Board approves Varun Beverages Plans to acquire PepsiCo franchise rights in India

INDIA – Varun Beverages Limited (VBL), the bottling partner of PepsiCo India, said its board has approved its plans to acquire franchise rights of the beverage and snacks in India’s South and West regions.

VBL’s board approved the company’s intent to enter into a binding agreement with PepsiCo India Holdings to acquire franchise rights for bottling, distribution and sales operations in the two regions.

“The proposed acquisitions are in line with 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,” the company said.

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

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

The divestment deal is estimated at US$210.58 million and will also involve the transfer of 1,900 employees from PepsiCo to Varun.

Varun said that it intends to raise the capital through Qualified Institutions Placement (QIP) and partly through internal accruals.

Ravi Kant Jaipuria, Chairman Varun Beverages said that the acquisition will enable the company spread its wings as it seeks to infiltrate India’s beverage market, reports ET Retail.

With this acquisition, we are practically pan-India. We already had north and east with us. Now this gives us south and west. We are acquiring nine more plants and about 2,000 employees.

This means more revenue generating potential,” said Ravi .

Ahmed El Sheikh, President PepsiCo India, in a statement said 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.

He further said that PepsiCo will retain responsibility of category creation, brand building and development of the beverage portfolio to drive sustainable profitable growth.

The deal however, reduces Pepsi’s beverage operations in India mainly to marketing as it exits bottling.

The RJ Corp is also a franchisee partner for Yum Restaurants-owned Pizza Hut and KFC and Coca-Cola owned coffee chain Costa Coffee.

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