Varun Beverages to acquire Pepsico's South Africa bottler Bevco

New Delhi: Varun Beverages Ltd (VBL), PepsiCo's largest franchise bottler, on Tuesday announced the acquisition of South Africa-based Beverage Company (Bevco) along with its wholly-owned subsidiaries at an enterprise value of Rs 1,320 crore, which will help it expand geographical footprint in the African market.

Bevco holds franchise rights from PepsiCo in South Africa, Lesotho and Eswatini. It also has distribution rights for Namibia and Botswana.

It also owns beverage brands such as Refreshhh, a high caffeine content drink, Reboost, an energy drink, Coo-ee, a carbonated drink in classic flavours and JIVE, which is a fizzy Lemonade. The "proposed transaction is at an enterprise level is valued at ZAR 3 billion (Rs 1,320 crore)," it said.

VBL expects to complete the transaction, which is "cash consideration" before July 31, 2024.

Bevco had a net revenue of Rs 1,590 crore in FY23, the filing added. Bevco has five manufacturing facilities - two in Johannesburg and one each in Durban, East London and Capetown and has an installed capacity of 3,600 BPM (bottles per minute).

"The acquisition will enable VBL to expand its geographical footprint in Africa," said VBL in a regulatory disclosure. South Africa is the largest soft drinks market in the African continent, which is expected to grow at a CAGR of 5.3 per cent for the next four years till 2027.

"The rising affluence of South African households has resulted in urbanization, coupled with longer workdays and emerging interest from female consumers, which has contributed to the growth in the Industry," said VBL.

Currently, the beverage industry there is dominated by B-brands with a market share of as much as half of its size and PepsiCo has an insignificant low single-digit market share. However "product portfolio innovation with favourable demographics coupled with thrust on Go To Market Strategy shall drive the lateral growth across segments," it said.

Besides, in a separate filing, VBL informed it has signed a Memorandum of Understanding (MOU) with the Government of Jharkhand on December 18, 2023, for its proposed manufacturing plant in Patratu, Jharkhand. This plant will have "a total capital outlay of approximately Rs 450 crore when fully commissioned in due course," it said.

VBL accounts for 90 per cent of PepsiCo's beverage sales volume in India. Its revenue was Rs 13,390.5 crore in 2022.