Ladies and gentlemen, good day, and welcome to Varun 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. 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, Mr. Pujari.
Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q1 CY 2026 earnings conference call. We have with us Mr. Ravi Jaipuria, Chairman of the company, Mr. Varun Jaipuria, Executive Vice Chairman and Whole-Time Director, and Mr. Raj Gandhi, President and Whole-Time Director of the company. We will initiate the call with opening remarks from the management, following which we will have the forum open for a question-and-answer session. Before we begin, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you all earlier. I will now request Mr. Ravi Jaipuria to make his opening remarks.
Good afternoon, everyone, and thank you for joining us on our earnings conference call. I hope you've had a chance to review our results presentation for the first quarter ended 31 March 2026. We are pleased to report a strong performance in the first quarter of CY 2026, supported by healthy demand, disciplined execution, and continued progress across our markets. Consolidated sales volumes grew by 16.3% in quarter one CY 2026, driven by volume growth of 14.4% in India and 21.4% in international territories. Revenue increased by 18.1% year-on-year to INR 65,742 million, and EBITDA improved by 21% year-on-year to INR 15,289 million.
In India, demand remained encouraging during the quarter, supported by our wide distribution reach, strengthened execution, and continued investments in manufacturing capability and chilling infrastructure. We undertook targeted initiatives to drive volumes and strengthen our domestic portfolio, including pack upsizing, selective price point launches in identified markets to onboard new consumers, and new launches in the energy and juice-based drink segments. The facilities commissioned over the last year have stabilized well and are expected to support growth and enhance operating efficiencies going forward. Our international business continued to make steady progress during the quarter. We consummated the acquisition of Twizza in South Africa through BevCo, strengthening our manufacturing footprint and route to market capabilities in Africa's largest soft drink market. The acquisition is expected to generate meaningful operational and commercial synergies over time.
We have also entered into an agreement to acquire Crickley Dairy through BevCo, which will further strengthen our presence in South Africa, subject to regulatory and other approvals. Across Africa, we continue to build scale in snacks and deepen our presence in high-potential markets in line with our strategy of broadening the portfolio and strengthening consumer relevance. In accordance with our dividend policy, the board of directors has approved an interim dividend of 25% of face value, INR 0.50 per share, resulting in a total cash outflow of approximately INR 1,691 million. Looking ahead, we remain confident in the long-term opportunity across our markets, supported by favorable demographies, rising income, growing urbanization, and increasing beverage consumption.
With adequate capacities, a diversified portfolio, and a strong distribution network, we are all well-positioned to deliver sustained growth and create long-term value for all our stakeholders. I would like to invite Mr. Gandhi to share his key highlights of our operational and financial performances. Thank you very much.
Thank you, Mr. Chairman. Good afternoon and a warm welcome to everyone joining us today. Let me provide an overview of the financial performance for the first quarter ended March 31, 2026. Revenue from operations net of excise and GST increased by 18.1% year-on-year to the level of INR 65,741 million in Q1 CY 2026. Consolidated sales volume grew by 16.3% year-on-year to the level of 363.4 million cases as compared to 312.4 million cases in Q1 CY 2025. This growth was supported by strong volume growth of 14.4% in India and 21.4% in international territories.
At the consolidated level, net realization per case improved by 1.6% year-on-year, supported by improved realizations in international territories, primarily due to favorable currency movement. In India, realization per case declined by a marginal 1.5%, primarily due to volume growth initiatives such as upsizing of packs and selective price point launches in target markets to onboard new consumers. CSD constituted 73.6% of total volumes, while non-carbonated beverages and packaged drinking water contributed 7.5% and 18.9% respectively. In line with our focus on healthier offerings, the mix of low sugar and no sugar products increased to the level of 63% approximately of consolidated sales volume during the quarter. Gross margins improved by 62 basis points to 55.2%, supported by early stocking of key raw materials despite an inflationary input environment.
