Varun Beverages to acquire PepsiCo’s bottling operations in India

INDIA – The Indian based franchisee of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs), Varun Beverages Ltd (VBL) is in talks to acquire PepsiCo’s bottling, sales and distribution operations in the south and west India.

According to an ET Retail report which mentioned two executives aware of the matter, the development involves PepsiCo’s carbonated drinks business and its functions.

This will give Varun Beverages a nationwide control of the Indian soft beverages business as it already runs PepsiCo’s bottling operations in the north and east.

If the deal comes to fruition, RJ Corp-owned Varun will hold the sales and distribution functions while PepsiCo will own the brand name and sell concentrate to franchisees besides handling marketing.

“The divestment of the bottling operations nationally is in line with the company’s global direction to run asset-light businesses across world markets and operate the majority of its bottling operations through franchisee partners,” said one of the persons.

“The likely transaction, however, will not be (completed) in the short term since it will involve multiple and complicated transfers of assets and employees.”

In October, ET Retail reported that PepsiCo was planning to sell bottling operations to franchisees in south and west India.

Last year, PepsiCo’s former CEO Indra Nooyi said that they could give in to a ‘good’ franchisee to run the business and carry out the bottling operations.

One of the executives said: “RJ Corp is the most likely contender for the national bottling business, given its over two-decade association with PepsiCo.

“While there were talks about PepsiCo likely to split its bottling assets among multiple franchisee partners, it is now likely to consolidate further with Jaipuria.”

Slow ‘aerated’ growth

The company, alongside its rival Hindustan Coca-Cola Beverages (HCCB) have been grappling with slow growth in the aerated drinks category.

The company sold its bottling operations in the north and east to franchisee Ravi Jaipuria three years ago.

In the South and West, PepsiCo, which makes which makes Pepsi cola, Mountain Dew and 7Up aerated drinks has about nine company-owned manufacturing facilities.

The divestments come even as the New York based firm looks to being asset light in the beverages business, with a focus to make India a primarily food and health arm.

Growth has slowed in the US$3.11 billion carbonated soft drinks market as consumers switch to healthier beverages such as juices, energy drinks, flavoured tea, fortified water and dairy-based beverages. 

Such factors have seen PepsiCo make launches such as 7Up with natural sweetener stevia, Pepsi Black with zero sugar, hydration drink Revive and several local and international flavours in juices.

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