VBL Q4 2024-2025 Call Highlights: New Plants, Snack Expansion and Energy Drink Push!

Varun Beverages Ltd., PepsiCo’s largest franchise bottler outside the US, in its Q4 earnings call discussed the company being confident of maintaining double-digit growth in India, with plans to expand from 4 million to 12 million outlets, while its current product mix consists of 59% CSD, 15% energy drinks, 8% juice, and 18% water. In South Africa, the company is transitioning from modern trade to general trade to improve margins, with this shift expected to take about a year alongside backward integration plans. The company is expanding capacity by 20-25% in 2025, targeting 90-95% utilization, while also growing its food business in African markets and launching Sting Gold to capitalize on India’s underpenetrated energy drinks market, which is currently 5-6% vs. 15-20% in other developing countries.

Varun Beverages reported Q4 results showing consolidated net profit growth of 36% year-over-year, though falling short of analysts’ estimates. Revenue increased by 38%, while EBITDA grew 38.7% with margins remaining flat at 15.7% due to rising raw material costs and taxes. The company demonstrated strong volume growth with consolidated volumes up 23.2%, driven by African expansion and India volumes increasing 11.4%. The company’s strategic initiatives include acquisitions in Tanzania and Ghana, new operations in the Democratic Republic of Congo, entry into the snacks business across multiple African markets, and becoming debt-free following a INR7,500 crore QIP.

Continue Reading: Discover the Vital Insights from Varun Beverages Ltd.’s Earnings Call!

Financial/Operational Metrics:

• Total Revenue: INR3,689 crore, up 38% YoY.
• Net Profit: INR196 crore, up 36% YoY.
• Basic EPS: INR0.55, up 34% YoY.
• Consolidated Sales Volume: 1,124.4 million cases, up 23.2% YoY.

Outlook:

• Investments: Increased investment in sustainability with higher renewable energy usage and rPET recycling initiatives.
• Expansion: Continued Growth in India & International Markets through deepening market penetration and expanding distribution & manufacturing capacity.

 

 Analyst Crossfire:

• India Business Growth & Seasonality, Competition from Campa & Market Expansion (Vivek Maheshwari – Jefferies)? Despite mid-single-digit growth in H2, double-digit annual growth remains on track, as short-term fluctuations are driven by seasonality. Regional brands hold a 20% market share, but VBL’s expansion into 400,000-500,000 new outlets annually supports long-term growth. Market size is far from saturation, and more players will expand the category rather than threaten VBL (Ravi Jaipuria – Chairman).

 

• Capacity Expansion in 2025 & South Africa Growth Ambitions (Aditya Soman – CLSA, Percy Panthaki – IIFL)? Capacity will increase by another 20-25% in 2025, following a 45% expansion over the last two years, with new plants operational by March. Targeting higher than 30% growth in South Africa over the next 3-5 years, with aggressive expansion in general trade & backward integration (Ravi Jaipuria – Chairman).

 

• Snack Foods Expansion in 2025 (Devanshu Bansal – Emkay Global)? Morocco; Expected to reach $25-30 million revenue in 2025. Zimbabwe & Zambia; New plants operational in Q3 2025, currently relying on imports from South Africa. Jeera Drink Launch; VBL is working with PepsiCo to introduce a Jeera-based beverage, targeted for launch in the upcoming season (Ravi Jaipuria – Chairman).

 

• Margin Sustainability & International Growth, Competitive Landscape & Market Growth (Latika Chopra – JP Morgan)? Domestic 21%+ margin is sustainable, while international margins will improve through backward integration and market expansion. New entrants haven’t impacted VBL’s growth. The market is underpenetrated, and more players will expand rather than shrink the category (Ravi Jaipuria – Chairman).

 

• Pricing Decisions Amid Competition & New Product Launches (Amit Purohit – Elara Capital)? VBL makes pricing decisions in consultation with PepsiCo but sees no need for price cuts, as lower-priced brands will help grow the overall market. VBL will launch Sting Gold (new energy drink flavor) and other products before the season (Ravi Jaipuria – Chairman).

 

• Recycled PET (rPET) Project Update & Capacity Utilization for Peak Season (Nitesh Dutt – Burman Capital, Devanshu Bansal – Emkay)? The Indorama JV for rPET is on track, with production starting in early Q3 2025, covering nearly 100% of VBL’s PET requirements. VBL has sufficient capacity for expected summer demand, targeting 90-95% utilization if demand peaks (Ravi Jaipuria – Chairman).