Ladies and gentlemen, good day and welcome to Warung Beverages Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Pujari from CDR India.
Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverage's Q1 2021 earnings conference call. We have with us Mr. Ravi Jayapuriya, Chairman of the company Mr. Varun Jayapuriya, whole time director Mr.
Raj Gandhi, Group CFO and Whole Time Director Mr. Kapil Agarwal, CEO and Whole Time Director and Mr. Vikas Bhatia, CFO of the company. We'll initiate the call with opening remarks from the management, following which we'll have the forum open for a question and answer session. Before we begin, I would like to state that some statements made in today's call may be forward looking in nature and a detailed disclaimer in this regard is available in the results presentation shared with you earlier.
I will now request Mr. Ravi Jaituria to make his opening remarks.
Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope you and your families are all doing well and staying safe during this unprecedented time. I would like to begin the call by providing you an update on the current quarter following which Mr. Gandhi will take you through the financial performance. We have started the year 2021 on a healthy note, delivering progressive performance across parameters in quarter 1.
The company registered a strong volume growth of 33% year on year. The macro environment in the quarter was largely supportive as consumption was almost nearing a sense of normalcy. This resulted in a healthy volume growth of 34% year on year for our India business. The growth momentum continued in our international territories registering a 26% year on year volume growth during the quarter. On the profitability front, we were able to sustain some of the cost optimization measures implemented during last year that enabled us to report steady EBITDA margins at 17% in quarter 1 2021.
This is this in addition to a higher operational leverage and increased profitability from our international operations resulted in improved profits in quarter 1, with VAT registering a growth of 128% year on year. Further, the repayment of debt as well as lower average cost of borrowing translated into reduction in finance costs during the quarter. From a demand standpoint, while we saw a noticeable recovery in the domestic markets in quarter 1, the environment has evolved now with the onset of the 2nd wave of COVID infections in the country.
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2 2020, primarily on account of supportive demand environment during the current quarter and lower base of Q1 2020 due to the lockdown measures in the later part of March last year. Our organic volume growth was 24.7 percent in Q1 2020 over Q1 2019, leading to a 2 year CAGR of 11.7%. PSG continued 70%, juice mix 7%, packaged drinking water mix 23% of total sales volume in Q1 2021. Realization per case improved marginally by 0.6% to a level of INR148 in quarter 1, 2021, led by change in product mix with higher contribution from CHG and Juice. Gross margin reduced by 294 basis points year on year to the level of 55.8%, primarily due to change in product mix and lower margins from our international operations due to water mix.
There was a marginal ceiling in added sugar and fat prices in India during the quarter. EBITDA increased by 40.7 percent to RMB3816.2 million in Q1 2021 from the level of RMB2711 rmb2711.6 million in Q1 2020. EBITDA margin improved by 86 basis points to the level of 17% in Q1 current year 2021 as a result of sustained cost optimization measures that were implemented last year. Depreciation declined by 0.3 percent to a level of RMB1347.2 million as compared to RMB1351.2 million in Q1 2020. Finance cost reduced by 33.4 percent to RMB579,400,000 due to repayment of debt as well as lower average cost of borrowing.
That increased by 127.7 percent to the level of CNY1367.6 million in Q1 2021 from between CNY600.6 million in Q1 2020, driven by higher revenue improvement in margins and higher profitability from international operations. Overall, during the quarter, we have reported an encouraging performance. Our operational and financial profile remains solid and stable and our focus remains on generating strong free cash flows over the coming years. On that note, I come to an end of the opening remarks and would like to now ask the moderator to open the forum for any questions or suggestions that you may have. Thank you.
Thank you very much.
We will
now begin the question and answer The first question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Hi, good evening, everyone. A couple of questions. First, can you just talk about the scenario in April, although you did touch upon it, but April, both in terms of from a supply chain perspective as well as from a demand perspective as things are on the ground right now?
Well, April, I don't think we had any issues in supply chain. We are because we were pretty well stocked and there were some challenges, but we were very well covered. So we didn't have faced any challenges at all. And as far as supplies are concerned, I mean, at the end of April, the problems have started. Some states have got lockdown.
So there are some issues. But as of as in end of April, it was not any major issue which we faced. The question is going to be the lockdowns which are going to come now or what is going to come now, we are not very clear.
