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Varun Beverages Surges 5%, Nearing Record High

Pepsi bottler Varun Beverages said the soft drinks market in India is expected to see significant growth.

On Wednesday, Varun Beverages (VBL) shares surged 5% to Rs 1,378.75 on the BSE in intraday trade on solid growth prospects. The beverage company’s shares increased to an all-time high of Rs 1,432.05 hit on December 12, 2022.

The future of the beverages industry looks promising, thanks to its expanding demographic profile, growing middle-class population, and deeper penetration into rural markets. Varun Beverages (VBL) is capitalising on this trend by expanding its product mix and manufacturing facilities to increase volumes and margins.

Pepsi, one of VBL’s key brands, has recently roped in Ranveer Singh as its new brand ambassador and recorded double-digit growth in beverage volume during the September quarter. VBL’s extensive manufacturing facilities and established distribution network enable it to manufacture, market, and distribute PepsiCo-owned products.

VBL distributes various PepsiCo brands, including Pepsi, Mountain Dew, Tropicana Juices, Gatorade, and Aquafina packaged drinking water.

VBL shares have doubled in the past year, surging 122%, as the domestic soft drinks industry experienced strong growth in CY22 after two years of dull summers due to Covid-19 restrictions. This performance outpaced the 4.4% increase in the BSE Sensex during the same period.

The Indian soft drink market is expected to grow significantly, driven by positive demographic characteristics, rapid urban growth, increasing earnings, and rural development. Consumers have more disposable income and are willing to spend more on premium and niche products.

The main segments of the soft drink market in India are carbonates, juices, and bottled water, with carbonates being the largest category in value terms. VBL is well-positioned to benefit from this growth trajectory and has doubled its stock price in the past year.

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