VBL Case Study

Varun Beverages Limited (VBL or Company)
It is one of the major players of the beverage industry, along with being the biggest
franchise of Pepsico. Carbonated drinks, non-carbonated drinks, ice teas, pulp based
drinks, energy drinks, water, milk based drinks and munching snacks are few segments
where the company is currently operating. While handling more than 90% production of
Pepsico, more than 80% comes from sale of carbonated drinks and of that too 80% is only
from the Indian subcontinent.
Company Overview
● Founded: 1995
● Headquarters: Gurugram, Haryana, India
● Chairman & CEO: Ravi Kant Jaipuria
Revenue Streams of the company (detailed)
● Until FY 2022, Varun Beverages Limited (VBL) had its major revenue coming from the
Carbonated Soft Drinks (CSDs) business, accounting for about 91% of the company's
revenue. The CSD market is dominated by brands such as Pepsi, which represent a
substantial portion of VBL's portfolio. Non-Carbonated Beverages (NCBs), including
Tropicana juices, Aquafina bottled water, and Gatorade sports drinks, comprised a
smaller yet growing segment of the revenue.
VBL's product range primarily consists of PepsiCo brands, including:
● Carbonated Soft Drinks: Pepsi, Diet Pepsi, Mountain Dew, Mirinda, 7UP, etc.
● Non-Carbonated Beverages: Tropicana juices, Aquafina bottled water, Gatorade
sports drinks, and dairy-based drinks like Tropicana Frutz.
The company saw a 5-year volume CAGR of 18.4% between FY 2017-2022. The realization
has remained in the same range (grew at a 5-year CAGR of 4%).
Sales breakup for the last 5 years:
Advantages:
1. Strong partnership of over 32+ years with Pepsico
2. Extensive distribution connections within the Indian subcontinent as well as foreign
production units.
3. State of the art manufacturing units along with geographical diversification across the
world.
4. Broad product portfolio allowing them to tend to different requirements of consumers.
Risks:
1. Very high dependence on Pepsico, even small changes in franchise agreements can
disrupt the business.
2. Head to head competition with other carbonated drinks producers such as coca cola, etc
resulting in price wars and reduced market shares.
3. Continuous regulatory risks and changing consumer preferences which impacts pricing,
new products and operational disruptions.
Sectoral analysis
The Fast-Moving Consumer Goods (FMCG) industry, also known as the Consumer Packaged
Goods (CPG) industry, encompasses a wide range of essential, non-durable products that are
sold quickly and at relatively low cost.
- Sold in big quantities but at low pricing leading to low profit margins.
- Overall brand image, identity and consumer base play a very big role.
- The products sold here have a comparatively shorter shelf life and are bought and sold
on a regular basis.
- Effective management of supply chains, following market trends, investing in brand
building, and continuous innovation are the essentials of a successful FMCG company.
1. Varun Beverages Ltd compared to its sector focuses only on the beverage industry with
a wide product portfolio allowing them to fulfil their consumer needs.
2. Being the biggest franchise of Pepsico gives the company the brand recognition to
survive in the market.
3. Whereas in the FMCG market, companies usually focus on diversified range of products
like food, beverages, healthcare, household, etc VBL has managed to be at the top of
the market even though with only production in the beverages market which
subsequently reduces the prospective earning capacity.
4. Operates in India and several other countries, particularly in South Asia and Africa,
benefiting from geographic diversification within emerging markets unlike in the sector
where businesses remain to run at a local level
Here is the bar chart displaying the revenue growth of Varun Beverages Limited (VBL) from
2018 to 2022. The chart highlights the steady increase in revenue over the five-year period,
showcasing VBL's strong financial performance:
Varun Beverage Ltd (latest changes/news)
- Acquired The Beverage Company in south africa

- Manufacturing of Cheetos starting in morocco from 2025
- Commercial production starting at greenfield production facilities in india
- Entering into dairy based beverages (through creambell)
- The increase in equity capital and reserves indicates positive growth and reinvestment in
the company.
- Stable reduction in carbon emissions while production along with reduction in plastic
used (Producer Responsible Organization) - green initiatives
- Along with production of bottles and caps, VBL also manages the remote coolers where
the final products are stored for consumer consumption
- Varun foods incorporated in zimbabwe
- Varun Beverages stands out among its peers in several key financial metrics, including
market capitalization, net profit, and ROCE, reflecting its strong market position and
profitability. Despite its high valuation, the company's growth potential and profitability
make it an attractive investment. However, the low dividend yield may be a consideration
for income-focused investors.
Financial Analysis:
1. Balance sheet
- Equity capital started at Rs. 8 crores in Dec 2012 and saw significant fluctuations,
reaching Rs. 650 crores by Dec 2023.
- Reserves had a notable increase over the years, particularly from Dec 2015 (Rs. 91
crores) to Dec 2023 (Rs. 6,287 crores), indicating retained earnings.This increase in
equity capital and reserves indicates positive growth and reinvestment in the company.
- With such high borrowing and liabilities on the company, this showed the dependence
on debt or borrowed funds
2. PnL
- Growth of sales is comparatively higher than expenses of the company
- The OPM % has improved at a slow rate though, indicating better profitability.
- EPS has increased substantially, indicating higher returns for shareholders from 4.65%
to 16.66%
- Dividend payouts in recent years suggest the company is now in a position to return
value to shareholders.
3. CFS
- High cash flow from operating activities, indicating a strong growth in core operational
cash generation.
- Continuous large investments implement in expansion of business, infrastructure, etc
- Overall there is an increase in the cash flow of the company making it have a strong
financial position.
4. Ratios
- With decrease in the debtor days and subsequent increase in the inventory days, this
how that there is a strong credit control with good cash flow as well as efficient inventory
management to grow the increasing demand.
- Decrease in days payable shows better payment management
- Decrease in the cash conversion cycle provides with better management of receivables,
inventory, and payables.
- ROCE increase from 5% to 29% shows that capital employed is giving greater returns
shows good investment.

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Varun Beverages Limited (VBL or Company)

Revenue Streams of the company (detailed)

Varun Beverage Ltd (latest changes/news)

- Acquired The Beverage Company in south africa

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