EBITDA increased by 21% year-on-year to the level of INR 15,289.3 million, with EBITDA margins improving by 55 basis points to 23.3%. In India, EBITDA margins improved by 112 basis points, supported by operational efficiencies from strong volume growth and improved gross margins. PET increased by 20.1% year-on-year to the level of INR 8,787 million, driven by strong volume growth across both India and international markets. Depreciation increased by 30.9% on account of commissioning of four new plants last year in Buxar, Prayagraj, Damtal, and Meghalaya. Finance cost increased by 18% primarily on account of the acquisition of Twizza in South Africa, while income on surplus cash in India has been accounted for under other income.
During the quarter, we completed the acquisition of Twizza in South Africa, BevCo, at an enterprise value of ZAR 2,053 million. In addition, BevCo entered into a share purchase agreement for the acquisition of Crickley Dairy Proprietary Limited at an enterprise value of approximately ZAR 232 million, including net working capital subject to regulatory approvals. These transactions further strengthen our presence in the region and support our portfolio expansion in adjacent categories. Overall, we continue to maintain a strong financial position supported by disciplined capital allocation, efficient working capital management, and a robust balance sheet. With the capacities commissioned over the past year, backward integration initiatives, and a strengthened distribution infrastructure, we are well-positioned to support growth and drive profitability through improved operating leverage across markets.
Despite the inflationary environment arising from the prevailing geopolitical situation, we remain confident in our ability to navigate near-term challenges through focused execution and supply chain agility, while sustaining growth and profitability. On that note, I have come to an end of our 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. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Vivek Maheshwari with Jefferies. Please go ahead.
Hi. Good afternoon, team. A few questions. First on, you know, Mr. Gandhi, where you ended on the geopolitical bit, can you just, you know, talk about the impact that you expect from a near-term perspective, especially on the packaging material and anything else that we should bear in mind, across different markets because of, you know, higher oil prices?
Well, I'll answer this, Vivek . First of all, in our international markets, our effect will be in the raw material practically zero to couple of points maybe, because we are well stocked till even not this quarter, but the next quarter also. We normally carry six months inventory in international. Our impact will be practically very low and which actually gives us an edge over our competition because I don't think competition carries anywhere close to six months. As far as India is concerned, we will have minor effect because again, we were reasonably covered for this quarter, but for the next quarter, we will have some effect, which is.
We are covering that by reducing our discounts and becoming more efficient, which is already starting to show and cutting our costs wherever we can, and which is already showing in the first quarter results. As long as the volumes continue, then I don't think there'll be any effect on the bottom line.
Thank you, Mr. Jaipuria.
Does that answer your question?
It does. Beyond packaging material, anything else that we should be aware of any potential-
Well, the only thing which can affect slightly, which you can't stock is, you know, the transportation cost. That there will be some effect, but that we'll be more than able to absorb it, and it won't show any major issue on our P&L.
Got it. Mr. Jaipuria, if you know, I know you have a very, you know, strong season upcoming, but do you also, let's say, worry about from a consumption perspective if the higher oil prices feeds into, in the form of higher inflation, does it imply some, you know, pushback, from the consumers on the consumption of the products? In general, not just your category.
I don't see it, Vivek, because consumption is very strong. We are going through a season which was terrible last year with all the rains and with this weather. I don't see any. We are very happy with what is happening right now, what the sales growths are. This quarter should be rather much better than what we've already had. More than that, I can't answer on the rain gods. It's looking very positive.
Sure. Another question on the point on the, you know, response that you just gave. When I look at your, you know, inventory build up in the P&L, it doesn't look like to be very high compared to, let's say, what you have had two years back, for example. It is certainly higher than what it is last year. So just wanted to be sure, you know, the for India business, are you covered for most part of the season, for this quarter? Or, there will be-
We are completely covered for this quarter, and we are partly covered for the next quarter also.
In India business also, Mr. Jaipuria?
Yes.
