The board of directors of Varun Beverages Limited, a key player in the beverage industry, has approved its intent to enter a binding agreement to acquire franchise rights from SMV Group in 13 districts in Karnataka, 14 districts in Maharashtra and three districts in Madhya Pradesh, subject to the satisfactory completion of due diligence and other approvals including final approval of PepsiCo. These rights had previously been franchised by PepsiCo to SMV Group. Upon the completion of these acquisitions, the company will be a franchisee of PepsiCo products across 22 states and 2 Union Territories (UTs) of India.
These are highly under-penetrated regions and provide a huge opportunity to increase volumes and gain market share. The proposed acquisition is in line with the company’s strategy to expand into contiguous territories to garner better operating leverage and asset utilisation through economies of scale.
Commenting on the development, Ravi Jaipuria, chairman, Varun Beverages Ltd, said, “We are happy to announce our intent to acquire the franchise rights in parts of the states of Karnataka, Maharashtra and Madhya Pradesh. This is a part of our strategy to consolidate our presence in contiguous territories and garner market share. These are highly under-penetrated markets which offer long-term, sustainable growth opportunities. Further, the manufacturing facilities are strategically located close to target markets, which will reduce the time to market, and enable optimisation of freight and logistics costs, aiding margin expansion.”
