VARUN BEVERAGES LIMITED (VBL):
Varun Beverages is one of the largest manufacturers, bottlers, and distributors of beverages in the world. The company’s foundations are traced to a pivotal moment in 1991, when RJ Corp, the promoter group of VBL, signed a bottling appointment and trademark license with PepsiCo.
Today, over 80% of VBL’s sales volumes come from PepsiCo products and this has propelled VBL to become the second largest bottling company of PepsiCo’s beverages in the world outside of the US.
The beverages business is comprised of two parts: the parent beverage company, and the downstream franchisees (manufacturers, bottlers, and distributors).
Here is a graphical representation of the business structure.
VBL has been granted manufacturing, bottling, and distribution licenses for 27 Indian States (barring J&K, Andhra Pradesh) and 7 Union Territories (barring Ladakh). The company has expanded their international footprint and has been granted the franchise for PepsiCo’s products for the countries of Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe.
Manufacturing & Distribution:
- 37 state of the art manufacturing facilities spread across the Indian subcontinent and their international territories
- Distribution network structured around 90 primary depots which are further supported by 1500+ primary distributors and 2500+ owned distribution vehicles
- Manufacturing facilities and depots are strategically located closer to the target market thereby
- Lowering the time to market drastically
- Reducing transportation and logistical costs
Growth and Efficiency:
- Setting up backward integration facilities to produce packaging material such as preforms, plastic crates, crowns, corrugated boxes, and shrink wrap films, helps minimize costs
- Growth Drivers
- Portfolio enrichment
- Addition of capacity to create integrated facilities
*Integrated facilities in this context are ones that manufacture a wide gamut of products within the same facility. VBL’s new facility at Pathankot is their first fully integrated facility in India which can manufacture the entire range of PepsiCo products as well as Cream Bell’s dairy-based products.
The Green Path:
VBL has been proactively working towards reducing their carbon footprint and has been working on two key projects.
- PET recycling: Currently, they recycle roughly 36% of their PET (primarily used in bottles) requirements and intend on ramping this up to 100% over the next 2 years. PET – polyethylene terephthalate
- Water Management: The company is actively undertaking initiatives such as rainwater harvesting, pond development, and wastewater management. These measures are intended to ensure optimal water consumption across their facilities. In the most recent year, the company recharged more water than they consumed which is a remarkable feat (3.08 million KL net recharged)
Finally, yet importantly, the Covid-19 pandemic has substantially hampered the near-term growth of the company. However, owing to a near monopolistic business with low ticket items, the company should be back on track soon!