Okay, nice. Lastly, you know, on the realization bit, I know there had been a lot of, you know, concern in the last quarter. I just wanted to, you know, speak about the or discuss this point. Last quarter, the realization in India was down about 4%. This time around it is 1.5%. I know the seasons are very different. The quarter context is very different. Can you just still elaborate on, because I was just thinking in the context of like, you know, new launches that you have had done, INR 10, higher volumes. This number has actually gotten better. Can you just elaborate a bit on this?
Well, INR 10 is a very small part. We only use it where we feel it is necessary. It will be less than 5% of our total volume or maybe even less than 2%. It practically would not show. We are using it only to make sure our distributors remain with us, and where there is a huge stress, then only we use it. We are not really using INR 10. We have the products ready. If ever we need it, we can use it, but we are not using it. INR 10 is not a factor, is not going to affect us.
And J-
Also, as I said to you, once the season is reasonable, we have consolidated and cut some costs and all our new plants have also come into effect, which further cuts our cost as all the new plants which are coming up are much more cost-effective and large plants where our production levels are much higher.
That's interesting, sir, because I always thought that you were already very efficient. New plant angle I get. My point is that will still not show up on the realization side, right? Realization last quarter -4%, this quarter -1.5%. In fact, there were worries that, you know, this number could actually be worse than what it was in the December quarter. What explains this delta then?
Vivek, in fact, we have premiumized lot of products. You know, launches or growth of something like 60% in our dairy, realization is 3x the normal. Focus is everywhere to compensate from the system itself for major part. Secondly, you know, the tax cut in the 22nd September on the GST also is going to help us.
Yes.
Although we had reduced the prices, but with the costs going up, you know, it will not be felt by the consumers. I don't think end of the day they will be that much affected by this.
As I said, we are running it more efficiently and making sure discounting is reduced little bit.
Got it. Thank you and wishing you all the very best.
Thank you.
Thank you. Next question comes from the line of Abneesh Roy with Nuvama. Please go ahead.
Yeah, congrats on a very good set of numbers. My first question is on aluminum cans. So you have tied up your inventory for PET and most of the packaging quite well. I do understand that your salience to aluminum cans is much lower than the other large national player. If you could tell us, is there any shortage which you are facing? Here, what will be your salience in terms of percentage aluminum cans?
Well, I think first of all, our aluminum can sales is less than 2% for us. It's very, very small. Secondly, we have tied up a reasonable quantity to more than cover our 2% volumes and maybe a little higher. We will be able to get cans. They are slightly more expensive, but that again, as I said, wherever we are finding a large cost up, we are cutting discounts and giving less discounts in the market because there's shortage for everyone, and the costs are going up for everyone. If the demand is there, then we are making sure that overall our bottom line is not getting affected.
Sure. Customers must be shifting, right? If there is a can shortage, there is a section of customers who will not sacrifice their consumption, right? They will switch to PET-
No, absolutely. If you can't get a can, then you go for PET or you go for glass. Mostly PET.
Right. My second question is on water. If I see the Reliance presentation which has come up, they are saying that they are now India's third-largest branded water player. If you could comment in terms of your standing within the top players. You have always been there, so wanted to understand, is the market share changing? Second is, the volume growth initiatives in carbonated have done quite well, which is visible in last two quarters double-digit volume growth. In water, at some stage, would you need volume growth initiative there also?
No, we don't over-push water. We try and make sure our basic margins remain, and we want to make sure our monopoly customers and our visi-coolers, which is close to a million-plus in the market. On those outlets, we make sure our water is serviced properly. Water is like a commodity. You can increase your sales as much as you want, you just have to give discount, which we are not in the game of. That's why we can sustain our margins.
Last question. In terms of energy drink portfolio, how has Sting done? You had also mentioned in the previous quarter in terms of expansion of that portfolio, including the scaling up of mid-priced Adrenaline Rush. If you could tell us how has Sting cans done, how has Sting overall portfolio done, and how has Adrenaline Rush done? Thanks.
