PepsiCo bottler Varun Beverages Ltd’s (VBL) solid volume growth in the September quarter (Q3CY26) was overshadowed by margin compression. Investors didn’t take this well, pulling the stock down 5.5% on Friday. The company follows a January-December financial year and the September quarter is its third.
VBL’s consolidated volume grew 28.7% year-on-year to 354.4 million cases in Q3CY26, driven by 22.5% growth in India and 39.9% in international markets. India volume growth, aided by a low base and favourable weather, was a key highlight, especially after disappointment in the previous quarter, and momentum continued in October, said Jefferies India.
India volume growth in Q2CY26 was 14.4%. DAM Capital noted that in CY25, a weak summer coincided with the expansion of Campa Cola (operated by Reliance Consumer Products), making it difficult to separate the impact of weather from competition. However, with a normal summer, India volume growth in Q2CY26 and Q3CY26, suggests the slowdown was largely weather led, DAM Capital said, adding that double-digit growth will continue.
Consolidated revenue rose 33.2% year-on-year to ₹6,607 crore in Q3CY26, beating consensus estimates, while beverage realization per case increased 2.2%. India unit realization inched up by 0.5%, reversing recent declines, aided by premiumization and trade spend rationalization. However, improved realizations and robust volumes could not offset the pressure from higher packaging costs, including preforms, shrink films, closures and cans, driven by geopolitical disruptions.
Consequently, gross margin shrunk 334 basis points (bps) year-on-year to 53.1% in Q3CY26. Elevated packaging costs eroded almost nearly 300 bps from India gross margin, and 272 bps internationally. Overall Ebitda margin drop was curtailed to 140 bps year-on-year to 21.6%.