PepsiCo and Varun Beverages Explore Partnership for Alcoholic Drinks in India

Varun Beverages Limited (VBL), PepsiCo's primary bottling partner in India and globally, is in preliminary discussions to extend its collaboration with PepsiCo into the lucrative Indian alcoholic beverage market. Ravi Jaipuria, chairman of VBL's parent company RJ Corp, indicated that the companies are exploring the possibility of distributing PepsiCo's ready-to-drink (RTD) low-alcohol products in India. This move aligns with global trends where RTD alcoholic beverages are gaining significant traction.

PepsiCo has prior experience in this domain through international partnerships, including its collaboration with AB InBev's subsidiary for SVNS Hard 7Up and with Diageo for an alcoholic drink combining Captain Morgan rum and Pepsi Max in the UK. VBL itself has recently ventured into distribution partnerships, such as with Carlsberg Breweries for select African markets.

This potential expansion would represent a first for the three-decade-old partnership between VBL and PepsiCo, moving beyond their traditional soft drink portfolio. VBL has stated its intention to test opportunities in RTD and alcoholic beverages, including beer, wine, liquor, brandy, whisky, gin, rum, and vodka, both domestically and internationally, with a cautious, phased approach.

The Indian market for alcoholic RTD beverages is projected for substantial growth, with an estimated CAGR of 6.0% between 2025 and 2035. Key drivers include rising disposable incomes, adoption of Western lifestyles among urban millennials and Gen Z, and a preference for convenient, premium alcoholic drinks. However, regulatory compliances and taxation policies remain market constraints, although liberalisation trends support long-term expansion.

This strategic consideration by VBL and PepsiCo occurs amidst a challenging period for the soft drink market in India, which has faced declines due to factors like adverse weather and increased competition.

Impact This development could significantly boost Varun Beverages Limited's revenue streams and market position by tapping into a high-growth segment. It also signals a potential shift in the competitive landscape of the Indian beverage industry. Rating: 8/10.

Difficult terms: Ready-to-Drink (RTD) Cocktails: Alcoholic beverages that are pre-mixed and packaged for immediate consumption, requiring no further preparation by the consumer. CAGR (Compound Annual Growth Rate): The mean annual growth rate of an investment over a specified period of time, assuming profits are reinvested at the end of each year of the investment's lifespan.