Sure. And Mr. Jayapriya, when you say supply chain, I'm sure manufacturing side would be far more under control. But let's say on the distribution side, anything specific you are seeing in any of the states like Maharashtra, for example, or Delhi at the moment? [SPEAKER SRINIVASAN VENKATAKRISHNAN:]
No. At the moment, of course, demand I mean supply has got a bit battered because of the lockdown. So you are only able to supply X amount of stores. Some stores are shut like hotels, restaurants have shut down. So again, it's the same scenario what happened last year, but much better than last year because last year was a complete lockdown.
So and also we learned a lot last year. So we've been able to manage it much better and the effect on sales is there, but this is not as bad as what happened last year.
Sure, sure. And in the pockets of states where it is happening, is it fair to say that versus last year, the impact is rather more broad based as against, let's say, rural, which did better after the lockdown was opened?
So the rural is still doing much better. Rural is even today doing much better even in the states or places where there is lockdown because the rural lockdown is never as severe as what the lockdowns are in the main cities. So even this year, we are finding that rural is performing much better for us. I mean if we look at the Q1, the rural was flying for us. It was going at 50% plus.
So obviously, with lockdown, the growth can't be anywhere close to that. But rural is still doing well for us. So we are not finding that kind of challenges. As long as we are able to make the good reach there, they are still performing.
Got it. Sure. The second one is on can you just talk about the input price environment, particularly on the sugar as well as PET? I know there is a question mark on demand itself. But from a gross margin perspective, how are you seeing the next few quarters?
Sugar, I think, is very close to what it was last year. There is maybe a couple of points. It has gone up, but I think it keeps going up a couple of points and keeps coming down. So sugar is not a major issue. What has really gone up in the last couple of months is the price of raisin.
But fortunately for us, we are covered for the year. So we had bought resin and that's why our inventories are slightly higher. As we took that, we saw that something as oil prices were going up, China restrictions were happening. So we had covered ourselves and we have covered practically for the whole season till maybe September, October. So we don't see any challenge for us this year.
Got it. Got it. And last small bookkeeping question. The tax rate in this quarter is 30%. On a full year basis, shouldn't it be closer to about 25%, 26%?
Vivek, this is some provision made for which was that we are incontinent dilating on the safer side. It's only the effect of provisioning.
Okay. So on a full year basis, Mr. Gandhi, should we still be running at about 25, 26?
25, 26. That's right.
Got it. Got it. Thank you and wish you all the best.
Thank you.
Thank you. The next question is from the line of Anant Shah from Axis Capital. Please go ahead.
Yes. Hi, everyone. Congrats on the good side of numbers. Yes. Hi.
Just a couple of questions here. Firstly, on the quarter gone by Jan to March that you delivered, I mean, obviously, the volume growth even on a 2 year CAGR on NH is also quite strong double digit. So just want to get some color what is driving this because it seems you're clearly outperforming most of the other categories in staples. So I mean, is it again in terms of in home consumption and the ORECA Revived or out of home Revived to that extent, which is driving this extra or in home consumption is also showing similar growth. I mean any color you can give a
little bit granularity in that? I've just got a couple of things which have done extremely well for us apart from the regular business growing. 1, our energy drink, which was launched a couple of years back, we rationalized the pricing last year. And that is actually growing at a few 100% actually. So that is actually my son is sitting and he's saying we are actually growing at more than 1,000%.
So that is what is one which is really pushing the volumes higher. Secondly and it has been accepted by all most of the states in every outlet and that is really flying out of the shelves. Secondly, we launched a new variant, which is to compete with the lemon drink of our competition with Limca, which is Mountain Dew Ice, which is a lemony drink, cloudy lemony drink, but has juice instead of just chemicals and carbonated only. So that has done extremely well since we have launched it, and we launched it this year only. So that these two things combined over and above our Tropicana juices have done extremely well, which we have said we have started in a PET format, which was not available in the countries.
Slowly, it took time for the market to accept it and now it has been very well accepted. So apart from our regular go to market improvements and other things, these three specific categories, 3 products have really enhanced our overall growth.
Okay. Well, Kanno, this is great. So essentially product portfolio expansion on the new launches side is leading this extra growth. Anything on distribution also, especially in Southwest? I mean, you were looking to ramp it up post acquisition and also
for the quarter. As I said, our go to market has been improved and we are keeping on improving every day. So that will keep on enhancing our volumes and are going to the number of outlets every day. But that is a slow process and it will keep on happening. These are a couple of things which helped us over and above what our growth would have come.