Adrenaline Rush has done phenomenally well. Adrenaline Rush, we are feeling some pinch from the shortage of cans because we had not expected Adrenaline Rush to do as well as it is doing. There is slight pain there. Also we've got energy drink Sting in cans with our new Classic Sting, what we call, which has been launched and is doing extremely well. Again, the demand is much higher than what cans we can get, but it's much better than what we had planned. We'll be doing better than what we had planned, but still there will be some crunch on that. We have put the Sting Classic in PET bottles also, which is doing extremely well, but it has gone only in this in April only in the market.
You will see a big response of that in this quarter.
Sir, one last follow-up. Essentially, if I see this quarter results, all the FMCG results have been ahead of expectation. Obviously yours, Nestlé, Bajaj Consumer, and then VST Industries. Overall consumption, at least March quarter, are you picking up that overall trends are accelerated? Of course, now we have to take quarter to quarter. Based on your understanding and what you have seen in the results, would you say that there is an uptick?
There is definitely an uptick. I mean, until the market is growing. Because there is Campa in the market, and they are very aggressive, and they are growing the volumes in the market, and even Coke is growing. The overall industry is growing. I don't know if we are growing faster, but Campa is definitely, as they are adding capacity, they are growing in the market. The market is definitely growing at a huge pace. I think as there is enough competition, everybody is more in the market, putting more chilling equipment, more outlets are being opened. I am very bullish on the Indian market, and I believe this should continue in double digits for the next five, 10 years at least.
Sure. Thanks. That's all from my side. Thank you.
Thank you. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Aditya Soman with CLSA. Please go ahead.
Yeah. Hi, good afternoon, and thanks for the opportunity. Two questions. Firstly, in terms of new products, can you give us a sense of what new launches, how the new launches have done, particularly around Nimbooz? You mentioned that fruit drinks have done well, as well as the milk-based beverages, if you can give us some sense of what the contribution is and how the growth has been. Secondly, in terms of summer, now you've indicated that obviously we've had a strong start. Is there any sort of risk to this in terms of unseasonal weather at any specific part of the country, or do you expect summer this year to be very strong? Thanks.
Well, what we are hearing is summer looks to be very good. Now, the fear of rain coming, I can't answer you, but if the weather gods are not as with us, which they were not last year. Overall it's already a month has passed, so the trends are looking very good. If the weather remains like this, there's no reason why we shouldn't do extremely well. Our products are doing extremely well. Our dairy is growing at 60%-70%. Our Nimbooz is growing at 50%-60%. Our Tropicana PET is growing at, I think, more than 100%. All our and the new energy drink which we launched at mid-price, which is at INR 60, Adrenaline Rush, is doing extremely well. Even our energy drink in the cans is doing extremely well.
The new launch of Sting Classic, which is the gold and black, is started only about a few weeks back, but the initial response is fabulous and we feel it will become another Sting, hopefully, and at the moment it's looking very positive. Anything else? Aditya.
Thank you. We have lost the line of the participant. We'll promote the next in line. That is, Devanshu Bansal from Emkay Global. Please go ahead.
Yes, sir. Hi. Many congratulations on a strong set of numbers. Sir, first question, I wanted to check, in the base quarter, the rain disruption was across all the three months last year, or it was more towards the second half of the quarter? If you could provide some color.
Well, it was mainly end of April to end of June for sure, and even continuing to the third quarter. For this quarter, I think it was mainly May and June was really disaster and April end was not great.
Got it. Got it.
Fundamentally May and June.
There are some supply chain issues, right? Which might have impacted opening of new plants for competition. On the other side, we have sufficient capacities. Wanted to check, can we benefit from this or the competitive intensity that you were anticipating is on those lines itself?
Well, I think competition is there, but I think there is enough market for everybody to take, as I have said that every time. As I said, we are adding about close to 500,000 and maybe more chilling equipment, which is between Campa, Coke and ourselves. Plus the individual outlets are buying 400,000-500,000. So there's a million chilling equipment, refrigerators going in the market on a year-to-year basis. That is expanding the market drastically. I think it's only going to be whoever does a good go-to-market and whoever can expand his distribution will win the game. We are trying to do that. We are expanding at about 300,000-400,000 outlets every year, and we are doing the same.
