Varun Beverages hits record high on strong demand for soft drinks

Demand for soft drinks and ice-creams has reportedly touched a five-year high, with the early onset of summer and rise in mobility.

Shares of Varun Beverages hit a record high of Rs 1,055, up 4 per cent on the BSE in Monday’s intra-day trade as reports suggested that demand for soft drinks and ice-creams has touched a five-year high, with the early onset of summer and rise in mobility.

An improved power supply in villages, stable prices, return of push-cart workforce to cities, and revival of business and leisure travel have seen strong demand for soft drinks and ice creams, the Economic Times reported.

Varun Beverages is a key player in the beverage industry and one of the largest franchisee of PepsiCo in the world (outside USA). The company produces and distributes a wide range of carbonated soft drinks (CSDs), as well as a large selection of non-carbonated beverages (NCBs), including packaged drinking water sold under trademarks owned by PepsiCo.

PepsiCo CSD brands produced and sold by VBL include Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mountain Dew, Mountain Dew Ice, Seven-Up Nimbooz Masala Soda, Evervess, Sting, Gatorade and Slice Fizzy Drinks.

PepsiCo NCB brands produced and sold by the company include Tropicana Slice, Tropicana Juices (100 per cent, Delight, Essentials), Nimbooz, as well as packaged drinking water under the brand Aquafina.

In the last two years, due to the pandemic, the industry underwent a significant shift in consumer purchase patterns. During the lockdown-related restrictions, while out-of-home consumption patterns were notably impacted, in-home consumption trend improved significantly.

Going forward, the soft drinks industry in India is expected to report healthy growth across categories on the back of better demographics, improving retail penetration across markets, better agro-economics, and rising trend of in-home consumption, Varun Beverages said in its FY21 annual report. The main segments constituting the soft drinks market in India are carbonates, juices, and bottled water. In value terms, carbonates is the largest category.

"Extreme heat & cola companies' aggressive push after two years of disruption has resulted in robust sales for carbonated drinks & ice-creams. We believe this would result in not only higher sales but better margins owing to operating leverage benefits", ICICI Securities said in a note.