So that's where we are seeing the growth coming much faster.
Got it. Got it. Perfect. And of
course, here our investments in the vizzy coolers, our ceiling equipment were much higher. So I think overall everything put together has helped and we focused a lot on the rural market, which has also helped
April May essentially would be contributing how much of your volumes overall for the year? It would be 1 third or
more? About
27%, 28% currently?
Yes. 37% is the 2nd quarter. So these 2 months maybe like 68%.
Africa is weak in this time. So about 27%, 28% could be a percent up or down.
Sure, sure, sure. And has this at all changed the mix post your Southwest acquisition? Because I would assume they are less seasonal so well. Has it at all changed or just a minor change?
It's changed because Nont is still our strong SBL. So it will change slowly. It will start making maybe 100%, 1% difference. And over the next few years, it will show a big change. Right.
Got it. Perfect. And just one last bookkeeping question, if you can share the debt number, is it possible, I mean, to get for this quarter? I mean, how much has come down? Because we've seen increment in Q1Q also.
From last March quarter to this March, we have reduced it by INR 600 crores even though we had a tough year last year, but we were still able to reduce our debt by more than INR 600 crores.
Yes, I know that is commendable. Great. Thanks a lot for the answers. Thank you.
Thank you.
Thank you. The next question is from the line of Pasi Panthakhi from IFL. Please go ahead.
Hi, Tim. Congrats on a good set of numbers. My first question is basically on the acquired territories from Pepsi in South and West. I understand after acquisition, there was a pandemic and that really disrupted the initiatives that we wanted to take I mean, wanted to put in place. But if you could give some idea of what improvements you have put in place and how that has helped you, I mean, at least on a relative basis versus the industry growth, has your growth been faster?
And if you could also share whatever data points on this in terms of increase in visicoolers or increase in distribution points or any other metric that you deem fit will explain what you have done in South and West?
Well, I think you already see the difference which is showing in the numbers in the Q1 of March January to March and that improvement is constantly going on. Our biggest improvement what we needed to do was increase the number of outlets in South West, which we were not servicing unfortunately during Mexico's time. And that has been done by adding more people, by adding more vehicles and by adding more busy coolers. So all three have been done and which have started showing results in the Q1 and hopefully will still show decent results in the Q2. Q2 again being pandemic being hit again in the 2nd row, we can't be very sure what is going to happen, but it is still going it looks like it's going to be much better than last year.
So would you be able to give any flavor on how much different the growth in South and is versus your other organic geographies? I'm not looking for an exact number, but any kind of sort of input you can give on that will be helpful.
No, but I think overall, we were much stronger in north as it is. So our north was always growing faster. Now I think the south and east has also started has joined and growing at reasonably the same pace. Although we were hoping north and south and west would grow faster, but I think unfortunately we've really not had that one proper year to really do justice to that territory. And we were hoping it would be this year, but again there is disturbances.
So it's very difficult to really say now West has been locked down for the last 1 month already. So it's very difficult to really assess the growth and what is the real business when things are so up and down. So I think we still have it is clearly showing improvement and our go to market has drastically improved and that is what has shown the overall results because otherwise we would have never had this kind of growth overall. But to pinpoint exactly is it being difficult right now, our staff, some of it is there, some is not there. So we are a little bit struggling right now.
Sure. My next question is on CapEx. If you could give some guidance on how much CapEx you would be doing for CY21 and also for CY22? And also within this, is there any international CapEx component or it's going to be mainly India?
Well, we are going to try and stick to what we have set up not more than our depreciation Because some CapEx we will have to add for certain production capabilities in certain territories, but we are not going for any major expansion, which will be higher than our what we have suggested to you, which is the depreciation part.
Okay. So this formula of CapEx less than depreciation applies for CY 2022 as well, not just 2021, right?
Might have changes could happen depending on product mix like our juice is doing extremely well. So we might have to expand a little bit on juice because the Tropicana juice is doing extremely well. So those couple of changes might happen, but within very close to the framework of about the depreciation and not trying to move beyond that between the 2 years.
