PepsiCo India’s bottling partner Varun Beverages announced that its board has approved plans to acquire franchise rights of the beverages and snacks major in South and West regions. The company will divest its bottling franchisee rights in the West and South of India to Varun Beverages. The deal is estimated at Rs 1,850 crore and involving the transfer of 1,900 employees.
The company’s board has approved its intent to enter into a binding agreement with PepsiCo India Holdings to acquire franchise rights in the two regions for a national bottling, sales and distribution footprint in seven states and five UTs, Varun Beverages Ltd.
After completion of all these formalities is complete VBL will be PepsiCo’s franchisee in 27 out of 29 Indian states and all the seven union territories.
Ahmed El Sheikh, PepsiCo India’s president said, “The decision to franchise its company owned bottling operations in South and West regions to VBL will profitably drive synergies of scale, operational productivity and efficiency across all facets of PepsiCo’s beverage business.”
Ravi Jaipuria, Chairman VBL said, “The franchising in South and West regions will enable VBL to acquire a national bottling and sales footprint. This development will help us acquire greater scale, operational productivity and efficiency leading to higher revenues and profitable growth.”
The maker of soft drink brands Pepsi and Mountain Dew has been divesting its bottling operations globally to operate asset-light businesses across world markets.
PepsiCo’s Sheikh said, “The Company will retain responsibility of category creation, brand building and development of the beverage portfolio to drive sustainable profitable growth. The deal reduces Pepsi’s beverage operations in India mainly to marketing as it exits bottling. The $1.6-billion RJ Corp, among PepsiCo’s top three bottlers globally, is also a franchisee partner for Yum Restaurants-owned Pizza Hut and KFC and Coca-Cola owned coffee chain Costa Coffee.”