Varun Beverages Q4 Results: 40.2% Profit Growth, Expansion, and Strategic Moves in CY24
Varun Beverages Limited (VBL), the largest PepsiCo bottler outside the U.S., reported a remarkable 40.2% increase in consolidated net profit for the fourth quarter (Q4) of CY24 (Calendar Year 2024). The company’s net profit surged to ₹185.14 crore, compared to ₹131.97 crore in the same period last year. Revenue from operations grew 39.78% year-on-year (YoY) to ₹3,817.61 crore, driven by strong volume growth, international expansion, and an improved product mix.
The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 39% to ₹580 crore, while EBITDA margins remained steady at 15.7%, indicating that operational efficiencies were balanced against rising costs. Despite strong financial performance, Varun Beverages’ share price dropped 2.47% post-earnings, trading at ₹540 per share on the NSE.
In addition to its impressive financial results, Varun Beverages announced a dividend of ₹0.50 per share, subject to shareholder approval. The company also undertook multiple strategic initiatives, including expanding into Africa, acquiring PepsiCo businesses in Tanzania and Ghana, and enhancing its backward integration capabilities. These initiatives position Varun Beverages for long-term growth in both domestic and international markets.
This article explores Varun Beverages’ financial performance, key growth drivers, expansion strategies, stock market response, and future outlook.
1. Strong Financial Performance in Q4 CY24
Varun Beverages delivered yet another quarter of strong growth, reinforcing its leadership position in the beverage industry.
1.1 Revenue Growth
- Revenue from operations surged 39.78% to ₹3,817.61 crore, compared to ₹2,730.98 crore in Q4 CY23.
- The revenue growth was supported by an increase in domestic and international sales volumes, an improved product mix, and the expansion of distribution networks.
- The company benefitted from strong seasonal demand, new product launches, and higher consumption trends in emerging markets.
- The rapid expansion into South Africa, Namibia, Botswana, Mozambique, and Madagascar further contributed to revenue gains.
1.2 Profitability Trends
- Net profit jumped 40.2% YoY to ₹185.14 crore, compared to ₹131.97 crore in Q4 CY23.
- EBITDA increased 39% to ₹580 crore, compared to ₹418 crore in Q4 CY23, reflecting efficient cost management and strong sales growth.
- EBITDA margin remained steady at 15.7%, indicating that while revenue and profit grew, input costs and other operational expenses remained a challenge.
- The company focused on cost efficiencies and backward integration, which helped maintain healthy profitability despite inflationary pressures.
1.3 India and International Market Growth
- India sales volumes advanced 11.4%, demonstrating strong domestic demand.
- Consolidated volumes surged 23.2%, driven by international growth and higher penetration in key markets.
- South Africa sales volumes grew 12.5% in the first year of operations, highlighting successful execution in a new market.
- The company’s strategy of enhancing distribution networks in general trade and reducing reliance on modern trade channels helped strengthen retail presence.
2. Expansion and Strategic Investments
Varun Beverages has been aggressively expanding its operations, with major investments in both domestic and international markets.
2.1 Entry into New Markets in Africa
- Acquired distribution rights in Namibia, Botswana, Mozambique, and Madagascar, increasing its African market footprint.
- Launched greenfield operations in the Democratic Republic of Congo (DRC), an underpenetrated but high-growth market.
- Entered into a share purchase agreement to acquire PepsiCo’s business in Tanzania and Ghana, further consolidating its presence on the continent.
- Africa is a key strategic market for Varun Beverages, given its young population, growing middle class, and increasing demand for carbonated beverages and packaged drinks.
2.2 Investment in Production Facilities
- Commissioned three new greenfield plants in:
- Supa, Maharashtra – catering to high beverage demand in western India.
- Gorakhpur, Uttar Pradesh – enhancing supply in northern states.
- Khordha, Odisha – strengthening presence in eastern India.
- Expanded backward integration facilities in:
- Guwahati, India – boosting production efficiency.
- Morocco, Zambia, and Zimbabwe (International regions) – improving supply chain logistics and raw material access.
- Investing in state-of-the-art bottling plants and production units ensures cost efficiencies, higher production capacity, and improved supply chain resilience.
2.3 Fundraising via QIP
Varun Beverages successfully raised ₹7,500 crore through a Qualified Institutional Placement (QIP) during the quarter.
- The funds will be utilized to:
- Expand operations in Africa and other international markets.
- Increase production capacity across multiple regions.
- Strengthen logistics and supply chain infrastructure.
- The QIP saw strong participation from institutional investors, reflecting high confidence in the company’s future growth.
3. Market Performance and Stock Reaction
Despite delivering robust financial performance, Varun Beverages’ stock fell 2.47% post-earnings, trading at ₹540 per share on the NSE.
3.1 Why Did the Stock Drop?
- Investors booked profits after recent rallies, leading to short-term corrections.
- Concerns over execution risks in Africa, as entering new markets involves logistics challenges and regulatory approvals.
- Flat EBITDA margins (15.7%) despite strong revenue growth, raising questions about rising raw material and operational costs.
3.2 Long-Term Market Sentiment
- Analysts remain bullish on Varun Beverages, citing:
- India’s growing soft drink market and premiumization trends.
- Aggressive global expansion, unlocking new revenue streams.
- Backward integration improving long-term profitability.
- The stock is expected to rebound in the medium to long term, once margin concerns subside.
4. Future Growth Drivers for Varun Beverages
4.1 Rising Soft Drink Consumption in India
- India’s soft drink consumption is still lower than global averages, leaving room for growth.
- Urbanization, premiumization, and demand for healthier beverages are driving sales.
- PepsiCo’s strong brand portfolio supports Varun Beverages’ domestic growth.
4.2 International Expansion and Market Penetration
- Africa and emerging markets offer higher per capita consumption potential.
- Increasing retail penetration and localized marketing strategies will help gain market share.
4.3 Cost Optimization and Supply Chain Strengthening
- Backward integration in manufacturing, PET preforms, and packaging will reduce dependency on third-party suppliers.
- The company will focus on improving operational efficiencies and cost structures to maintain profitability.
5. Conclusion: A Strong Growth Story with a Bright Future
Varun Beverages continues to deliver strong financial growth, expanding both domestically and internationally. Its 40.2% YoY net profit growth and 39.78% revenue increase reinforce its market leadership.
The expansion into Africa, acquisitions, and backward integration strategies position Varun Beverages as a dominant player in the global beverage industry.
While short-term stock fluctuations may persist, the company’s strong fundamentals, aggressive expansion plans, and brand association with PepsiCo make it a compelling long-term investment.
Varun Beverages is well on track to becoming one of the world’s largest bottlers, with a strong presence in high-growth regions and an expanding product portfolio.