Okay. And lastly, sir, just one suggestion. It's not a question, but a suggestion if you could implement. Now you're almost synonymous with Pepsi Beverages India. There are only a couple of small geographies which you don't cover.
And therefore, apart from tracking your growth, it becomes very important for us to understand how the industry is growing and how your market share within that is moving. So going ahead, next quarter onwards, if you can share any industry growth data or market share data, that would really be helpful to the analyst and investor community.
Okay. We will talk to Pepsi and try and get whatever is available and try and share with you.
Thank you, sir. That's all from me. Thanks and all the best.
Thank you. The next question is from the line of Prashant Kutti from Sundaram Mutual Fund. Please go ahead.
Thank you for the opportunity. A couple of questions. Firstly, on the South and West side, sorry for extending this a bit. You did highlight about that probably it's not going to be a full year. But just wanted to understand from where we kind of acquired, let's say, if you're talking about close to 140,000,000 cases that you were around there roundabouts, what would that number look like as of now, if one is to annualize that number, if you could probably help us in giving us that?
We understand you said that you've not got a full year of operation date. P.
Vijay Kumar:]
The question is how do you analyze that full number because the 1st full year we got was last year. And the last year was not really the correct year for us to look at it. And again, as we have started in the right format, now again, there are lockdowns coming. So how do you really analyze it? So whatever growth we were expecting, I mean the same growth are not going to come, that is very clear because of lockdowns.
To expect that business would be 100% normal is not going to be there. Although we feel the effect would be much lower to us, I think we have been able to get away with it for at least the 1st 4 months. And coming forward also, since we've got the experience now, we know how to manage lockdowns and manage what the issues were last year. And the lockdowns are weaker than last year. It's not 100% lockdown.
I think we will do much better. But to exactly pull the numbers because I don't know what the common policy is going to be in the next couple of weeks.
Sure.
Just want to understand, like you said, obviously, North has been our territory and we continue to do well over there. But more at an industry level, this would be a fair assumption to make that otherwise also South and West would have been weaker in general also, that's a fair assumption or that the industry itself would have been
weak, as the whole country was growing, I mean the industry was growing. I mean I can't really tell you that we have been growing faster, but I think the overall industry has done well.
Sure, sure.
To supplement what Chairman said, of course, the mix of South and West is lower than the East and the North because when we acquired that territory, that constituted 50% equivalent to our North and East share. Definitely, the mix in the countries, South and West mix is lower. Sure.
So you spoke about the apart from your Govilad GTM initiative, you said the 3 products kind of helped a lot of growth. Any number to put up, sir, and typically how much would they have incrementally added to our growth, maybe either from the spotters perspective or some of the other?
Yes, I think what I'm saying at peak season when the real growth starts coming is again got disturbed. So very difficult to say that what it would have added. I think you have to allow us to have one reasonable season for us to really give you what it has happened. But we definitely see the numbers improving. We have the numbers that are go to market.
The number of outlets we are building is much larger. Now again, what happens is the number of outlets, some of them are shut down because of the COVID situation. So it's very difficult to analyze the whole thing. As soon as it opens up, yes, maybe in the next quarter or so, I'll be able to answer it very clearly.
Sure. No, I was just asking, sir, what was the contribution of, let's say, these three products to our growth? That's what I was just trying to check.
Prashant's plan, otherwise, you can sell them off line. I don't know if I have it handy to me. Okay. Sure. Sure.
Whatever I have, I can give you, Prashant. See, in the Q1 itself, there is a tremendous growth, of course, not as much as in NOND, but towards that. And as we are seeing in India
No, that's nothing. What's the 3 products I've said Tropicana, Mountain Dew Eyes and STING?
Yes. STING, last year, we had grown about 2.5x over 2019. And that volume, we have already covered more than that in fact in the Q1 of the current year.
Is it good? So if you see pressure, what have we we grew 2 50% last year even during COVID times over 2019 in STNG. And that 2 50% growth we have already covered in the Q1. So the numbers for the full year have been covered in the Q1.
Sure. Sure.
I understood. I got it, sir. I got it. Sure. Just one more one last question, if I may, actually, sir.
It's actually a very commendable effort that given that there's been so many lockdowns and given that last year until last year, we were always I mean generally carbonated is considered to be very impulsive and out of home consumption product. But I presume that there will still be a proportion of out of home consumption is still there. I think last year if I vaguely remember you told a number of some 40% was out of home consumption. That number has now come down to something like 20% or something is what that is around in one of your con calls. Just trying to understand that even after that not being there, we have still kind of achieved much better than expected organic growth rates.
