Varun Beverages Ltd (VBL), a leading bottler for PepsiCo, announced on Tuesday its acquisition of a 100% stake in South Africa-based The Beverage Company (BevCo) and its wholly-owned subsidiaries. The enterprise-level transaction is valued at approximately ₹1,320 crore (ZAR 3 billion), and the Board of Directors has greenlit the acquisition, awaiting regulatory approvals.
The company, which is among the largest franchise bottlers for PepsiCo globally, expressed its intent to expand its geographical presence in Africa through this strategic move. BevCo, the target of the acquisition, is actively involved in the manufacturing and distribution of licensed PepsiCo and proprietary non-alcoholic beverages in South Africa. It holds franchise rights from PepsiCo Inc in South Africa, Lesotho, and Eswatini, and distribution rights for Namibia and Botswana.
BevCo’s robust portfolio includes popular PepsiCo franchise brands such as 7UP FREE, Mirinda, Mountain Dew, Pepsi, Pepsi Light, and Pepsi Max. Additionally, the company has carved its niche with its own branded non-alcoholic beverages in the South African market.
South Africa, being the largest soft drinks market in Africa, offers a lucrative opportunity for Varun Beverages to extend its market reach. The rising affluence of South African households, urbanization trends, longer workdays, and growing interest from female consumers have contributed to the industry’s growth, making it an appealing market for expansion.
BevCo, with five manufacturing facilities across key regions in South Africa including Johannesburg, Durban, East London, and Cape Town, reported a net revenue of approximately ₹1,590 crore (ZAR 3,615 million) in the financial year ending June 30, 2023. The acquisition aligns seamlessly with VBL’s vision for expansion, leveraging BevCo’s established market presence and strong ties with PepsiCo Inc.
Varun Beverages’ shares witnessed an impressive surge, soaring over 17% to a record high of ₹1,380 apiece on December 19, marking the third consecutive day of upward momentum. The stock’s heightened performance over the past week has been remarkable, reflecting the positive sentiment surrounding the acquisition.
The proposed acquisition includes an option for minority co-investment from a large equity fund, securing 100% of the equity share capital of BevCo and its subsidiaries. The indicative timeline for the completion of the acquisition is set on or before July 31, 2024, subject to regulatory approvals, including those from PepsiCo Inc and the Competition Commission South Africa.
Varun Beverages, in a regulatory filing, emphasized that this move is in line with its strategic vision for growth. The acquisition of BevCo positions VBL to fortify its standing in the African beverage market, reflecting the company’s commitment to exploring new horizons and creating value for its stakeholders.
In response to this news, Varun Beverages’ shares achieved a 52-week high, reaching ₹1380.45 apiece on the BSE, contributing to the company’s market capitalization, which soared to Rs 1,70,697.36 crore. This development underscores the positive reception by shareholders and the broader market to Varun Beverages’ strategic expansion plans.
The Varun Beverages-The Beverage Company takeover is poised to shape the company’s trajectory, opening up new avenues for growth and consolidating its position as a key player in the global beverage industry.
