Varun Beverages Ltd (VBL), one of PepsiCo’s largest franchise bottlers worldwide, 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, on Tuesday.
The proposed transaction is valued at an enterprise level of ZAR 3 billion (Rs 1,320 crore) and will help it expand its geographical footprint in the African market, the company said in a stock exchange filing.
BevCo, which has franchise rights from PepsiCo Inc, in South Africa, Lesotho and Eswatini, manufactures and distributes licensed PepsiCo and own-branded non-alcoholic beverages in South Africa. The company also has distribution rights for Namibia and Botswana.
According to the filing, Bevco achieved sales volumes of 117 million 8oz cases in FY23, and achieved net revenue of ZAR 3,615 million, or Rs 1,590 crore, in FY23.
BevCo bottles and sells PepsiCo’s brands including Pepsi, 7UP, Mirinda and Mountain Dew. It also sells brands such as high caffeine drink Refreshhh, energy drink Reboost, carbonated beverage Coo-ee and fizzy Lemonade JIVE.
“The Board of Directors of the Company, at their meeting held today, considered and approved to acquire 100% stake in the business conducted by The Beverage Company (Proprietary) Ltd, South Africa along-with its wholly-owned subsidiaries (‘Bevco’) with an option to accept minority co-investment from large equity fund subject to regulatory and other approvals,” VBL said in a filing.
VBL, which bottles and distributes PepsiCo’s beverages in 27 states and 7 union territories in India, also holds the franchise for PepsiCo products in territories in Nepal, Sri Lanka, Morocco, Zambia and Zimbabwe. But India is VBL’s largest market.
“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,” VBL further announced in an investor presentation, following the acquisition announcement.
VBL said it expects to complete the transaction, which is “cash consideration” before July 31, 2024.
Bevco reported 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).
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.
In another exchange filing, VBL announced that it has signed a Memorandum of Understanding (MoU) with the Government of Jharkhand on December 18, 2023, for a proposed manufacturing plant in Patratu, Jharkhand. The plant will have “a total capital outlay of approximately Rs 450 crore when fully commissioned in due course,” it said.