So can we actually say that once that also kind of comes through the organic growth rate itself would increase versus whatever we were expecting earlier? Is that the way I look
at it? That is showing no, Prashant, that is clearly showing in the Q1. No, I don't have to say it once things were normal like it was not 100% normal, still you've seen a growth which is unprecedented. The Q1 has grown at 34%. So that has only happened because the demand is there.
It's just that our additional go to market, our additional putting, mini coolers and the number of trucks we've added, the routes we have added, that is all starting to show. Clearly, it is showing it can't be just a normal organic growth of 33%, 34% to that.
Sure. Absolutely, sure. Thank you so much and all the very best to you.
Thanks. Thanks. Thank you.
Thank you. The next question is from the line of Devanshu Bansal from NK Global Financial Services. Please go ahead.
Hi, thanks for the opportunity and congrats on a good quarter. Sir, I wanted to understand on the growth CapEx front, how do we see the growth CapEx in terms of placement of vesicleers in CY21? And question is to basically understand whether CY22 can be a year as if COVID actually did not happen or there is going to be some impact that we are going to see off due to 2 week years in between.
So 2022, of course, we don't know, I mean, what is going to happen. But 2021, I mean, as far as busy coolers are concerned, most of the busy coolers have already been placed because the season has already started. So our placement of busy coolers for this year has already been done. And I'm not very clear on what we if you wanted the second question. It's not very clear to me.
Sir, basically, I wanted to understand as in if COVID did not if COVID had not happened, so basically in CY 2020 2021, we would have placed a certain number of vesicleers. So still with COVID, have we placed do we plan to place a similar number of vesicleers in the market or it would be a cycle?
Yes, exactly. It is placed before the season starts. So we have placed the vesicleers for this year, what we had to place.
Okay. And second question is on standalone other expenses front. So these are up about 50% in Q1. So what is the reason for this? Is there any one off here?
I don't know. What Ravi, can you answer it, please?
Yes. Here, there are 2 parts. One is as the volume has gone up, the expenses, most of them are variable in nature, they have gone up. If the volume is up by 34%, naturally the expenses have to be up by that. Apart from that, because we had a good profitability, we had reviewed all our assets base.
There had been certain molds, which were not to be put in use because the size of the designs had changed. So we have taken a return of that. And the third thing is we had one glass line at Baspur. And the mix of glass with COVID is coming down, and we were thinking that it may not be put to use for a little longer period. So we have taken a raise off of that also.
These two things together, INR 15 crores and then pro rata, the expense growth because of the volume growth will make good the other expenses comparable to any other year.
Okay. And one last one from my side. In terms of international profitability, there has been a healthy improvement, largely led by our Jambawgi operations. So are these margin levels sustainable going ahead in this year as well? And secondly, you also talked about some reversal of currency related provisions in earlier calls.
When can we start seeing these reversals?
I think the profitability of the international operations should keep on surprising you now on the very positive side every time. And hopefully, the quarter which is going on, maybe we may start every quarter on quarter reversal of INR 127 crore reserve for the currency for Zimbabwe.
And this would be over how many quarters, sir? Any idea on
that? How the currency behaves? So, I mean, I can only say my foreign currency exposure is reducing. And to a great extent, the Reserve Bank of Zimbabwe has my foreign currency exposure will get reduced, pro data, we will be taking this. So we went to PPM there.
Okay. Thanks, sir. Thanks. That's it from my side.
Thank you. Thank you.
Thank you. The next question is from the line of Deepak Poddar from Sophia Capital. Please go ahead.
Yes. Thank you very much, sir, for the opportunity. So just wanted to inquire about your margins. Basically, earlier we were of the view that the CY 2021 should be a year where we should be seeing the normal kind of margins, like 21%, 20% that we have been doing. So is there any impact of raw material prices or the second wave?
So has this view changed in somewhat way because of these renewals recently? So any kind of comment on those would be helpful?
Thank you. Actually, your line was not very clear. It's fast
and too loud. Can you go through the
Hello? Hello? Hello, Aditi?
Hello, Aditi? H. B. Balaji:] H. Balaji, your last question.
