Varun Beverages shares rally over 3%: What to expect on FY27 revenue front

According to a report by rating agency CRISIL, soft drink bottlers are likely to witness a revenue rebound to their long-term average growth of 15% this fiscal, owing to a hotter summer this season and deeper penetration into the market.

The summer months account for almost 40% of the overall sales of beverage makers. However, due to unseasonal rains, the last fiscal year was not good for the industry.

"Soft drink bottlers are poised for a strong volume rebound this fiscal year, driven by hotter summers and rising penetration. IMD predictions of above normal temperatures during summer, along with the possibility of El-Nino, which usually prolongs the summer months, are expected to boost consumption," it said.

However, with rising sales, competition is also on the rise with newer entrants launching products at popular price points. The incumbent players are expected to ramp up their marketing and distribution spends, besides expanding capacity and distribution reach to protect their turf.

Moreover, a sharp rise in crude prices due to the West Asia conflict has driven packaging costs higher.

"These will negatively impact the industry’s profitability by up to 250 basis points (bps)," it added.

However, the impact will be lower for large bottlers having a nationwide presence due to their "higher pricing power and better economies of scale". Cash flows of the players will remain healthy, ensuring stable credit profiles, it added.

IMD has predicted above-normal temperatures during summer, along with the possibility of El Niño, which usually prolongs the summer months, and is expected to boost consumption.

Varun Beverages' share price trend

Shares of the company advanced as much as 3.42% to ₹445.35 apiece on the NSE in the early trade on Wednesday, April 15. However, the stock retreated from the high a little.

Over the past five sessions, the stock has jumped around 5%. In the past 30 days, the stock has gained 8.6%.

However, on a year-to-date (YTD) basis, the stock is down 10% (as of early trade on Wednesday, April 15).

About Varun Beverages

Varun Beverages Ltd (VBL), a key franchisee of PepsiCo, has steadily expanded its partnership with the beverage major since the 1990s. Over the years, the company has widened its licensed territories, diversified its product portfolio, and strengthened its distribution network.

VBL manufactures, distributes, and sells a range of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs), including packaged drinking water, under PepsiCo-owned brands.

Its CSD portfolio includes brands such as Pepsi, Pepsi Black, Mountain Dew, Sting, Seven-Up, Mirinda Orange, Seven-Up Nimbooz Masala Soda, and Evervess. In the non-carbonated segment, the company produces and sells products such as Tropicana Slice, Tropicana Juices (100% and Delight), Seven-Up Nimbooz, Gatorade, and packaged drinking water under Aquafina.

The company holds franchise rights for PepsiCo products across 27 states and 7 Union Territories in India, accounting for a significant share of PepsiCo India’s beverage sales volume.

It also has international operations spanning Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe. India remains its largest market, contributing about 80% of its revenue from operations as of FY22.

VBL is part of the RJ Corp group, which has business interests across beverages, quick-service restaurants, ice creams, and healthcare.