only Sting and there’s an opportunity to cross-sell other PepsiCo products in those outlets. Can you sort of give us some qualitative color on directionally where that number has moved in terms of 400,000 as it moved to 500,000 or [Technical Issues].

Ravi Jaipuria — Chairman

I don’t have the exact numbers right now, but we are definitely moving ahead. And that’s why if you see from a 9.6% share, it has gone to 16%. That means definitely more outlets are selling Sting, which they were selling in the first nine months.

Jaykumar Doshi — Kotak — Analyst

Understood.

Ravi Jaipuria — Chairman

And as we enter new outlets, we always try and cross-sell our other products once you start going to the outlet once the salesman is going there, then he always tries and cross-sells the other products.

Jaykumar Doshi — Kotak — Analyst

Understood. That’s helpful. Second question is more of a macro question. Now, there are a few categories where we are seeing a little bit of slowdown, especially in discretionary and it includes QSR and other segments as well. At the group level, you oversee multiple businesses. Clearly, at this point of time, we see Varun Beverages is doing exceptionally well and your confidence for next year also indicates that. So, how do you read between these things that there is some slowdown in some discretionary categories? And where do you sort of place carbonated beverages?

Ravi Jaipuria — Chairman

I would like to talk about Varun Beverages. And I think Varun Beverages is doing exceptionally well. When we come to our other [Speech Overlap], which is not too long. So, we will discuss and we’ll give you all the information on that.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

[Indecipherable] is scheduled for 9th.

Ravi Jaipuria — Chairman

So, it’s not too far.

Jaykumar Doshi — Kotak — Analyst

No, I was just trying to understand, generally, you get these questions from investors that if there is broad-based discretionary slowdown, why is it not affecting certain segments and [Speech Overlap].

Ravi Jaipuria — Chairman

So, I’ll give you one small answer for it. While you don’t find a lot of FMCGs said that rural is not firing for them, we find it slightly different because a lot of the rural territories didn’t have power situation. So, if you are selling a Unilever or a Colgate or a Dabur or most of the other products, they didn’t require electricity or chilling. For us, as the electricity and the power situation is getting better, our visi coolers are reaching and cold drink only sell when it’s cold. So, that is what is helping our rural markets.

Jaykumar Doshi — Kotak — Analyst

Understood. That’s helpful. Thank you so much.

Ravi Jaipuria — Chairman

Thank you.

Jaykumar Doshi — Kotak — Analyst

And wish you the very best for this calendar year.

Ravi Jaipuria — Chairman

Thank you very much. Thank you very much.

Operator

Thank you. Our next question is from the line of Sparsh Jain from Intrinsic Value Compounding. Please go ahead.

Sparsh Jain — Intrinsic Value Compounding — Analyst

Yeah. Thank you for the opportunity and congratulations for a good set of numbers. My question is regarding your rock star product Sting. What would this current market share in a [Technical Issues] market in India as the main competitor [Technical Issues] if you just can give us tentative [Phonetic] idea about that?

Ravi Jaipuria — Chairman

I can give you my numbers, and I think we are doing exceptionally well. And they have also recently launched their products. So, let us give it a few months and let’s see what happens. But we are quite positive on our drink and it is expanding and it’s doing extremely well.

Sparsh Jain — Intrinsic Value Compounding — Analyst

Sir, do you have a number regarding that?

Ravi Jaipuria — Chairman

No, I’ve given you the numbers in the sense of our — overall for the year, we were 9.6%. And in the last quarter, we were 16% of our mix.

Sparsh Jain — Intrinsic Value Compounding — Analyst

Okay. Just a follow-up question that. What would be the volume growth of Sting this quarter?

Ravi Jaipuria — Chairman

No, volume this quarter, we don’t know, and we would not like to predict — and 16% of our total volume is Sting. So, we have given you the total volume numbers for this quarter.

Sparsh Jain — Intrinsic Value Compounding — Analyst

No, I’m talking about the product volume growth of Sting this quarter.

Ravi Jaipuria — Chairman

I’m not understanding your question maybe.

Sparsh Jain — Intrinsic Value Compounding — Analyst

Sir, I’m asking what would be the volume growth of the product Sting?

Ravi Jaipuria — Chairman

For when?

Sparsh Jain — Intrinsic Value Compounding — Analyst

Do you have a particular number for only this [Technical Issues] Sting?

Ravi Jaipuria — Chairman

[Speech Overlap] specific numbers, no. It’s 16% of our mix and our total numbers we have given you for the quarter. So, 16% of our total number is Sting.

Sparsh Jain — Intrinsic Value Compounding — Analyst

I’m not asking about the product breakup of your product portfolio, I’m asking about the volume growth, the specific volume growth of the Sting.

Ravi Jaipuria — Chairman

From last year? Against last year, you wanting to know?

Sparsh Jain — Intrinsic Value Compounding — Analyst

Yes, yes.

Ravi Jaipuria — Chairman

One second. It’s about 175%.

Sparsh Jain — Intrinsic Value Compounding — Analyst

And what would be Q-o-Q?

Ravi Jaipuria — Chairman

This is quarter four number. I’m giving you quarter four number — the quarter four numbers I’m giving you, that has been the growth.

Sparsh Jain — Intrinsic Value Compounding — Analyst

Okay, sir. Thank you.

Ravi Jaipuria — Chairman

Thank you.

Operator

Thank you. We’ll take a next question from Devanshu Bansal from Emkay Global. Please go ahead.

Devanshu Bansal — Emkay Global — Analyst

Yes, sir. Thanks for the follow-up opportunity. I just wanted [Indecipherable] on your remarks when you said the single serves updated a better margin than multi-serve. This remark was at the gross margin level or at the EBITDA level as well?

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Impact at the gross margin level and other expenses when we reduce flows through to a better EBITDA margin, leading to that.

Devanshu Bansal — Emkay Global — Analyst

Sir, our understanding is that the smaller packs also entail a higher distribution cost. So, still the EBITDA margins are better for smaller packs?

Ravi Jaipuria — Chairman

But I don’t know where you got the information, but they don’t entail a higher distribution cost.

Devanshu Bansal — Emkay Global — Analyst

Okay.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Devanshu, we extended — we calculated on standardized 8-ounce credit basis [Phonetic]. So, if you take on that basis, the cost will be — distribution and other things will be the same.

Devanshu Bansal — Emkay Global — Analyst

Okay. And I also wanted to check on Sting since the competition has launched it under Thums Up brand. So, is it that Sting is also able to take some of the consumers, which were earlier consuming Thums Up and they are also sort of moving towards Sting? Is this a right understanding?

Ravi Jaipuria — Chairman

To be honest, it’s very difficult to say because they might be drinking some from Pepsi, some from Thums Up, some from other products. But overall, Sting is doing extremely well, and it is — we are expanding distribution also.

Devanshu Bansal — Emkay Global — Analyst

Okay. Okay. Got it, sir. Thank you.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Thank you.

Operator

Thank you. As there are no further questions from the participants, I would now like to hand the floor back to the management for closing comments.

Raj Gandhi — Group Chief Financial Officer & Whole-Time Director

Thank you very much. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the Company, please feel free to contact our Investor Relations team. Thank you [Technical Issues] and support and for taking the time to join us on this call. Look forward to interacting with you soon. Thank you very much once again.

Operator

[Operator Closing Remarks]