B.
Balaji:] Yes, sir. Okay, okay.
So, sir, just wanted to understand more on the margin front because earlier we were of the view the CY21 is a near where we should be seeing the normal kind of margin.
So is there any kind of
change in view on that front because of the second wave or or the resin prices that we have been talking about or the sugar availability? So any comments on those kind would be helpful. Yes. Thank you.
As I said earlier also that we have covered resin for the year, so we don't see any challenges for ourselves. And I think sugar prices are reasonably under control. So I don't see any challenges in our margin structure. So we'll have a different margin than what you have actually.
Okay. So this 21% kind of a normal margin that we have been doing is what one should look forward to, right?
Well, that's what our margins have been. And I don't see any major challenge, but exact margin, nobody can say it would depend on the volumes also.
Yes, understood. That's it from me. Thank you very much.
Thank you. The next question is from the line of Sarish Pardesi from Centrum Capital. Please go ahead.
Hi. Good evening, Mr. Jayapudi and Mr. Gandhi. Thanks for the opportunity and hearty congratulations for well ahead.
I have two questions. If you take out the West and South acquired territory, in the core markets, you are East and North, what is the growth? And the follow-up on that, if you compare the number with the Pepsi coverage for West and South, what is the growth which you have achieved Y o Y?
Y? North and East, the growth is maybe 4% higher than the mean of 34% and that much is lower in South and West because there we need a little more time as you have insight to make the corrections which we wanted to. In spite of COVID, we have It's been faster for us than South and West.
And so we see a lot of headroom available for us for South and West. As we keep on making the commitments, we will see huge growth coming out of there.
That's right. That's correct. Yes.
Okay. Ravi, just when I look at and when we spoke to channel partners, I think northern market is more of a juices market. So would you able to help me understand this Tropicana growth, which falls under juices, the growth is faster I mean, only Tropicana I'm talking about versus carbonated. Is the shift in consumer behavior happening from juices to carbonated drink or carbonated to juices?
I think it's still too small. I think Tropicana itself is doing well, but doing well still in our overall category is still very small. So I think till it expands, it can't really change the complete scenario because Tropicana is much more than 3%, 4% of our volumes. So I think it's still long way off, but the growth in juices is coming. Yes, let me come and answer that.
This is Varun Jayapriya. Essentially, we've taken over the Capriwana business recently, and I think Mr. Jeppreya was sharing earlier that we've actually gone into PET. So this is only being done in tetra by Rial. Rial is the market leader.
Now since we've taken over, we're expanding the distribution of this very rapidly, and our distribution is much more than any other company, especially Rial. So Rial, you will find more in major metros and tier 2 cities, but in the smaller villages and all the other places. Due to our strength of the VBL distribution, we're able to take this product everywhere, especially in the PET as well. So due to that expansion and the organic market core markets also, we are able to distribute this product much highly in the growth of the company.
Got that, Varun. Thank you. Just one follow-up. While we speak to many channel partners and I think what is the crux during this Jan, Feb, March period, I think consumer has clearly upgraded to from 500 ml to upwards, say maybe a liter or 2 liters. So would you be able to share what kind of contribution upwards of 500 ML the company enjoys at this time in the paid bottle?
I think the main difference is I don't think we'll have the exact numbers handy, but you can offline get whatever you need. But the biggest difference what has happened is the in home consumption because of lockdown last year, a lot of people have started consuming these products much more at home than they used to. And I think that is continuing. And that is what is partly showing in the growth, which has gone faster is when the on the go market also started, the in home consumption did not stop. So apart from the in home consumption, which has increased last year, the On the Go consumption also started and combined both of them have made the market grow much faster.
And that is why you see such huge growth of 32%, 34%.
Thank you, Mr. Jayapuriya and thank you, Mr. Gandhi and thank
you, Varun. All the best.
Thank you.
Thank you. The next question is from the line of Suvarna Joshi from Axis Securities. Please go ahead.
Thank you for the opportunity and congratulations on a good set of numbers. So I had just one question. Most of my questions have been answered. So you talked about rural market growing better or ahead of the urban market. But we have been reading in newspapers that some Gram Panjads have kind of put a ban on sale of soft drinks and ice cream for the fear that it may spread the COVID for known or unknown reasons.
