Varun Beverages slips 5%, stock tanks 30% thus far in CY25; here's why

Looking ahead, Varun Beverages sees immense headroom for growth in India, supported by rising per capita incomes, accelerating urbanisation, electrification, and improving cold-chain infra.

Varun Beverages share price today

 

Shares of Varun Beverages slipped 5 per cent to ₹448.10 on the BSE in Thursday’s intra-day trade, extending its past 2-day decline, on concerns that rising competition poses a margin risk. The stock of beverages company was trading close to its 52-week low of ₹419.40 touched on March 3, 2025.

 

Thus far in the calendar year 2025, Varun Beverages has underperformed the market by falling 30 per cent, as compared to 4 per cent rise in the BSE Sensex.

 

At 02:23 PM; Varun Beverages was quoting 4 per cent lower at ₹450.90, as against 0.11 per cent gain in the benchmark index. A combined 12 million shares changed hands on the NSE and BSE.

 

 

Varun Beverages Q1CY25 results

 

Consolidated sales volume grew by 30.1 per cent to 312.4 million cases in Q1 CY2025 from 240.2 million cases in Q1 CY2024 driven by strong organic volume growth of 15.5 per cent in India and in-organic volume contributions from South Africa and DRC.

 

Net realization per case increased by 1.8 per cent in India and remained flat in international markets (ex. South Africa). There is a decline of 0.9 per cent in net realization per case at the consolidated level because of lower realization in own brands in the South African market.

 

Due to the relatively lower margin profile of owned brands in the South African market and the higher mix of carbonated soft drinks (CSD) in India, Gross margins stood at 54.6 per cent, a decline of 171 basis points as compared to Q1 CY2024. EBITDA margins marginally declined at the consolidated level by 20 bps because of the lower profitability in the South Africa market.

 

Looking ahead, the management sees immense headroom for growth in India’s beverage market, supported by rising per capita incomes, accelerating urbanisation, expanding electrification, and improving cold-chain infrastructure.

 

Brokerages view on Varun Beverages

 

Within its product portfolio, the snack food business, in partnership with PepsiCo across various regions, performed well. However, certain headwinds could impact its growth trajectory going forward; these include rising competition from Campa Cola's aggressive pricing strategy, the potential for increased GST on aerated beverages, and currency as well as geopolitical risks associated with expanding its international footprint, fear analysts.

 

While organic growth trends were healthy in Q1, persistent unseasonal rains in the peak season and scrapping of the Tanzania/Ghana acquisition (7-8 per cent topline contribution) compelled a 10-12 per cent cut to EPS estimate, analysts at Emkay Global Financial Services said in the result update.

 

While rising competitive intensity poses a margin risk, the brokerage firm maintains India margin estimates with ongoing backward integration at plants, rising low-calorie mix, and PET light-weighting. However, despite the earnings cut, analysts remain confident of Varun Beverages delivering double-digit volume growth and considerably outperforming the FMCG pack.

 

Analysts at KRChoksey Shares & Securities revised its CY25E/CY26E adjusted EPS estimates by -4.0 per cent/-3.0 per cent respectively, led by delay in margin normalization in South Africa, hold on in Tanzania and Ghana acquisition deals, and intensifying competitive pressures in the Indian market. However, the brokerage firm remains constructive on the company's long-term prospects, underpinned by increasing penetration in newly acquired African territories, sustained growth momentum in the domestic business, and incremental capacity additions that enhance operating leverage.

 

About Varun Beverages

 

Varun Beverages (VBL) 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. 

 

As on date, VBL has been granted franchises for various PepsiCo products across 26 States and 6 Union Territories in India. India is the largest market and contributed ~72 per cent of revenues from operations (net) in fiscal 2024.