Varun Beverages gets CCI approval to acquire PepsiCo’s franchise rights in India

INDIA – The Competition Commission of India (CCI) has approved the acquisition of PepsiCo India’s franchise rights of the foods and snacks major in southern and western India by its bottling partner Varun Beverages Ltd (VBL).

In February this year, Varun Beverages announced plans of acquiring acquire franchise rights of PepsiCo in southern and western regions.

This followed approval of the acquisition plan by Varun Beverages Board hence entering into a binding agreement with PepsiCo India Holdings to acquire franchise rights in the two regions.

The board said that the proposed acquisition was part of “the company’s strategy to expand into contiguous territories and will help to acquire greater scale, operational productivity and efficiency leading to higher revenues and profitable growth.”

Varun Beverage will now hold the sales and distribution functions while PepsiCo will own the brand name and sell concentrate to franchisees besides handling marketing.

According to Ahmed El Sheikh, President PepsiCo India the decision to franchise its company-owned bottling operations in the regions to VBL seeks to ensure an all-round efficiency and profitability at PepsiCo.

El Sheikh noted that PepsiCo would retain responsibility of category creation, brand building and development of the beverage portfolio to drive sustainable profitable growth.

However, growth in the US$3.11 billion carbonated soft drinks market has been noted to lag behind as consumers switch to healthier beverages such as juices, energy drinks, flavoured tea, fortified water and dairy-based beverages.

Varun Beverages will be a franchise of PepsiCo’s beverage business across 27 out of 29 Indian states and all seven Union Territories (UTs), upon completion of the acquisition.

The deal is estimated to be worth US$210.58 million, which Varun said that it intends to raise the capital through Qualified Institutions Placement (QIP) and partly through internal accruals.

According to a report by ET Retail VBL had In January 2018, entered into a pact with PepsiCo to sell and distribute the latter’s entire Tropicana range of juices along with Gatorade and Quaker Value-Added Dairy in North and East India.

VBL already held manufacturing, sales and distribution rights for Tropicana Slice and Tropicana Frutz in the two regions.

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