How Varun Jaipuria made sure the family-run Varun Beverages is in able, strong hands
In 2009, when Varun Jaipuria returned to India, fresh from completing his studies in the UK, the idea of diving into his family’s business seemed distant. Instead, he longed to savour a year of youthful freedom and exploration. But destiny wanted him to walk a different path.
Hailing from a traditional Marwari family, Jaipuria was tasked with overseeing the family’s bottling business in Sri Lanka. Fast forward 15 years, and as the Executive Vice Chairman of Varun Beverages (VBL) now, he has plenty to celebrate. Steering a family business to unparalleled success is no easy feat, yet Jaipuria has achieved what many second- and third-generation businessmen still strive for. At the age of 36, he is one of the youngest recipients of the BT-PwC India’s Best CEOs award. He has won in the FMCG category.
Unlike many modern entrepreneurs who flourish in the limelight, Jaipuria prefers to operate away from media attention. However, when it comes to discussing the intricacies of his business in person, he sheds his reserved demeanour.
Consider this: in an age when health-conscious consumers are increasingly eschewing sugary aerated beverages, Jaipuria’s VBL, responsible for bottling and distributing nearly the entirety of PepsiCo India’s beverage portfolio, has experienced remarkable growth. Between 2021 and 2023, the company’s top line surged at a 35% CAGR, soaring from Rs 8,958 crore to Rs 16,321 crore. Under Jaipuria’s direct leadership as CEO of its India and South Asia operations, revenues nearly doubled in two years, from Rs 6,596 crore in 2021 to Rs 12,633 crore in 2023. Furthermore, despite widespread concerns about inflation, VBL has also managed to improve its margins: from 7.42% in 2019, its standalone net profit margin has jumped to 14.05% in 2023.
Since Jaipuria assumed leadership of the domestic territory, which contributes approximately 80% to VBL’s top line, its market capitalisation has surged fourfold to Rs 1.97 lakh crore (as of February 23, 2024). This remarkable growth stems from a pivotal shift in the company’s operations, which is the re-franchising initiative spearheaded by PepsiCo India in 2019. This move effectively doubled VBL’s addressable territory in India. Previously serving roughly half of the Indian market, VBL acquired a significant portion of PepsiCo India’s territories, expanding its coverage to over 92%.
But all this was before the pandemic. With the outbreak of Covid-19, disruptions jolted VBL’s daily operations. And that is when another chapter unfolded.
Amidst the pandemic, VBL embarked on a significant capex cycle, prioritising infrastructure expansion for last-mile delivery and retail storage. This, coupled with agile execution of business and product strategies, propelled sales to record highs in 2022, notes Jaipuria.
Jaipuria shares the credit of VBL’s success with his father, Ravi Jaipuria, the Promoter and Chairman of VBL. “He has tremendous risk-taking abilities. So, when everyone else was cutting down on spending, my father went on a capex spree during 2020 and 2021. And being a large bottling partner, in comparison to the fragmented model followed by our competitors, we could execute the plans much faster,” Jaipuria tells Business Today. Since its acquisition of the additional PepsiCo India territories, the company has added nearly 13 new plants in India, taking the number to 33.
Interestingly, while Coca-Cola has been traditionally leading the local market with its product and pricing strategy, VBL took the lead by tweaking its strategy. It introduced 1.25 litre and 400 ml packs at competitive prices, thereby helping it turn the tables.
“We thought, why don’t we come up with a new strategy and become the leader. So, the change in pack pricing also gave us a lot of traction,” he says.
Jaipuria also recognised the untapped opportunities in rural areas, particularly with the enhanced road and electricity connectivity. The upgraded road network facilitated increased access to remote regions at reduced costs, while the improved electricity supply in rural areas across northern India enabled the company to deploy its freezers in retail outlets previously hindered by unreliable power supply. After all, stocking chilled cola bottles in local stores remains one of the most effective methods of attracting consumers.
According to Emkay Global Financial Services, multiple factors will sustain VBL’s business through FY24 and likely into FY25. Over recent years, VBL has invested Rs 3,000 crore in capacity expansion, aiming to further enhance sales. This investment is projected to increase production capacity by over 45% from its peak in 2022. “The beverage category is outperforming other FMCG categories on under-penetration and improved road and electricity infra. VBL has identified these tailwinds and has invested close to Rs 3,000 crore for capacity expansion. Further, it is benefitting from new products at affordable price points,” says Devanshu Bansal, Research Analyst at Emkay Global Financial Services. They estimate that by calendar year 2025, VBL’s revenue could nearly double to touch Rs 23,570 crore, while its profit after tax (PAT) could reach Rs 3,350 crore.
Experts suggest that India’s per capita consumption of colas remains among the lowest, indicating potential for a broader portfolio, including juices, value-added dairy, packaged water, and energy drinks. Despite expanding retail reach in recent years, VBL has only accessed about 3.5 million of the country’s 12 million FMCG outlets. As India’s per capita income rises, this gap presents an opportunity to increase consumption of branded packaged drinks over the next decade.
For Jaipuria, the dream run has just begun.
@arndutt
