Margins Drive Growth

Varun Beverages (VBL), the second largest franchisee of PepsiCo outside the USA, in its third quarter ending September 30 Calendar Year (CY) 2020 posted 3.6 per cent growth in Year-on-Year(Y-o-Y) net revenues. A higher mix of better-realised products and rationalised trade promotions boost revenue growth. It is not a surprise that the company’s stock has come under the radar of broking firms. VBL is a key player in Indian beverage industry, with operations across six countries. The company has over 28 years of strategic association with PepsiCo, which accounts for approximately 80 per cent of the latter’s beverages sales in India. The Compounded Annual Growth Rate (CAGR) of its sales volume between 2015 and  2019 was 19.7 per cent However, overall domestic sales volume declined 6.7 per cent Y-o-Y. With carbonated soft drinks constituting 74 per cent of revenue and juice...