Why Varun Beverages is betting on Africa for its next growth phase
The PepsiCo bottler’s ₹1,120-crore acquisition of South Africa’s Twizza signals a strategic shift toward slower-burn scale overseas as competition crimps margin headroom at home.
Varun Beverages Ltd (VBL)’s acquisition of South Africa-based Twizza (Pty) is less about shoring up near-term earnings and more about extending its growth runway beyond India. While the domestic business remains resilient, stiff competition is creating challenges. Africa offers scale, even if the payback is slower.
Twizza manufactures and distributes non-alcoholic beverages and operates in a mature yet sizable ready-to-drink market, which is about 40% the volume of India’s. “Though the market is mature, we are confident of a market share-driven double-digit volume growth in the geography, basis VBL’s strong track record for turnarounds in Zimbabwe and Nepal (>50% share now)," said an Emkay Global Financial Services report dated 22 December.
With Twizza integrated, VBL’s volume market share in South Africa is expected to rise to around 20% by 2027, up from about 10% currently. Twizza’s own volume growth is modest, at roughly 3% CAGR.
VBL’s realizations in South Africa are estimated to be about 50% lower than those of Coca-Cola Beverages Africa, offering potential upside as consolidation unfolds. Any narrowing of this gap, however, is likely to be gradual and mix-driven rather than the result of sharp price hikes.
Varun Beverages will acquire a 100% equity stake in Twizza through its South African subsidiary, The Beverages Company Proprietary Ltd (Bevco), for an enterprise value of ₹1,120 crore. Based on FY25 numbers, this translates to an EV/sales multiple of 1.24x and an EV/Ebitda of 7-8x.
“Over last three years sales have grown at a CAGR of 4% to ZAR 170 crore (equivalent to ₹902 crore or about 4-5% of VBL’s consolidated sales) and as per our checks, entity has tad better Ebitda margin (about 15%) versus Bevco," said JM Financial Institutional Securities. “We reckon that Bevco acquisition happened at about 0.8x EV/sales and about 7-8x EV/Ebitda. The SBC Tanzania acquisition (which didn’t go through) was also valued at about 1.2x EV/sales and about 7-7.5x EV/Ebitda," added JM’s analysts in a report on 21 December.
For VBL, margin is the trade-off: its consolidated Ebitda margin stands at about 23%. Twizza’s backward integration is in place, and cluster-level synergies could help lift its mid-teens margin over time.
In October, the company entered an exclusive distribution agreement with Carlsberg to test beer sales in parts of Southern Africa. The initiative is at a pilot stage and visibility remains limited, but it reflects VBL’s attempt to broaden its portfolio.
The VBL stock is down about 25% year-to-date, reflecting concerns around margin normalization in India, rising competition, and uneven performance outside South Africa. These worries surfaced in the third quarter of calendar year 2025 (CY25), when consolidated sales and Ebitda fell short of estimates due to weaker international volumes. Domestic volumes were flat year-on-year, while international volumes rose 9%, led by South Africa’s mid-teens growth but dragged down by slower expansion in other markets.
Despite an adverse monsoon, the India business maintained stable gross margins and improved cost efficiencies. Management pointed to double-digit volume growth in October, suggesting recent softness was weather-driven rather than structural.
Still, with competition intensifying, incremental margin gains in India may be harder to achieve. International markets accounted for 27.4% of VBL’s sales volumes during 9MCY25, with the remainder coming from India.
The Africa push shifts the company’s focus from squeezing more out of India to building scale abroad. The payoff may be slower, but VBL appears to lack meaningful growth alternatives at home. For now, investors seem willing to wait and watch.
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