Business & Economy

Varun Beverages Acquires South Africa’s Bevco for Rs 1,320 Crore to Expand African Presence

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Varun Beverages Ltd (VBL), PepsiCo’s largest franchise bottler, has announced the acquisition of South Africa-based Beverage Company (Bevco) and its subsidiaries at an enterprise value of Rs 1,320 crore. The strategic move aims to bolster VBL’s geographical footprint in the African market and tap into the growth potential of South Africa’s thriving soft drinks market.

Acquisition Details:
Bevco, holding franchise rights from PepsiCo in South Africa, Lesotho, and Eswatini, along with distribution rights in Namibia and Botswana, becomes part of VBL through the acquisition. The enterprise-level transaction is valued at ZAR 3 billion (Rs 1,320 crore) in cash consideration. VBL expects to complete the acquisition before July 31, 2024. Bevco, with net revenue of Rs 1,590 crore in FY23, owns popular beverage brands like Refreshhh, Reboost, Coo-ee, and JIVE.

Geographical Expansion in Africa:
The acquisition enables VBL to enhance its presence in the African market, particularly in South Africa, the continent’s largest soft drinks market. With a projected CAGR of 5.3% till 2027, South Africa’s soft drinks industry presents growth opportunities driven by factors like urbanization, longer workdays, and evolving consumer preferences. Currently dominated by B-brands, the market has substantial potential for growth and innovation.

Manufacturing Facilities and Capacity:
Bevco operates five manufacturing facilities in South Africa, with an installed capacity of 3,600 bottles per minute (BPM). This infrastructure adds to VBL’s capabilities in the region and positions it strategically to meet the demand for a diverse range of beverages.

Government of Jharkhand MOU for New Manufacturing Plant:
In a separate development, VBL has signed a Memorandum of Understanding (MOU) with the Government of Jharkhand for a proposed manufacturing plant in Patratu, Jharkhand. The plant, with an approximate capital outlay of Rs 450 crore, is expected to contribute to VBL’s production capacity.

Financial and Market Standing:
VBL, accounting for 90% of PepsiCo’s beverage sales volume in India, reported revenue of Rs 10,595.83 crore for the financial year ending March 31, 2023. The acquisition of Bevco aligns with VBL’s strategic vision to strengthen its position as a key player in the global beverage industry.

Varun Beverages’ acquisition of Bevco and the establishment of a new manufacturing plant in Jharkhand mark significant steps in the company’s expansion strategy. With a focus on tapping into the growth potential of the African market, particularly South Africa, VBL aims to leverage its strengthened portfolio and manufacturing capabilities to meet evolving consumer demands and drive innovation in the beverage industry.

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