Varun Beverages Prepares for Cost Hike with Six-Month Inventory Buffer

Varun Beverages Ltd Sees Minimal Impact from Rising Raw Material Costs

Varun Beverages Ltd, PepsiCo's largest franchise bottler, has built up to six months of raw material inventory, shielding it from near-term disruptions caused by rising plastic and aluminium costs amidst the US-Iran war. The company's inventory cushion is expected to minimize the impact on its operations.

According to the company's quarterly analyst call, Varun Beverages carries six months of inventory in its international markets. This strategic move will help the company maintain its profit margins despite the increasing costs of raw materials. The prices of PET resin and polyolefins, which are used for plastic bottles and bottle caps, labels, and pouches, have surged by 40-80% in March following the war.

In India, the company will experience a minor effect due to the rising raw material costs, but this impact will be mitigated by reducing discounts and increasing operational efficiency. Varun Beverages' management believes that this will give the company an edge over its competitors, as they do not carry a comparable level of inventory.

Read also: Market Analysis: Key Stocks to Watch - Narayana Hrudayalaya, ABB India, Federal Bank, Premier Energies, Ather Energy and More

Financial Performance

Varun Beverages reported a 20% year-on-year (y-o-y) rise in its consolidated net profit to ₹872 crore in the March quarter of 2026, compared to ₹726 crore in the same quarter last year. The company's revenue from operations stood at ₹6,721 crore, up 18.3% from ₹5,680 crore reported in the corresponding quarter of the previous financial year.

The company's consolidated sales volumes grew by 16.3% in the quarter, driven by volume growth of 14.4% in India and 21.4% in international territories. The mix of low sugar and no sugar products increased to approximately 63% of consolidated sales volume during the quarter.

Read also: FirstClub Secures $55 Million in Funding from Peak XV, Sofina, and Other Investors 9 Months After $22 Million Series A Round

Positive Outlook

Varun Beverages expressed a positive outlook for the next quarter, driven by favorable weather conditions and a strong portfolio of brands. The company's lemon drink Nimbooz is growing at 50-60% YoY, dairy brand Cream Bell is growing at 60-70%, and Tropicana PET bottles are growing over 100%. The company is expanding its outlets at a rate of 300,000-400,000 every year, with a goal to expand half a million outlets this year.

Analysts are positive about the industry growth, with a predicted 10% India volume CAGR (CY25-28). Shares of the company closed at ₹519.50 on Monday, up 5.9% from the previous close in a largely positive market.