Varun Beverages, PepsiCo’s largest franchise bottler outside the US, is making a bold move into the global snack market. In a strategic shift from its core beverage business, the company has commenced commercial production of Cheetos in Morocco, marking its first major foray into international snack manufacturing. This expansion signals a new chapter for Varun Beverages as it leverages its distribution strength and operational scale to diversify revenue streams and tap into high-growth categories.
The announcement was made during the company’s second-quarter earnings call, where Chairman Ravi Kant Jaipuria emphasized the importance of international diversification and long-term value creation.
Key Developments Driving the Expansion
- Commercial production of PepsiCo’s Cheetos has begun in Morocco
- The move marks Varun Beverages’ entry into the global snack segment
- International volumes rose 15.1 percent in Q2 CY2025, offsetting domestic weakness
- New production lines and land acquisitions are underway in South Africa
- Equity infusions have strengthened subsidiaries in Zambia, DRC, and South Africa
Strategic Rationale Behind the Snack Push
1. Diversification Beyond Beverages
- With beverage volumes in India declining 7.1 percent due to unseasonal rains, Varun Beverages is actively pursuing non-beverage categories
- Cheetos production in Morocco allows the company to capitalize on PepsiCo’s snack portfolio and expand its product mix
2. Strengthening International Footprint
- The company is building a new can line in Durban, South Africa
- It is awaiting regulatory approval for land acquisition in Boksburg to enhance capacity
- Subsidiaries in Zambia and DRC have received equity infusions to support expansion
3. Operational Resilience
- Despite a 3 percent drop in consolidated sales volume, Varun Beverages maintained EBITDA margins and improved net realization per case
- International markets contributed significantly to profitability, aided by favorable currency movements
Performance Snapshot: Q2 CY2025
- Consolidated net profit rose 5 percent to ₹1,325.4 crore
- Revenue declined 2.32 percent to ₹7,163 crore
- Total expenses fell 3.62 percent, reflecting operational efficiencies
- EBITDA margins improved by 82 basis points to 28.5 percent
Chairman’s Outlook
Ravi Kant Jaipuria expressed confidence in the company’s ability to navigate domestic challenges and seize global opportunities. He highlighted the strategic importance of backward integration, capacity expansion, and product diversification in driving sustainable growth. The company’s focus remains on strengthening its execution capabilities and ensuring wider product availability across retail touchpoints.
Looking Ahead: What This Means for Varun Beverages
- The Cheetos rollout in Morocco is expected to be a template for future snack production in other territories
- Varun Beverages is exploring co-manufacturing opportunities for other PepsiCo snack brands such as Doritos and Kurkure
- The company’s long-term strategy includes expanding its snack portfolio in Africa and South Asia
Investor Sentiment
Shares of Varun Beverages rose nearly 2 percent following the announcement, reflecting investor optimism about the company’s diversification strategy and international growth prospects.
Conclusion
Varun Beverages’ pivot toward global snack production marks a significant evolution in its business model. By leveraging its existing infrastructure and PepsiCo partnerships, the company is well-positioned to become a formidable player in the international snack market. As it continues to expand its footprint and product offerings, Varun Beverages is setting the stage for a more balanced and resilient growth trajectory.
Sources: MSN India, NDTV Profit, Livemint, Economic Times.
