Varun Beverages’ Master Bottler

EVEN IN EARLY DAYS of his business, Ravi Kant Jaipuria’s work ethic and ambition set him apart. Ravi Dhariwal, who was heading PepsiCo’s India operations in 1990s, recalls meeting Jaipuria to persuade him to switch to manufacturing Pepsi instead of Thums Up at the Agra factory he had inherited from his father. “Within an hour, we had an agreement, as Ravi realised he had much more growth potential with PepsiCo,” recounts Dhariwal, who has known Jaipuria for about 35 years and has been on boards of Jaipuria’s Varun Beverages and Devyani International.

When PepsiCo re-entered India in early ’90s, Thums Up, owned by Parle then, had hegemony in carbonated beverages. Though Jaipuria’s beginning with PepsiCo was humble — about a million cases as opposed to 91 million in 2023 — he was quick to realise the potential. “He was tireless and used to ensure till late at night that all trucks have been loaded for distribution around Agra. He also understood the business well,” says Dhariwal. Varun Beverages soon got rights for Rajasthan and Punjab-Haryana regions as well.

Jaipuria’s vision has made Varun Beverages the largest franchisee of PepsiCo outside U.S. It manages 90% of PepsiCo’s bottling in India and has been granted rights for various PepsiCo products in 27 states and seven Union Territories. It also has the franchise for Nepal, Sri Lanka, Morocco, Zambia and Zimbabwe. India, the largest market, contributed about 79% to revenue from operations in CY23. Jaipuria is now one of the most successful leaders in the consumer segment and has broken into the ₹1 lakh crore club. His net worth, ₹83,783 crore in 2023, jumped to ₹1.29 lakh crore in 2024.

The company clocked gross sales of ₹16,321 crore in FY24. Market capitalisation is ₹1.6 lakh crore. According to analysts, strategic initiatives such as consolidation of most of PepsiCo’s India bottling operations into Varun Beverages and backward integration have helped the company.

The Next One

After cementing its position as a bottler of PepsiCo, Varun Beverages is now working on expanding territories as well as entering new segments. The company, for instance, has started commercial production of Kurkure Puffcorn at its plant in Kosi, Uttar Pradesh, for PepsiCo. Recently, it signed an agreement with PepsiCo to manufacture and sell snacks brand ‘Simba Munchiez’ in Zimbabwe and Zambia. It plans to manufacture Cheetos in Morocco by May 2025. “These agreements complement our existing distribution of PepsiCo portfolio, marking another significant step in our strong symbiotic partnership,” Jaipuria told investors while reporting CY24 second-quarter results.

Dhariwal says PepsiCo sees Varun Beverages as a close partner. “He understands the needs of the partner and works hand-in-hand to provide a win-win solution on every issue,” he says.

The company has also pushed the pedal on geographical expansion. In December 2023, Varun Beverages announced plans to acquire South African beverages major The Beverage Company (BevCo) and its subsidiary Little Green Beverages for ₹1,320 crore. BevCo holds franchise rights of PepsiCo Inc. in South Africa, Lesotho and Eswatini, along with distribution rights for Namibia and Botswana. According to a report by Axis Securities, the acquisition provides significant synergy benefits to Varun Beverages along with a market expansion opportunity. “This sets the stage for a substantial, long-term, sustainable growth trajectory,” it says.

Besides, Varun Beverages has incorporated a new subsidiary, ‘VBL Mozambique, SA’, in Mozambique for distributing beverages. These moves are aimed at tapping the South African market, the largest soft drink market in the African continent.

“Earlier, there was a perception that Varun Beverages is a bottler of PepsiCo, but eventually they acquired almost pan-India rights for PepsiCo. Apart from that they have been diversifying into other parts of the world,” says Vishal Gutka, sector lead (Consumer), Institutional Equities, at HDFC Securities.

Ramping Up Capacity

During past year, the FMCG company has taken steps to strengthen its presence in India and ramp up domestic capacity. It commissioned two greenfield facilities at Bundi in Rajasthan and Jabalpur in Madhya Pradesh with a capital expenditure of ₹850 crore. It expanded facilities in Pathankot, Kosi, Bharuch, Tirunelveli, Begusarai and Guwahati and acquired land in Buxar in Bihar and Kangra in Himachal Pradesh to build more plants.

Jaipuria says expansion is designed to meet rising demand for beverages in India and support long-term growth. “The commissioning of multiple greenfield and brownfield beverage manufacturing lines in CY23 was a significant step in enhancing operational capabilities. These expansions are vital for meeting increasing consumer demand, tapping into new market opportunities and have set the stage for our continued growth in the beverage industry,” he says in annual report for 2023. The company incurred a capital expenditure of ₹2,100 crore in 2023. It expects a 45% jump in capacity over 2022. The move is primarily aimed at boosting production of juices and value-added dairy products.

“Consumption of carbonated beverages in India is one-tenth of that in a developed country. So, sales of cola drinks will go up as consumer incomes rise,” says Rajat Tuli, partner at management consulting firm Kearney. Tuli feels initiatives by cola beverage companies to launch healthier versions of products and offerings such as energy drinks bode well for the industry. Varun Beverages is also optimising sugar content in its products and says low or no sugar products accounted for a 40.2% product mix in CY23 as compared to 35.7% in CY22.

Futuristic View

In his journey to become the Cola King of the country, Jaipuria has amassed a fandom amongst young entrepreneurs trying to make it big in the consumer segment. One founder fondly reminisces being invited by Jaipuria for lunch at his bungalow in New Delhi. During the meal, the promoter offered a deal to buy a majority stake in the start-up. “I declined and told him I had a vision to make it as big as him. He did not get offended but appreciated my vision and started talking about ways in which we can collaborate and take my brand global,” he recounts.

Jaipuria has set a vision to establish Varun Beverages in the global consumer landscape. Experts indicate that much like his journey so far, he is keen on exploring partnerships. “He has set a milestone that he wants to see businesses doubling turnover every three-four years. He wants this vision to be aligned with partners,” says Dhariwal.

With an eye on the future, Jaipuria recently announced his succession plan. His son Varun, who he has trained over the years, is set to lead Varun Beverages. Currently, while Varun Jaipuria oversees the Indian business of the company, the promoter is more involved with the global business. However, in years ahead, he plans to pass on the baton entirely to his son.