So do you think that this can challenge the rural growth if it becomes more stringent? That is part 1. And part 2 is the question is what would be the rural versus urban contribution? That's it from my end.
See, I don't think that is more news. It's not really happened in any of the town we really or the villages we really are serving. I mean, we have not heard that seriously. So I don't think we should take that too much. Maybe a couple of guys in some village have taken it and somebody has picked up in the media.
So it's still not happened. So let's hope to that and it stays like that. So I don't want to comment more on that. But it's not a serious concern for us at the moment. And rural is still growing much faster than the urban.
Well, thank you for that. Would you be able to share the contribution of rural versus urban in terms of our volumes or revenues?
I don't think I have it handy. So the exact numbers, I don't have it handy. I would suggest if you can go on offline and just ask for it, we'll be able to provide you. I don't have it really and I don't want to Sure.
We'll take it offline. Thank you so much. Thank you. Wish you all the best.
Thank you.
Thank you. The next question is from the line of Sivakumar K from Unifi Capital. Please go ahead.
Yes. Thank you for the opportunity. Sir, one question with regards to the new territories of South and West. Are you done with the market level interventions which you had in mind in terms of establishing new vise coolers or increasing the penetration?
Well, we keep trying and before we start something or that keeps coming. So the same thing happened last year before we could really do justice to the market. I mean, the complete lockdown came. And this year, of course, some of that we were able to do so, which is what is showing the results. But again, 100%, unless until you go through at least 1 full year of normal year, very difficult to say that have you been able to do complete justice or not.
So we really are happy that we are seeing results in the positive side, but I think still there is a lot more to be done. And in the disruptive sector, unfortunately, you can only push people to a point and especially today's market with the own staff is falling, the distributors are falling, there is a limit to what you can push the market. You have to let the natural thing go by. And I think fundamentally, we are on the positive side. Things are improving.
But if you really ask me, have we done everything we would have liked to do? No. And I think it would take a year or 2 years more minimum for us to really start feeling that we have done what we wanted to do.
Got it, sir. Sir, and from your own sense of the markets now, you have seen them for almost more than a year, are these markets similar to the do they hold the same growth potential as what the North and East markets hold? Or these are more mature markets?
Well, they're slightly more mature than North and East because, one, the population is much higher in North and East. 2nd, I think the weather is much more different there. So it's a year round business there. So and the penetration was there. Whereas in the North, especially in East, because of power situation, there was very low penetration in the rural market.
And the per caps in East was especially so low. So I think the same growth might not come in North and South, which can come in North and East in south and west, sorry, against north and east. But at the same time, for us, the growth will come because our share is very low there and because we were not going to the number of outlets we should go to. So as we penetrate and keep going to the right number of outlets, I think our growth will be also high for the next couple of years and then they will start stabilizing. Right.
Thank you, sir.
That's it from my side. Did I answer the question or anything I missed out? That's helpful, sir. Thank you. Thank
you.
The next question is from the line of Nehal Jamm from Edelweiss. Please go ahead.
Yes. Thank you so much. Sir, two questions from my side. You obviously alluded to the growth of STING, which I would assume is more of an urban product portfolio. Specifically for your rural market, which has grown at 50%, are there any specific brands which have driven this growth, if you could highlight that specifically?
Well, I think Sting has grown everywhere. So it's not an urban market drink. I think you're seeing more truck drivers and the youngsters all over the place having it. So it's not really an herbal drink. It's been taken as a regular drink all across anybody who wants to get a kit, wants to have it and who could not afford Red Bull at 1 is now having a kit listing.
And I think it's just expanding in a way which is out of proportion. So it's just that we see huge potential and this will become an important part of our portfolio.
That's helpful. Would it be that you mentioned about launching the Tropicana pet bottles also similar to your competitor. Is that also one of the key reasons for the world doing better?
That's correct.
But the only issue with Tropicana Pet is our facility right now is only 1 or 2, which we have which we are expanding. As we keep expanding, that will also grow at a huge pace because we were practically running out of capacity in the one plant in the peak season this year.
That's helpful. So just one last question. In the recently acquired South and West territory, you mentioned about reaching majority of the outlet. Just as I said, currently at present, what proportion of the outlets you think we are reaching? And obviously, the related question will be that how much more can we increase our footprint by in that acquired job?
Job?
