VARUN BEVERAGES Q3CY2022 Earnings Call Highlights
Delivered a solid organic volume growth of 22%, led by a favorable demand environment and strong performance of energy drink Sting in addition, healthy double-digit sales volume growth of 31% in key international markets further assisted performance during the quarter.
Post COVID-related setbacks over the last 2 years, now increasingly improving presence by expanding distribution reach across markets. This will help gain a larger share in the growing market.
Launches in the value-added dairy segment are seeing healthy consumer response, and remain confident of improving contributions from these new launches going ahead.
Overall, the demand environment for the beverage industry has been robust, and are witnessing a healthy offtake in India as well as in international markets. The festive season, quarter 4, is expected to further add consumption trends in this calendar year.
Realization per case, improved by 6.8% to the level of INR 167 per case in Q3 2022, primarily driven by a higher mix of smaller SKUs, which is 250 ml, especially blockbuster energy drink String, which has a higher net realization, and its mix is increasing in the sales volumes. Carbonated soft drink contributed 70%, juices 5% and packaged drinking water 25% of total sales volume in Q3 2022.
On the profitability front, despite the inflationary raw material environment, gross margins for Q3 2022 increased by 90 basis points to the level of 53.7% from 52.8% in Q3 of 2021. The increase in input costs was more than offset by operating leverage and higher sales volume, leading to an improvement in EBITDA margin to 22% during Q3 2022.
Existing business in Morocco is about INR 150 crores, which VBL will take it forward from there starting from January 1 and hopefully, in the coming time, will start manufacturing also in Morocco, and this involves all the brands, Cheetos, Doritos and Frito-Lay. Normally Pepsi doesn't give distribution rights of snacks. They have given it. Now VBL has to prove itself, and hopefully will get other countries.
For the quarter Sting was more than 12%. Sting reach is reaching pretty well close to highest penetration of any of products.
Tropicana is also doing extremely well. The only constraint was had 1 large facility which had opened in Pathankot, so because of that, and distribution has gone to about 15% of the outlets.
Realization is actually more than 65%, in Sting.
Major growth outside India have come from Morocco, where growth is not that much in CSD, but in water, where the realization is lower. But overall, the margins are good. Growing much faster in water there.
Were reasonably fully utilized this year. So adding new capacity, and should have good capacities for next year.
Sugar has not cooled down, but resin prices have started cooling down.
Hope to get CapEx in Rajasthan and Madhya Pradesh to get commissioned before next season.
There are lot of countries where Pepsi still not exist. So there is huge opportunities available. PepsiCo had a much smaller share in most of the markets which VBL has taken.
Bihar and MP has been seeing growth of over 50%.
The Tropicana and dairy are both done from the same plant. Adding one more plant next year. So that will double capacity in dairy as well as Tropicana. Should get ready by June or July.
ETR is going to be 25% for India blended with international something 22.5% or 23%. In a nutshell, it will bring an advantage of 3% in the overall tax rate for the company going forward.
Zimbabwe is doing extremely well. Their peak season is actually October to December. The peak season is going to come now.
Will be putting up a plant in DRC next year.
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