Sipping on Scale: Varun Beverages’ Market Momentum

Few realise that when they crack open a cold Pepsi in India, there’s a good chance it didn’t come directly from the global beverage giant.

Instead, it likely passed through the hands of Varun Beverages (VBL), PepsiCo’s most formidable bottling partner that has quietly rewritten the rules of India’s fizzy drink business.

What began as a regional bottler three decades ago has morphed into an indispensable arm of PepsiCo’s India operations.

In 2011, VBL handled just 26% of Pepsi’s beverage sales in the country.

A decade later, that number ballooned to 85%, accelerated by PepsiCo’s strategic retreat from direct bottling operations in 2019.

As the multinational shuttered its South and West India plants, VBL stepped in, expanding its reach across 27 states and 7 union territories, a masterclass in filling voids left by global players.

The business model is deceptively simple: PepsiCo provides the secret syrup, while VBL does the hard work - manufacturing, bottling, and navigating India’s labyrinthine distribution networks.

But VBL’s real genius lies in its rural penetration.

Post-pandemic infrastructure improvements, including better roads, reliable electricity, allowed the company to embed itself deeper into India’s rural areas.

Today, its products reach 3-5 million of India’s 12 million FMCG outlets, with plans to grow that footprint by 10-12% annually.

The impact is visible in every village shop where a humming freezer now keeps Pepsi bottles frosty - a small miracle that took decades to engineer.

While colas still dominate (75% of sales), VBL has smartly diversified.

Packaged water (Aquafina) contributes 21%, and juices, once a struggling segment, now make up 4%, thanks to VBL becoming Tropicana’s first-ever global bottler.

The energy drink Sting emerged as an unexpected hero, already accounting for 15% of sales.

Beyond beverages, VBL also packages PepsiCo’s snacks and sells CreamBell ice cream, while its international arm services markets from Nepal to Zambia.

Financially, the numbers present a clearer picture.

Between 2020 and 2024, revenue vaulted from ₹6,450 crore to ₹20,008 crore, while net profit leapt from ₹424 crore to ₹2,636 crore - a 40% annualised growth rate that turned VBL’s stock into a ten-bagger, outpacing nearly every FMCG peer.

Yet challenges loom.

While VBL dominates India's beverage bottling landscape, outpacing even Coca-Cola's own bottling arm, the market presents new hurdles.

Reliance's 2022 relaunch of Campa Cola at ₹10 for 250ml, undercutting Pepsi and Coke by 50%, has reignited the cola price wars.

This aggressive pricing targets India's value-conscious consumers, particularly in inflationary times when every rupee counts.

The company's near-total reliance on PepsiCo products presents what appears to be a theoretical vulnerability - losing franchise rights would indeed be catastrophic.

VBL has effectively become an extension of PepsiCo's operations in India, with its unparalleled distribution network reaching millions of outlets across the country.

Yet this doomsday scenario remains very improbable.

More pressing is the gradual shift in consumer preferences. As health consciousness grows, demand for sugary drinks might suffer.

VBL's diversification into juices, energy drinks, and packaged water shows awareness of this trend, but the core business still relies heavily on the fizz that made its fortune.

VBL leads now, but must keep evolving as competitors and consumer preferences change.