Varun Beverages surges 5%, nears record high on strong growth outlook

The beverages' sector presents significant growth opportunities in the future, driven by deeper penetration into rural markets, an expanding demographic profile, and a growing middle-class population

Shares of Varun Beverages (VBL) surged 5 per cent to Rs 1,378.75 on the BSE in Wednesday's intra-day trade on strong growth outlook. The stock of the beverages company inched towards its record high level of Rs 1,432.05, touched on December 12, 2022.

VBL expects the Indian soft drink market to see significant growth as consumption is steadily anticipated to increase, driven by a variety of factors including, positive demographic characteristic, rapid urban growth and increasing earning, rise in average expenditures per household, rural development, and electrification.

With its vast manufacturing facilities and established distribution network, VBL manufactures, markets, and distributes PepsiCo-owned products like carbonated soft drinks, carbonated juice-based beverages, juice-based beverages, energy drinks, sports drinks and packaged drinking water.

The various PepsiCo brands manufactured and distributed by VBL include Pepsi, Pepsi Black, Mountain Dew, Sting, Seven-Up, Mirinda Orange, Seven-Up Nimbooz Masala Soda, Evervess, Duke, Slice, Tropicana Juices (100 per cent & Delight), Gatorade, as well as packaged drinking water under the brand Aquafina.

In the past one year, the stock price of VBL has more-than-doubled, zooming 122 per cent, as the domestic soft drinks industry experienced robust growth in CY22. This came after two years of dull summers owing to Covid-19 pandemic-led restrictions. In comparison, the S&P BSE Sensex was up 4.4 per cent during the period.

"The resurgence of out-of-home channels, and pent-up demand driven by consumers returning to socializing also contributed to the significant increase in demand. Additionally, with a favorable demand environment and strong performance, the market for energy drinks picked up and emerged as a growth category," VBL said in its CY22 annual report.

The Indian beverages 'industry presents significant growth opportunities in the future, driven by deeper penetration into rural markets, an expanding demographic profile, and a growing middle-class population.

Furthermore, with the growth in per capita income, consumers are willing to spend more on premium and niche products. Urbanization is also playing a significant role in the growth of the industry, as more people move to urban areas and have greater disposable income. The main segments constituting the soft drinks market in India are carbonates, juices, and bottled water. Carbonates is the largest category in value terms, the company said.