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Varun Beverages on verge of bagging more territories from PepsiCo in India

Arnab Dutta/New Delhi 14 Jan 19 | 02:39 PM

Varun Beverages, the largest bottler of PepsiCo drinks outside the US, is closing in to acquire more territories from the cola major in India. The bottler from the stable of Ravi Jaipuria led RJ Corp, is in advanced talks with PepsiCo for rights to bottle and market its beverages – both cola and non-cola – in seven Indian states in the southern and western parts of the country.

The refranchising operation, if successful, would bring crucial territories like Gujarat, Maharashtra, Karnataka, Kerala, Tamil Nadu Andhra Pradesh and Telangana under Varun Beverages’ fold. Put together, these seven states constitute nearly 40 per cent of the country’s Rs 34,000 crore branded beverages market.

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The deal would give Varun Beverages an unprecedented edge over all its competitors in the country. While, most other bottlers of Coca-Cola and PepsiCo have rights for specific regions – after the deal is signed, Varun Beverages would have 27 out of 29 states under its fold – barring Jammu & Kashmir and Sikkim. The firm already has bottling rights for 21 states – including the fast-growing seven northeastern states – and two union territories – Delhi-NCR and Chandigarh – after its successful acquisition of crucial central and east Indian states like Madhya Pradesh, Chhattisgarh, Jharkhand, Bihar and Odisha, last year.

Apart from these, VB recently acquired rights for two neighbouring countries – Nepal and Sri Lanka. The two countries and India currently contribute some 90 per cent of its Rs 4,500 crore yearly revenue. The rest comes from regions like Morocco, Zambia and Zimbabwe – acquired in 2018.

Currently, the firm bottles and markets major PepsiCo brands like Pepsi Cola, Mountain Dew, Mirinda, 7Up and Nimboos. VB acquired bottling rights for non-cola brands like Tropicana, Slice and Aquafina in 2018. With 244 million cases of beverages bottled during January-September 2018 – compared to 224 million cases in CY2017 - VB is poised to end the year with an all-time high with over 51 per cent of PepsiCo’s total volume in the region.

Addition of new territories and brands have invariably worked in favour of VB’s growth trajectory. Since its listing on the Bombay Stock Exchange three years ago, VB’s yearly sales jumped to Rs 4,516 crore in CY2017. During the first nine months of 2018, it posted operating revenue of Rs 4,424 crore – up 11.4 per cent from Rs 3,973 crore in Jan-Sep, 2017.

VB’s rise is expected to aid Ravi Jaipuria – the founder chairman of RJ Corp – in taking the group’s revenue beyond $5 billion (or Rs 35,000 crore) by 2022 and is also expected to benefit the promoters significantly. At present, Ravi Jaipuria owns 21.46 per cent of VB, followed by his son Varun Jaipuria, who owns 21.45 per cent. While, 30.56 per cent is held by the promoting group firm, RJ Corp, Reliance Growth Fund is the fourth largest stakeholder with 3.31 per cent in its kitty. Sundaram Mutual Fund and Tata Large and Mid-Cap Fund own 1.14 per cent and 1.07 per cent, respectively.

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