Varun Beverages, one of the world’s largest soft drink bottlers outside the United States and a leading franchisee of PepsiCo, is making a major play in the alcoholic beverages sector by tying up with Carlsberg to expand its footprint across Africa and beyond. This move is designed to broaden its product range beyond non-alcoholic beverages into beer, wine, and spirits.
Key Developments
Entry into Alcoholic Beverages
Varun Beverages in a recent board meeting accorded its consent to expand its “Main Objects of the Memorandum of Association”” by adding the word “alcoholic beverages, that is beer, ale, porter, stout and such other similar alcoholic fermented liquors whether or not distilled or rectified, including whisky, rum gin and wines like port wine Sherry and other wines whether sparkling or not. This step aligns with the firm’s strategy to tap into the growing popularity of Ready-To-Drink (RTD) and other alcoholic beverages, not just in India but worldwide.
Strategic Partnership with Carlsberg
The Group has entered into an exclusive distribution agreement with the Carlsberg Group’s subsidiary, Carlsberg Breweries A/S for their leading Benelux brand,Carlsbergin certain African territories. Some of Varun Beverages’ African subsidiaries will be first movers into their respective markets with beer and, if successful, open the door for wider reach. This collaboration utilises Varun’s current distribution reach and local market insight to further launch Carlsberg into the market.
Market Expansion
Besides exploring the African beer market, Varun Beverages also intends to foray into the production, sale, and distribution of other liquor products, such as wine and spirits, both in India and in global markets. The shift is part of a wider strategy to grow and diversify into the increasingly global alcohol market.
Financial and Business Impact
Although the finances behind this new commitment haven’t been publicly disclosed, credit can be given for consistent quarterly performance in line with investors’ standards and for increased revenue driven by success in the international market. The Carlsberg tie-up is good news for restoring investor confidence, and shares jumped by over 6% on the announcement.
Future Outlook
Ravi Jaipuria, Chairman of Varun Beverages, also stated that he sees opportunities for future growth in South Africa and other markets. The company is also positioning a 100% subsidiary in Kenya to consolidate its presence on the African continent.
Conclusion
Varun Beverages’ foray into alcohol also represents a significant shift in its business model as it expands from non-alcoholic to alcoholic beverages. With its alliance with Carlsberg and its strategic expansion, the company hopes to capitalize on rising growth opportunities beyond its soft drinks’ natural stomping ground. Observers will be closely monitoring the impact of this decision on the business’s competitive position and income over the next few years.