Hopefully, this year we might expand half a million outlets. I think that's what is giving us the growth.
You mean 500,000 visi-coolers or about 0.45-
500,000 new outlets.
New outlets.
We don't give visi-coolers to everyone.
Okay. Understood. Sir, last couple of bookkeeping questions. For Twizza and Crickley Dairy, what is the revenue and margin run rate that can be baked in for CY 2026? If you could provide some color. Second one, what is the expected CapEx?
Well, I think what we have told the CapEx, what we have bought it at, which is what, Raj?
Twizza, INR 800 crore.
Twizza we have bought at INR 800 crore.
Revenue.
Revenue.
INR 1,140 crore. Have bought at INR 1,140 crore.
We have paid INR 1,140 crore.
Sorry. I was checking for the consolidated CapEx for the company, sir, and the revenue and margin run rate for Twizza and Crickley in CY 2026.
Well, our CapEx is not going to be very large this year because we have enough capacity. We are most probably going to only have one plant and which CapEX will be less than INR 500-INR 600 crore this year. It will be very low this year. We have enough capacity, except the new plant which we have bought.
Yes.
Does that answer the question, Dev?
Yeah. Sir, just the revenue and margin run rate also for Twizza and Crickley Dairy.
Well, revenue was INR 800 crore for Twizza.
Okay.
About INR 160 crore for Crickley. About consolidated maybe of close to INR 1,000 crore between the two.
Okay.
Margin, I think it's a bit too early. Let us take it over properly. It's been 10, 15 days only or a month. We are going to correct the margins. I mean, obviously it was doing all right, but with the consolidation of both BevCo and Twizza, we have enough room and they've got enough production capability, which we were struggling in BevCo. Which will help us give growth going forward without putting too much CapEx.
Great. Thank you so much for answering my questions, and all the best to the team.
Thank you.
Thank you. Next question comes from the line of Anant Shah with Axis Capital. Please go ahead.
Yeah, hi, sir. Congratulations on the set of numbers. Just a few questions. Firstly, can you give some granular details on how the international has grown? I mean, you've grown almost 21%, which is quite strong. It seems your South Africa business would have delivered bulk of this growth, but if you can give some granular color there.
No, it's not only South Africa. Actually, all our international businesses have grown.
Your Zimbabwe and all which were relatively, I mean, except South Africa was growing in, let's say mid-single digit to high single. Is that also now come back to double digit and all?
No, no, absolutely. South Africa is growing at close to average is 21% international. South Africa is very close to what the international market is growing.
Okay. Except South Africa also, would it be double digits?
Yeah, yeah. All international market, otherwise we wouldn't be able to average 21.4%. I think Morocco was the only one which was weak last quarter, and that was because of Ramadan being preponed.
Okay. Got it. Sir, on food distribution, if I do the math between consolidated and standalone, it seems run rate has moved from, I mean, Q1 last year was of course just a start, so it moved from INR 40 crores-INR 50 crores to INR 120 crores. I think last year you highlighted INR 350 odd crores for CY 2025 for food distribution in Africa. How do you see that scaling up this year?
Anant, snack foods in the first quarter this year is INR 112 crore, which was last year INR 52 crore in the first quarter.
Okay. You will consistently see further ramp-up as well, right? I mean, in terms of the run rate as well.
Absolutely, because Zimbabwe plant has just come up last year, end of last year.
Got it.
There is consolidation and growth coming.
Got it. Okay. Well, thanks a lot, sir. Those were the two questions. Thank you.
Thank you.
Thank you. Next question comes from the line of Harit Kapoor with Investec. Please go ahead.
Sir, good afternoon. Most of my questions are answered. Just wanted to get your sense on market share. You know, on a very high base, you know, you've done an exceptionally good number. Also, given the availability issues which you are able to tide over, just wanted to get your sense about do you see opportunities in the market where maybe some of the other players have not been able to do as well as you in the current situation, and that could play out in terms of at least near-term market share gains. How do you see the situation on the ground right now?
