Varun Beverages Ltd — Nov2025 Conference Call Summary

Varun Beverages Limited Q3 & 9M CY2025 Earnings Conference Call (October 29, 2025)

Q3 CY2025 Financial Performance

• Volume: 273.8 million cases (+2.4% YoY); India: flat; International: +9%
• Revenue: INR 48,967 million (+1.9% YoY)
• Gross margin: 56.7% (+119 bps; backward integration shifts expenses from RM to employees/utilities)
• EBITDA: INR 11,474 million (~flat); margin 23.4% (vs 24% Q3 CY24; partly accounting-driven)
• PAT: INR 7,452 million (+18.5%); lower finance costs + FX gains ~INR 100 crores (vs -INR 10 crores Q3 CY24)
• Consolidated: net debt-free

Q3 Context

• Extended monsoon throughout India impacted domestic volumes
• International growing strongly (South Africa: mid-double digits; Zimbabwe recovering; DRC recovering)
• Backward integration shift: expenses moving from RM to opex (employees/power/manufacturing)

GST 2.0 Impact (Effective September 22, 2025)

• ~25% of India portfolio directly benefited: dairy, juices, soda, packaged drinking water
• Full benefit passed to consumers; minimal channel disruption
• Expected to drive category expansion and sustained demand growth

India Demand and Rs. 10 Price Point

• Competitors (Campa) launched Rs. 10 aggressively; VBL prepared but watching
• VBL response: "if market share taken, we'll come to the party"; focus is volume sustainability
• October: double-digit growth wherever weather breaks; business fundamentals solid
• Strategy: not chase market share through discounts; wait for season

Products Performing Well Q3

• Nimbooz: +50%+ growth; doing phenomenally
• Value-added dairy: +100%+ growth (small base; huge potential)
• Ad-Rush ("A Rush") at INR 60: launched in 4 cities; testing; high hopes for medium-priced energy category
• Sting Gold: not very successful (weather + timing)

International Business

• South Africa: mid-double digits growth; ~17-18% market share; "star territory"
• Zimbabwe: recovered to double-digit growth from September 2025 (after sugar tax impact)
• DRC: recovered from early operational errors; back to double-digit Q4
• Morocco: snack facility at full operations
• Zimbabwe snacks: commissioning end of year 2025

Carlsberg Distribution Agreement (ANNOUNCED Q3)

• Exclusive distribution of Carlsberg beer for southern Africa (Zambia, Zimbabwe, DRC, South Africa)
• Initially import and test market; own manufacturing later if successful
• Same distribution infrastructure as soft drinks (trucks, routes, outlets overlap)
• Beer market in Africa: as large as or bigger than soft drinks; mostly monopoly players
• VBL advantage: ran AB InBev JV in India until 2015; understands beer business

Kenya Subsidiary

• Registering wholly-owned subsidiary for dairy and beverages
• PepsiCo Kenya already sold to another bottler; Kenya for own portfolio development

MOA Amendments

• Broadened to include: RTD beverages, AlcoBev, noodles, milk preparations, frozen food etc.
• Purpose: avoid frequent shareholder approvals; optionality for India and Africa
• Will NOT compete with PepsiCo foods (Pepsi snacks)
• Carlsberg partnership: Africa first; India only if/when regulations allow

Snack Food Revenue

• CY2025 run rate: ~INR 300 crores
• Morocco: full operations since Q2 CY2025; Zimbabwe: just commissioning
• CY2026: significantly higher with both countries at full year

South Africa Outlook

• Market share: ~17-18%; goal to "reverse" market (grow from minority to leadership)
• Twizza acquisition announced December 21 (pending Competition Commission approval)
• South Africa described as "star territory" with significant potential