Varun Beverages Limited - Its Time for Africaaa...

Varun Beverage Ltd. (VBL) has acquired 100% equity stake in a South African beverage company, ‘The Beverage Company (Proprietary) Ltd. or BevCo, it was a 100% Equity deal.

Bevco was engaged in the manufacturing and distribution of licensed PepsiCo Inc. and it holds franchise rights from PepsiCo Inc and a sole licensed bottler in South Africa, Lesotho, and Eswatini, along with distribution rights for Namibia and Botswana.

BevCo,

● Top line is at Rs 15.6b in FY23, up 13.2% YoY

● Clocked sales volume of ~117m cases in FY23

● out of which,

- PepsiCo products contributed to ~17.4m cases (~14.9%).

- Energy drinks (Reebost - own brands) contributed to ~17.1m cases (~15%).

- Rest ~82.5m cases (~70%) of sales volume came from other owned brands.

Entering into South African market was a right decision for them as they have favourable Demographics

~ Total Population of 60mn and out of which 65% of it is in between 15-64 age group.

~ Urbanization is around between 60%-80%.

~ With 244 per capita consumption of CSD (8oz)

My key observations:-

Acquiring BevCo was a Strategic move afterall for VBL, since it has presence in the market, it wont take time for VBL to sell its products in the markets.

BevCo is a healthy company and showing upward tracjectory in terms of both Sales Volumes and Financials. Risk mitigation is also there is 70% of the total sales is coming up from the other brands, there is no dependency on single product.

With respect to, per capita consumption of carbonated soft drinks (CSD) is at 244 per person (8oz) suggests more room for growth, indicating that the market may not be saturated.

Src- Concall