Buying new territories will depend on what PepsiCo gives: Ravi Jaipuria

Interview with Chairman, RJ Corp

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PepsiCo's second-largest bottler in the world, Varun Beverages, will be tapping the capital markets next week with its estimated Rs 1,200-crore initial public offering. The first for an India-based bottling company, the IPO is expected to be keenly tracked by most stakeholders. Ravi Jaipuria, chairman, RJ Corp, the group that owns Varun Beverages, talks to Viveat Susan Pinto on his priorities. Edited excerpts:

With the IPO, what would be the road map for Varun?

The focus would be to grow our business. We've been working on the IPO for a year now and that work is through. The bigger takeout is that our investors -- Standard Chartered Private Equity and Aion -- continue to stay invested with us. No one is exiting the business at this stage, which means they see value in it. That is enough for us to keep going and our focus will be both organic and inorganic growth.

Of the IPO proceeds, Rs 678 crore would go into retiring of debt. As it will clean your books to some extent, will it give you the confidence to raise growth capital at a later stage?

The possibility is always there but we are not getting into it yet. We have debt of Rs 1,690 crore at the consolidated level (within Varun). So, yes, that does come down, with some part of the IPO proceeds. At this stage, we will keep an eye on what we have in terms of our plan of action.
This includes growing our current portfolio. Juices is doing well, around six per cent of our business. The plan would be to try and grow this end of the business. Water is around 12 per cent now; it was nine per cent a few years earlier. That would also be a focus area. While cola drinks has come down to 17-18 per cent from 70 per cent earlier in terms of our size of business, lemon-based fizzy drinks is on the rise. That is a big chunk now of our carbonated portfolio. Similarly, carbonation in juices is a promising segment. There are categories, therefore, that show promise in terms of growth in both the carbonated and non-carbonated segments.

What about adjoining markets such as Bangladesh, Pakistan or Southeast Asia. Will you get into these?
It all depends on what PepsiCo gives us. There is already a bottler in Bangladesh for PepsiCo, who is doing well. So, that market is out of question. We are not interested in Pakistan. In Southeast Asia, PepsiCo already has bottlers. So, much will depend on what PepsiCo gives us, if we have to get into these markets.

What about inorganic growth? How critical is buyout of bottling territories?
That would be critical and we're working on it, especially in Africa. This year, we will be setting up a plant in Zimbabwe, a market we will be adding in Africa. Effectively, therefore, in Africa, we have four territories -- Morocco, Mozambique, Zambia and Zimbabwe. In South Asia, we have India, beside Sri Lanka and Nepal.

Unlike Sri Lanka and Nepal, where you have full control of PepsiCo's bottling, you don't in India. Are you talking to the company for full control of bottling here, given that PepsiCo and Coca-Cola are slowly but steadily divesting their company-owned bottling operations and focusing on brand building and marketing?

Much will depend on PepsiCo and what it wants to give or keep. Yes, there is a move by PepsiCo and Coca-Cola to focus on what they think is core, which is brand building, marketing, product development, etc. As and when PepsiCo makes the relevant moves in divesting its bottling operations, as it did with its North India operations some time ago, we'd appropriately address it.