Varun Beverages to acquire South African bottler for Rs 1,320 crore

Varun Beverages (VBL), one of PepsiCo’s leading bottling and manufacturing firm globally, is aiming to acquire 100 per cent stake in a South Africa-based company named The Beverage Company (Proprietary) Ltd for Rs 1,320 crore. The deal is expected to be complete by 31 July, 2024, it said in a regulatory filing.

The South Africa-based company and its wholly-owned subsidiaries – collectively known as Bevco – are engaged in the business of manufacturing and distribution of licensed (PepsiCo Inc.) and own-branded non-alcoholic beverages. Bevco has franchise rights from PepsiCo Inc. in South Africa, Lesotho and Eswatini. Further, it also has distribution rights for markets like Namibia and Botswana. As per VBL, Bevco had a turnover of ZAR 361.5 million, or Rs 1,638 crore, in FY23.

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“The Board of Directors of the company at their meeting held today inter-alia considered and approved to acquire 100% stake in the business conducted by The Beverage Company (Proprietary) Ltd, South Africa along with its wholly-owned subsidiaries (hereinafter referred to as “Bevco”) with an option to accept minority co-investment from large equity fund subject,” VBL said in the regulatory filing.

Since PepsiCo’s re-franchising exercise conducted in India in 2021, VBL has emerged as the largest bottling company of non-alcoholic beverages in the country. But its presence in overseas markets is growing rapidly, as well. Apart from 27 states and seven union territories in India, which together form well over 90 per cent of the country’s consumer market, VBL has a major presence in foreign markets like Nepal, Sri Lanka, Maldives, Morocco, Zambia and Zimbabwe.

It already has plants in five out of those six markets, Jaipuria tells BT, and to increase its capacity further, VBL is setting up a greenfield bottling plant in the Democratic Republic of Congo (DRC). Per estimates by Nuvama Institutional Securities, with that plant, VBL will serve 60 per cent of the DRC market. Recently, the firm also got distribution rights in another African country, Mozambique. Jaipuria’s close and trusted relationship with PepsiCo over the decades is another factor that underpins VBL’s rise, says experts.

Factors like these have helped VBL’s financial performance in recent quarters. Its performance in the key season (April-June FY2024 quarter) suffered due to a milder summer, but in the July-September period, VBL reported 22 per cent YoY growth in top line at Rs 3,870 crore, backed by 16 per cent growth in volumes, while its PAT surged 31.5 per cent to Rs 501 crore.