Varun Beverages to bottle all the Pepsi that India drinks
Beverage maker PepsiCo will divest its bottling franchisee rights in the West and South of the country to Ravi Jaipuria-owned Varun Beverages in a deal estimated at Rs 1,850 crore and involving the transfer of 1,900 employees.
Varun Beverages board has approved the plan to acquire the rights for bottling, sales and distribution in seven states and five Union Territories from PepsiCo India, the company said in a stock exchange filing on Monday.
Once the formalities are completed, VBL will be PepsiCo’s franchisee in 27 out of 29 Indian states and all the seven union territories. ET had first reported in its January 14 edition that PepsiCo and RJ Corp were in advanced talks for this deal.
PepsiCo India president Ahmed El Sheikh in a statement said the decision to franchise its company-owned bottling operations in South and West regions to VBL will “profitably drive synergies of scale, operational productivity, and efficiency across all facets of PepsiCo’s beverage business.”
VBL chairman Ravi Jaipuria said the franchising in South and West regions will enable VBL to acquire a national bottling and sales footprint. “This development will help us acquire greater scale, operational productivity, and efficiency leading to higher revenues and profitable growth,” he said.
The company’s share closed at Rs 774 on the Bombay Stock Exchange on Monday, up 1.24% from its previous closing.
The maker of soft drink brands Pepsi and Mountain Dew has been divesting its bottling operations globally to operate asset-light businesses across world markets.
PepsiCo’s Sheikh said the company will retain responsibility of category creation, brand building, and development of the beverage portfolio to drive sustainable profitable growth. The deal reduces Pepsi’s beverage operations in India mainly to marketing as it exits bottling. The $1.6-billion RJ Corp, among PepsiCo’s top three bottlers globally, is also a franchise partner for Yum Restaurants-owned Pizza Hut and KFC and Coca-Cola-owned coffee chain Costa Coffee.
Last week, VBL had announced plans to acquire franchisee rights of PepsiCo in three states from SMV Group, promoted by Jaipuria’s brother Surya Kant Jaipuria.
“The proposed acquisitions are in line with the company’s strategy to expand into contiguous territories and will help it acquire greater scale, operational productivity, and efficiency leading to higher revenues and profitable growth,” VBL said.
The company also said its board will meet again on February 26 to consider raising of capital through a qualified institutions placement.