On Tuesday, Varun Beverages Ltd (VBL), PepsiCo‘s largest franchise bottler, announced the acquisition of South Africa-based Beverage Company (Bevco) and its wholly-owned subsidiaries at an enterprise value of INR 1,320 crore. This strategic move is intended to facilitate the expansion of VBL’s geographical footprint in the African market.
Bevco possesses franchise rights from PepsiCo in South Africa, Lesotho, and Eswatini, along with distribution rights for Namibia and Botswana. The company also owns a portfolio of beverage brands, including Refreshhh (a high-caffeine content drink), Reboost (an energy drink), Coo-ee (a carbonated drink available in classic flavors), and JIVE (a fizzy Lemonade). The stated enterprise-level value of the proposed transaction is ZAR 3 billion (INR 1,320 crore).
VBL anticipates finalizing the transaction, involving “cash consideration,” before July 31, 2024. The filing also noted that Bevco recorded a net revenue of INR 1,590 crore in FY23.
Bevco operates five manufacturing facilities, with two located in Johannesburg and one each in Durban, East London, and Cape Town. The combined installed capacity of these facilities is 3,600 bottles per minute (BPM).
“The acquisition will enable VBL to expand its geographical footprint in Africa,” said VBL in a regulatory disclosure. South Africa is the largest soft drinks market in the African continent, which is expected to grow at a CAGR of 5.3 per cent for the next four years till 2027.
“The rising affluence of South African households has resulted in urbanization, coupled with longer workdays and emerging interest from female consumers, which has contributed to the growth in the Industry,” said VBL.
At present, B-brands largely dominate the beverage industry in the region, holding a market share that is potentially half of its total size. PepsiCo, in contrast, commands a relatively insignificant low single-digit market share.
Nevertheless, it emphasized that “innovation in product portfolio aligned with favorable demographics, combined with a focus on the Go-To-Market strategy, will propel lateral growth across various segments.”
Additionally, in a separate filing, VBL informed that it has signed a Memorandum of Understanding (MOU) with the Government of Jharkhand on December 18, 2023, for its proposed manufacturing plant in Patratu, Jharkhand.
The plant is projected to incur “a total capital outlay of approximately INR 450 crore upon full commissioning,” as stated. VBL represents 90 percent of PepsiCo’s beverage sales volume in India.
Its revenue for the fiscal year ending on March 31, 2023, stood at INR 10,595.83 crore.