I think we are not even 50%, 60% there. We have a long way to go, my friend. So I think it will take us a long time to reach there. But we hope in the next 2 years to 3 years, we will be there. It's a long drawn battle.
It requires a lot of investment, a lot of manpower, really coolers, so which we are putting at a reasonably fast pace. And we are improving our reach quite rapidly, but it will still take us at least, I would say, 2 more years.
That is very helpful, Mr. Jabri. I wish you all the best. Thank you
so much.
Thank you.
Thank you. The next question is from the line of Sumant Kumar from Motil Al Oswal Financial Services. Please go ahead.
Yes, hi. So you talked about the rural is growing at is growing. So can you talk about the semi urban and urban growth and the demand scenario over 15 to 20 days?
When you say 15 to 20 days, are you talking the next 14 days, 15 days coming
out? I'm talking about, say, last week of April and 1st coming this week. Could depend on
which city was locked down and which was not. So wherever there is no lockdown, this business was happening fine. Wherever like the city like Bombay or Rajasthan, Jaipur and big cities, Delhi, there is the business has suffered. So it would depend on the city to city. And as the lockdowns are more prevalent in the urban towns, it further takes a hit.
So that is what is creating an issue, not really the market is I think the softening market is ready to take a big leap and jump, which is what has happened in the Q1. But in home consumption is happening, that's why you don't see the sales dropping so much even though when there is lockdowns.
Also in semi urban market because there is a partial lockdown, so there is no much impact?
Pardon me?
So talking about semi urban markets, there is a partial lockdown. So is there any demand impact? No, it's not
as severe as the major towns. And rural somehow, even though there are lockdowns in some places, it's not so effective because rural, I don't think people really lock themselves down. So somehow the rural market keeps is still open and it's still bugging.
And how is the ramping of the Pattan Kot facility?
So Pattan Kot, as I said, Tropicana is pretty well we are up to our full capacity utilization. So we could actually do better maybe if we had more facilities, which we have to seamlessly look at now.
Thank you so much.
The next question is a follow-up from the line of Devanjan from NK Global Financial Services.
Sir, just wanted to pick your thoughts on the product pricing front. As recently, we took a price cut in December Jan period on select SKUs and I recently happened to see some MobiKwik cashback also on our larger packs. So what is the strategy and how long do we plan to keep this pricing differential vis a vis the competitor?
There is no price differential between the competitor. The competition is and we are practically at the same price unless until they have some specific agenda or we have some specific agenda. So there is nothing else being differential to the competition.
So just to highlight, as
in on select 1.25 600 ml, I think we did some promotional tax at least in Mumbai.
That's the initiative we took last year and it has really worked for us. So now it is up to the competition to decide what they want to do. So we have not I mean, it's not the question of we believe that that's the right price point for that category, and it has done extremely well. And especially when you've got in home consumption and people don't have so much money, it's right back for a family to be able to drink and have enjoy the product. And that has shown us huge success.
So we don't want to change it.
Sure. That's helpful. Yes, thanks.
Thank you. The next question is a follow-up from the line of Suvarna Joshi from Axis Securities. Please go ahead.
So thanks for the opportunity again. Just wanted to understand, in the in home consumption space, would the growth rates have been similar to what we clocked in Q4 of CY 'twenty? Or they would have shown more improvement because of the season that we have been in?
No, of course, seasonality makes a difference. I mean, once summer comes, the consumption totally changes. But overall, as a percentage, if you look at the in home consumption has gone up drastically because a lot of people, while they are staying home, not going out as frequently as they used to even when the markets were open. And they have got used to because they have got used to staying home, they have got used to drinking at home also. I think I just wanted to add is that the 1.25 liter, what we've done is raise prices at INR 50, And we were the 1st month to do this in the industry.
And since larger gatherings are not happening, that means people are not in major cities that we are going to 2 liter, they're going to INR 1.25. And looking at the price point as well, once we're able to offer, that's really been on fire for us. So that's been one of the lead packs in terms of getting the consumption growth as well.
Sure. That was very helpful. Thank you so much.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarification or would like to know more about the company, please feel free to contact our Investor Relations team. Thank you once again for your interest and support and for taking the time to join us on this call. Look forward to interacting with you soon.
Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Warun Beverages Limited, that concludes this conference. We thank you all for joining us and you may now disconnect your lines.