No, I can't answer for other people. The only thing I can say, we are fully prepared and we have enough capacity that even if we get a 50% growth, we can comfortably do it without adding any capacity. We are fully prepared. We have the raw material, we have the back end covered. We only hope to God to give us the good weather, and then we should get a good set of results.
Got it. The second question is on distribution. You do mention a certain number that you would like to do every year in terms of growth. For this year, calendar year, you know that 8%-10% type of addition number, you know, is the year we are planning out consistent with that?
Yeah, that's what I have just said that practically this year we have added more than 10% outlets. That's why we are hoping to add close to 500,000 outlets with a base of about 4 million.
Great. Those are my two questions. Thank you.
We are aggressively increasing our go-to-market, and that is what is actually giving us the results.
Great. Wish you all
Thank you. Next question comes from the line of Latika Chopra with J.P. Morgan. Please go ahead.
Yeah, hi. You know, two follow-up questions to your earlier comments. One was on, you know, availability of raw material, particularly PET. You know, you mentioned you have reduced sales of packing materials. So I was just wondering, you know, have you started to see any visible signs of challenge for the smaller unorganized players in the market? And the second bit was, you know, in your assessment with this kind of inflation which is going to come up, and not necessarily for you, but for the industry, do you see potential scope for price increases ahead as the broader industry tries to offset the inflation impact?
Well, I see the B brands and the other players selling water, they are already. They've not increased the price, but they have reduced the discounts. That we are already seeing in the market because the costs are going up. I feel that will further happen once I think the gasoline prices go up. I mean, there will be some pain, but I think we are hopefully reasonably covered. I can't say fully covered because I don't know what the prices will be. At the moment, for this quarter, we are, you know, covered with our raw materials. Now, gasoline price, I don't know. That is the only vulnerable part, and that is not such a large part in our scheme of the whole thing.
If it happens, it is higher, then we will further reduce our discounting to some level. If our volumes are good, we are mainly concerned about our volumes. If the weather remains like this and we can grow at the same pace or better than this, then I'm not worried about few rupees.
Understood. You know, initially, you had explained the difference of realization for India business at 1.5% decline from 4% in the prior quarter. This was on account of product mix and also loading of discount sequentially. You know, assuming status quo on other things, is 1.5% more like what we should build for rest of the year, assuming the current levels of discounts are maintained? Because of seasonality, you know, this number could fluctuate.
I think it might even become lower because it depends how strong the season is, or it could remain that. That gets more than covered, as I said. If the numbers start happening, our costs start reducing drastically. Our efficiencies go up. This 1% or 2% we can cover easily if the numbers are right, and we feel the numbers are going to be good this quarter.
Understood. Thank you so much.
You're welcome.
Thank you. Next question comes from the line of Percy Panthaki with IIFL Securities. Please go ahead.
Hi, team. Good afternoon, and congrats on a great set of numbers. I'm looking at the standalone P&L, and you've done a 11% sales growth here on a fairly high base of close to 18% in the same quarter last year, which is like a 14% two-year CAGR growth. Now, if I look at the two-year CAGR growth for the previous quarter, it was 8%. Even for the last four-quarter average, the two-year CAGR growth was 8%. I'm using two-year CAGR so as to sort of offset any sort of high base, low base in seasonality and so on, and get the underlying growth trends.
What do you think is the reason that the two-year CAGR has accelerated so sharply from about 6%-8% to 14% this quarter? Is it just the summer season being better? Is that the main part of it? Or do you think that the rate of market share gained by the new incumbent has probably slowed down and the growth is more visible now? Or is there a third reason I'm not getting?
Well, I think we have never had this 6%-8% growth except last year when the weather was really bad and India did not grow. We've been average growing at a CAGR of 23%, so I don't know where you're getting 6%-8% growth.
Sir, like for example, Q4 CY 2025 was a 6% on a base of 9%. That gives me a two-year CAGR of about 8%.
