This Beverage Company is Betting Big on a Very Exciting Business

Varun Beverages, a key player in the beverage industry and one of the largest franchisees of PepsiCo in the world (outside the US) is entering the brewery space.

Every strategic shift has added depth to the company's story, and the recent stock price surge suggests the emergence of a pivotal new chapter.

Before we outline further details, let's tell you a little about the company.

About Varun Beverages

The company is one of the biggest PepsiCo franchisees outside of the US and a major force in the beverage sector.

Varun Beverages manufactures and sells a variety of non-carbonated beverages (NCBs) and carbonated soft drinks (CSDs), such as packaged drinking water marketed under PepsiCo's trademarks.

Pepsi, Pepsi Zero, Mountain Dew, Sting, Seven-Up, Mirinda, Seven-Up Nimbooz Masala Soda, and Evervess are among the PepsiCo CSD brands that the company manufactures and markets.

Slice, Tropicana Juices (100% and Delight), Seven-Up Nimbooz, Gatorade, and packaged drinking water under the Aquafina brand are among the PepsiCo NCB brands that the company manufactures and markets.

Varun Beverages is Getting into the Beer Business?

As a part of its growth and diversification strategy, Varun Beverages is incorporating a wholly-owned subsidiary in Kenya under Varun Beverages to carry on the business of manufacturing, distribution and selling of beverages.

The company is also diversifying its product offerings and certain African subsidiaries of the company shall test market beer in their territories through an exclusive distribution agreement with Carlsberg Breweries A/S for their Carlsberg brand.

These developments are a part of broadening its product base and strengthening its presence across key growth markets.

Good Quarterly Numbers for Third Quarter Ending Sept 2025

While the company reported flat revenues, net profits for Q3 2025 (third quarter ending September 2025) surged. The company follows a calendar year reporting.

Revenue from operations increased by 1.9% YoY to Rs 48,966.5 million (m) in Q3 CY2025 as compared to Rs 48,046.8 m in Q3 CY2024.

Gross margins improved to 56.7% in Q3 CY2025 due to increased mix of water in International markets. Also, in the international markets, there was a shifting of expenses from purchase of raw materials to employee cost, power & fuel and other manufacturing overheads because of increased in-house backward integration initiatives.

Net profits of the company increased 18.5% to Rs 7,451.9 m in Q3 CY2025 from Rs 6,288.3 m in Q3 CY2024 driven by lower finance cost and higher other income which includes interest on deposits in India and favourable currency movement in the international territories.

Third Quarter Financial Snapshot of Varun Breweries

Source: Company

What Next?

The company performed well with consolidated sales volume up 2.4%, supported by healthy traction in international markets.

While domestic volumes remained subdued due to prolonged rainfall across India, international operations grew 9%. South Africa delivered another quarter of strong growth. In South Africa, Varun Beverages sees a potential to strengthen its market position.

The company's ongoing backward integration initiatives across key locations are driving higher efficiency and operational resilience. This is in line with Varun Beverages' growth strategy.

Meanwhile, the snacks facility in Morocco has ramped up to full-scale operations, and the upcoming Zimbabwe plant is progressing towards commissioning, marking continued progress in diversifying the portfolio beyond beverages.

While the extended monsoon season impacted consumption trends in India, the company remains confident in the significant long-term potential of the domestic beverage industry.

How Varun Beverages Shares Have Performed Recently

In the past five trading sessions, shares of Varun Beverages have moved higher from Rs 461 to Rs 475.

The stock touched its 52-week high of Rs 663.7 on 2 January 2025 and a 52-week low of Rs 419.4 on 3 March 2025.

Should You Consider Varun Beverages Stock?

Geographic expansion in emerging markets like Africa and South Asia, new production facilities and capacity expansions should benefit the company going forward.

Risks include dependence on PepsiCo, competitive pressures, regulatory challenges on sugary drinks and plastic packaging, and forex fluctuations in foreign markets.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

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