Varun Beverages shares fall as margin pressure offsets volume growth
The PepsiCo bottler saw consolidated volume grow 28.7 per cent in the September quarter despite shrinking gross margins.
Varun Beverages Ltd (VBL) saw its stock fall 5.5 per cent on Friday as margin compression overshadowed solid volume growth in the September quarter, according to Mint.
The company's consolidated volume grew 28.7 per cent year-on-year to 354.4 million cases in Q3CY26. This growth was driven by a 22.5 per cent increase in India and 39.9 per cent in international markets.
Consolidated revenue rose 33.2 per cent year-on-year to ₹ 6,607 crore in Q3CY26. However, gross margin shrunk 334 basis points year-on-year to 53.1 per cent due to higher packaging costs for items including cans, closures, shrink films, and preforms.
Management indicated that the full impact of cost inflation has been reflected in Q3CY26 and expects gross margins to stabilise. The company has reduced grammage in Sting from 300 ml to 250 ml but has not raised prices for its carbonated soft drinks portfolio.
The company has earmarked ₹ 1,000 crore in capex for its India business and $90-100 million for international capacity expansions. Nuvama Research noted that while the CY27 capex involves significant investment, returns from newer initiatives remain uncertain.
In Q3CY26, depreciation and finance costs increased by 34.5 per cent and 53.5 per cent year-on-year, respectively. These increases were attributed to the acquisition of Twizza in South Africa and associated debt funding.