Last year it was one exceptional year. That's what I'm trying to say. Otherwise, on average, we've been always growing in double digits. With some new acquisitions, we have grown at more than 20%. Double-digit growths have been there if you look at last five years, 10 years. It's only last year in India, because of the weather, our growth was low. That's the only reason. We still believe and are still, we would say we definitely would grow in double digits going forward. For the next five, 10 years, I don't see any challenges. Of course, our business is partly seasonal, so in case there's some abnormal rains or something happens, that I can't answer you. Overall CAGR will definitely be more than that.
Understood, sir. I was not talking only of last year, I was looking at two-year CAGR, but anyways, I'll take this offline. Similarly, just wanted to ask on international business also. This quarter there has been a significant acceleration in growth versus what we have seen in the past few quarters. Just wanted to understand the reason for that as well.
Again, everywhere we are. You know, when we take a new territory, it takes us a little bit of time to stabilize that territory. Last year, actually we had just taken South Africa and DRC had just started for us. So some challenges and then, you know, with the Gaza war, we had some other challenges. So all those things put together, last year was a tough year for us. But if we don't have external issues, our growth, we would still believe should not be less than double digits comfortably outside or in the country.
Understood, sir. My last question is on the input cost. While it has been discussed in detail and we know you have covers for one or two quarters, but if crude remains at 100 for several more quarters, at some point of time, you will either have to increase your prices or reduce your discounts or take the hit on the P&L. My question was a little bit longer term. A few quarters down the line, if the input cost scenario remains where it is, do you think you would be able to hold your margins or it is a fair assumption to say that maybe margins might take a hit a few quarters down the line?
You know, it's very difficult to answer, but only thing I can tell you, we might be the only company which is holding six months inventory. I think other people will blink before I blink. I think we have to wait and see. Either everybody will take the prices slightly up to cover the cost or take a hit. I can't answer you that, but I don't see us taking a hit because I think other people have a much bigger issue than I have.
Got it, sir. Very helpful. Thanks and all the best. That's it from me.
Yeah.
Thank you. Next question comes from the line of Jay Doshi, Kotak. Please go ahead.
Hi. Congratulations on good set of numbers, and thanks for the opportunity. My question is, you know, with upsizing of packs from 250 ml to 400 ml, are you seeing more consumption, and maybe hence do you expect industry volumes to be, you know, growing faster by a few percentage points versus the earlier growth rate? Or are you seeing, you know, the consumers who are earlier buying, you know, larger pack, INR 40, INR 35, INR 40 packs are now buying two units of, you know, INR 20 SKUs? Basically is consumption going up in liters, you know, versus, you know, because of this upsizing of packs for yourself and industry? So that's question number one.
Well, the consumption is going up in liters as well as in numbers, both ways. Just if it goes up in liters is not good enough for us. We need the numbers to go up also and liters to go up also. Both are happening, and that is why you're seeing such large growths coming.
By any chance, as a one-off, would you be able to give us some color in terms of what the broad growth at a unit level in terms of number of PET bottles or whatever, versus 15% volume growth, which is, you know, in liters?
We are giving in 8 ounce, and that's what we quote. Otherwise, each size we have to start measuring.
Understood.
Some are much smaller, some are much larger, so it becomes very difficult. That's why we give in 8 ounce, which is the best way to.
Sure. Second is with, you know.
Otherwise, we have to start measuring.
Got it. Second question is with upsizing of 250 ml to 400 ml across the country, across portfolio, do you expect any more sort of changes in your pack price architecture? I heard you comment earlier that there is no need for you to actually step up focus on INR 10 price point. Is there any pack price architecture change that is left in your view?
Well, I don't want to say something, but only thing is we will see what the market requires, and we will play with that. I really, if I had something in mind, I would not be able to divulge it anyway because that's not good for us.
