Varun Beverages, a key bottler for PepsiCo, has experienced remarkable growth, reporting a 35.2% increase in net profit for the January to March 2025 quarter, amounting to Rs 726.4 crore. This surge in earnings is attributed to strong volume growth, although it slightly missed analyst expectations of Rs 741 crore.

Volume Growth Fuels Profit Surge

The company’s total volumes saw a significant rise of 30.1%, reaching 312.4 million cases. This impressive growth was propelled by a 15.5% increase in India, along with contributions from international markets like South Africa and the Democratic Republic of Congo.

• Volume Growth Highlights:
  • India: 15.5% increase
  • Overall: 30.1% rise to 312.4 million cases

Strong Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

Varun Beverages reported an EBITDA of Rs 1,264 crore, surpassing projections of Rs 1,235 crore. However, gross margins experienced a decline of 171 basis points, settling at 54.6%, primarily due to reduced profitability in South Africa.

Ravi Jaipuria, the chairman of Varun Beverages, noted that there was a shift towards selling a greater proportion of the company’s own beverages in South Africa, which typically yield lower margins compared to PepsiCo’s products.

Expansion in Africa and Potential in India

The company, which markets beverages under well-known labels such as Pepsi and Tropicana, is rapidly expanding its footprint in African countries, recognizing significant growth opportunities in those regions. In India, Jaipuria emphasized the vast potential for expansion, citing rapid urbanization and increasing per capita income as key drivers for growth, which led to a 1.8% rise in net realization per case.

Jaipuria stated, “We are optimistic about achieving double-digit growth this year.” Despite experiencing slightly lower domestic margins in recent quarters, the company is focused on enhancing production capabilities and expanding its product portfolio in the Indian market.

New Production Facilities and Future Outlook

In a strategic move to capitalize on the upcoming peak summer season, Varun Beverages has inaugurated new greenfield production facilities in Kangra, Himachal Pradesh, and Prayagraj, Uttar Pradesh. Furthermore, two additional facilities in Bihar and Meghalaya are set to begin production soon.

Jaipuria pointed out that these developments are expected to positively impact realizations and margins moving forward, with Indian margins anticipated to align with projections of 21%.

Diversification and Dividend Announcement

Additionally, Varun Beverages has begun distributing and selling PepsiCo snack products in Zimbabwe and Zambia during this quarter. The company also declared an interim dividend of Re 0.50 per share, resulting in a total cash outflow of approximately Rs 169.1 crore. On the stock market, Varun’s shares closed at Rs 520.3, reflecting a decrease of 1.64% on Wednesday.

Through strategic expansions and enhanced production capabilities, Varun Beverages is positioning itself for sustained growth and profitability in the coming years.