Varun Beverages: CALPIS launch, Africa expansion and new products could boost growth

Varun Beverages is doubling down on product innovation, international expansion and distribution growth as it looks to sustain its strong growth momentum despite rising competition and input cost pressures. Brokerages remain optimistic on the PepsiCo bottler's medium-term prospects, citing its expanding beverage portfolio, rapid overseas scale-up and healthy demand trends across markets.

CALPIS marks entry into premium dairy beverages

One of the company's biggest strategic moves is its partnership with Japan's Asahi Group Holdings to launch the CALPIS brand in India. The launch marks VBL's entry into the fast-growing value-added fermented dairy beverage segment.

Initially, the company plans to introduce Original and Mango variants in both concentrate and ready-to-drink formats, further broadening its non-carbonated beverage portfolio.

Juice, dairy and hydration emerge as growth engines

According to the management, product diversification remains a key priority.

During the June quarter, the Nimbooz portfolio recorded around 30% year-on-year growth, while value-added dairy products expanded nearly 40%. The company is also increasing its focus on sports drinks, hydration beverages and juices to reduce dependence on traditional carbonated soft drinks.

Although the Sting energy drink business witnessed a temporary slowdown after regulatory changes around the use of the word 'energy', the company said volumes have largely recovered following updated product labels and regulatory clarity.

Overseas expansion gathers pace

Brokerages believe VBL's international business could become an even stronger growth driver. The company has strengthened its South African presence through the acquisition of Twizza and Crickley, while expanding its snacks business into Zimbabwe and Zambia. It is also investing in manufacturing capacity and market infrastructure across international markets to support future demand.

Brokerage Axis Direct believes overseas expansion, combined with portfolio diversification and wider distribution, provides strong visibility for sustained medium-term growth.

Management confident on demand 

Management said beverage volumes have grown more than 20% in almost every month since March, with April being the only exception due to adverse weather conditions rather than weaker consumer demand. The company believes India's beverage industry continues to expand at over 20%, adding that increased competition is largely taking share from unorganised and regional brands instead of established players.

Margins remain resilient

Despite elevated raw material inflation, VBL maintained healthy gross margins by securing key raw materials early and increasing the share of low-sugar and no-sugar products, which now account for around 73% of total volumes.

Management said most raw material requirements for the current quarter have already been secured at favourable prices, helping protect profitability even amid volatile commodity markets.

Margins are likely to remain stable even during periods of geopolitical uncertainty, with potential for further improvement once global supply-chain disruptions ease.

Capacity expansion continues

The company invested around Rs 950 crore in capital expenditure during the first half of CY26, primarily towards brownfield capacity expansion in India, a snacks manufacturing facility in Zimbabwe and market infrastructure. It also spent nearly Rs 1100 crore on the acquisition of Twizza. While VBL's India business remains net debt-free with free cash of about Rs 1490 crore, consolidated net debt rose to around Rs 370 crore following the South African acquisition. In March 2026, the firm said its South African subsidiary Bevco will acquire Crickley Dairy Proprietary for Rs 131.47 crore.

Growth factors

Motilal Oswal expects VBL's growth to be driven by international expansion, a stronger domestic and global distribution network, scaling up of its snacks business and continued product diversification following the CALPIS partnership.

The key factor investors will monitor going forward is whether the company can sustain robust volume growth without sacrificing product mix or pricing as competition intensifies in the Indian beverages market.