Understood. Last thing on profitability, you know, should we expect that, you know, PET inflation aside, you know, the crude-led inflationary thing aside, should we expect that you broadly be able to maintain your margins in India business? You know, that 250 ml-400 ml upsizing has actually not really had any meaningful or any impact at all on your India business margins. That is what we see in March quarter. Is this something that we can extrapolate for at a full year level? PET inflation, I can understand that we can.
No, no, but that full quarter we had the upsizing, so whatever effect had to come has already come, and we have.
Those costs have been absorbed by the.
Yeah. Our volumes and our efficiencies have absorbed all that. As I said, our larger plants are much more cost efficient, and our cost of production is considerably half of what we were doing in our smaller plants.
Understood.
Scale is what is giving us the strength and cost reduction and which is what is playing with us. We are able to consume some minor, cost upsides which we can easily absorb.
Thank you very much. Perfect, sir. Thanks a lot.
Sure.
Thank you. Next question comes from the line of Robert Marshall-Lee with Cusana Capital. Please go ahead.
Hello. Just a couple of simple questions. Firstly, just in terms of the impact on the new plants, is there any kind of material impact from utilization rates? You know, where are you running the new plants? And do you have any fixed cost leverage there? And secondly, just in terms of global sugar prices have been falling, is there any impact on the Indian market at all?
Sugar prices are reasonably consistent here. Fortunately, they have not gone up, which is the positive side of the international prices. In the international market, definitely we've had a gain of sugar costs. Wherever we are, international prices have come down significantly. In India, it's been reasonably constant. Fortunately, it's not gone up.
Thank you. In terms of utilization of new plants, just is there any kind of material impact there?
Utilization is definitely helping. As our volumes are going up, the plants are getting more utilized, and the bigger plants we are using more, and we have shut down a couple of our really high-cost plants which were very small and which were very old. Overall efficiencies are helping, cost cutting is helping. Looking at the situation, looking at the costs which are going to go up, we have tried to curtail our costs and make sure to run it a bit more efficiently than we would have, I guess.
Thank you. That's great.
Thank you.
Thank you. Next question comes from the line of Arjun Jain with Systematix Group.
Hello.
Yes.
Yeah. I just have a quick question on the sales mix of the new product as well as the
Mr. Jain, there's a lot of disturbance in the background. Can you come to a place where there's less background noise? Thank you.
I was just asking the sales mix currently as well as the sales mix which is, like, expected in a few years down the line, especially with the traditional Coke and the new alternatives such as Sting or Gatorade.
No, I'm not getting your question properly. I mean, our mix is, you know, this keeps changing on a year-to-year basis. Energy is definitely becoming a big part of the portfolio. Dairy is becoming a big part. Hydration is becoming a big part. This will keep changing year on year. Very difficult to say. The new Gen Z keeps on asking for something new all the time. We have everything to support whatever is required because it's the same machines who produce it. It's just changing the flavors or changing the packaging.
Also, like, you said that you are opening new plants and they are much more efficient than the previous ones. Like, what is the expected payback period for these?
Payback period for what?
Of these plants.
I mean, we need capacity. We have to open plants, otherwise I can't keep on increasing my sales. If my sales are going up, they have to be backed up by the only thing we are saying is now we are not opening smaller plants and our plant efficiency being larger plants is much better than what it used to be in the older plants. Just to give you an example, if we had a 200 bottles per minute line, now we've got a 1,000 bottles per minute line, and the manpower is the same. So it's five times more production, but using the same manpower. So those are the efficiencies I'm talking about.
Okay. I was asking for the payback period. Like if there is
It depends on, you know. It's very difficult to answer for each plant.
Okay.
Normally, we work on a three to four-year payback. 30% off.
Mr. Jain, are you done with the question?
Yes.
Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of question-and-answer session. 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 clarifications or would like to know more about our company, please feel free to contact our investor relations team. Thank you once again for your interest and support and for taking the time out to join us on this call. We look forward to interacting with you soon. Thank you very much.
Thank you. On behalf of Varun Beverages Limited, that concludes this conference. Thank you for joining us. You may now disconnect your line.