AI-generated · cited to primary sources · not investment advice · How we research
Varun Beverages
Our verdict on Varun Beverages isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
The company achieved its 100% plastic waste recycling target by 2025. However, the rPET mix target appears to have been updated to a longer-term goal of 50% by 2030. (3 met, 2 revised across 5 tracked commitments)
“The plant in Zimbabwe is going to start in October, however we have already started distribution for snacks in Zambia and Zimbabwe markets.”
Joint venture with Everest International Holdings Limited to manufacture visi-coolers and refrigeration equipment in India. (+3 more commitments)
“Our Visi placements have gone up by approx. 15% from last year. And I think we will continue at this pace going forward.”
The company is aggressively increasing its go-to-market strategy by adding more than 10% to its outlet base annually. — target: >10% addition
“Yes, that is what we had just said that practically this year we have added more than 10% outlets. So, that is why we are hoping to add close to half a million outlets with a base of about 4 million.”
Management expects the snacks business in international markets to reach approximately $100 million in revenue. — target: $100 million
“We think this is going to go close to a $100 million business, and this is not an unforeseen number that can happen with two of these three territories.”
Management expects Zimbabwe beverage volumes to start growing by the end of the current quarter. — target: Volume growth
“Regarding Zimbabwe, the demand has started to stabilize. Our volumes are coming back to original volumes, we hope by the end of this quarter it will start growing.”
See the full cited Management analysis of Varun Beverages
How durable is the business?
The dairy segment within NCB is seeing explosive growth of 60-70%, with realizations nearly 3x higher than standard products. (1 expanding)
“growth of around 60% in our dairy segment, where realisations are nearly 3x of the normal level”
The water segment expanded its share of the total volume mix to 18% in Q2 2025, showing resilience despite the overall volume decline. (5 expanding across 1 engine)
“Water 68 [mn unit cases] 19%”
The company is aggressively pivoting toward low/no sugar products, which now make up over half of consolidated volumes. (2 expanding, 1 shifted across 1 engine)
“NCB 27 [mn unit cases] 7%”
India remains the core market with 14.4% volume growth, though its share of total volume decreased from 72.8% to 71.6% as international markets outpaced it. (1 stable)
“India is the largest market and contributed ~67% of revenues from operations (net) in Fiscal 2025.”
CSD volume share increased slightly to 75% of total volumes, though absolute volumes were impacted by unseasonal rains in India. (3 expanding, 1 contracting, 1 stable across 1 engine)
“CSD 268 [mn unit cases] 74%”
See the full cited Business Model analysis of Varun Beverages
Where does growth come from?
Expansion into new outlets has decelerated slightly due to unseasonal rains impacting rural demand and the opening of temporary outlets. (1 decelerating, 1 steady, 1 accelerating across 3 signals)
“practically this year we have added more than 10% outlets. So, that is why we are hoping to add close to half a million outlets with a base of about 4 million.”
Energy drinks continue to be a high-growth category for the company, with new product launches planned to capture more of this market. (+1 more signal)
“We undertook targeted initiatives to drive volumes... and new launches in the energy and juice based drink segments.”
The company is transitioning to more efficient R290 coolers for all new placements starting in 2023 to support sustainability and sales. (2 new trend, 3 steady across 5 signals)
“In-outlet Management – Visi-Coolers... Consumer Push Management (BTL) - Market Share Gains”
Profitability is improving as the company benefits from 'operating leverage'—meaning they are producing more efficiently as they grow in size. — EBITDA Margin: +55 bps YoY
“EBITDA increased by 21.0% to Rs. 15,289.3 million in Q1 CY2026 and EBITDA margins improved by 55 bps to 23.3% in Q1 CY2026.”
The snacks segment is a new and rapidly scaling trend, with revenue reaching Rs. 340 crore in CY2025 and expected to grow significantly as new facilities in Morocco and Zimbabwe hit full-year production. (1 new trend across 1 signal)
“‘Ad-Rush’ has done phenomenally well. We are feeling some pinch because of the shortage of cans, as we had not expected ‘Ad-Rush’ to do as well as it has.”
See the full cited Future Growth analysis of Varun Beverages
What could break the thesis?
Finance costs increased by 18% YoY specifically due to the Twizza acquisition, confirming the impact of expansion on the income statement. (1 intensifying, 4 easing)
“Cost of materials consumed 31,522.02 [Q1 2026] 26,710.71 [Q1 2025] 18.0% [YoY]”
A shortage of aluminum cans is currently impacting the supply of high-demand energy drinks, potentially limiting sales growth in that specific packaging format. [EXECUTION]
“We are feeling some pinch because of the shortage of cans, as we had not expected ‘Ad-Rush’ to do as well as it has. So, there is some pressure there.”
Depreciation increased significantly by 26.3% YoY due to the commissioning of four new greenfield plants in India and expansion in DRC. (5 intensifying)
“Depreciation increased by 26.3% on account of commissioning of new plants in India & DRC, as well as brownfield expansion in other international markets.”
Demand has recovered strongly with 14.4% volume growth in India during Q1, suggesting a return to normal consumption patterns compared to the previous year's weather-related slowdown. (1 easing)
“In India, demand remained encouraging during the quarter... driven by volume growth of 14.4% in India.”
Gross margins actually improved by 62 bps to 55.2% despite inflation, indicating successful cost management and product mix shifts. (1 easing)
“Gross margins improved by 62 bps at 55.2% in Q1 CY2026, supported by early stocking of key raw materials despite the inflationary raw material environment.”
See the full cited Risk analysis of Varun Beverages
Varun Beverages analysis by filing period
Read the full thesis on Varun Beverages
AI-generated informational research only. ThesisLoop is not investment advice, a stock recommendation, or a guarantee of returns.