Varun Beverages, a franchisee bottler of carbonated soft drinks and non-carbonated beverages under PepsiCo trademarks, reported a 26% rise in consolidated net profit to 12.53 billion rupees ($149.65 million) for the June quarter. However, this fell short of the anticipated 12.59 billion rupees. The company's operating expenses surged nearly 29%, driven by higher costs for sugar, flavorings, carbonated water, and packaging materials. These rising costs significantly impacted profits. Varun Beverages' stock dropped 5.4% to 1,595 rupees, making it the biggest loser in the fast-moving consumer goods index [abf93d3e].
Despite the profit miss, Varun Beverages continues to invest in renewable energy. The company recently announced its plans to invest in two solar power firms in India. Varun Beverages will acquire a stake in Huoban Energy 11 Private Limited, a special purpose vehicle engaged in supplying solar power to consumers in Maharashtra, and Aspirative Creative Ventures Private Limited, a solar firm in Uttar Pradesh. The company will spend Rs.2.90 crore towards subscribing up to 14% equity shares of Huoban Energy 11 Private Limited and Rs.2.24 crore towards subscribing 11,20,000 equity shares of Aspirative Creative Ventures Private Limited. The deal is expected to be completed by October 9, 2024 [efc1711a].
Varun Beverages' increased costs reflect broader global supply chain challenges affecting industries worldwide, highlighting the balancing act between maintaining product appeal and managing profitability. Investor concerns over soaring raw material costs eating into profit margins signal potential caution for investors as inflationary pressures and cost management become critical factors for consumer goods companies [abf93d3e].
Meanwhile, A.G. Barr, a beverage company based in London, expects a surge in revenue driven by strong demand for cocktail mixers and an expanding soft drinks range. The company projects its half-year revenue to surpass last year's figures, with revenue for the 26-week period ending July 27 expected to hit around £221 million, up from £210.4 million last year. A.G. Barr's full-year revenue is projected at approximately £421.19 million, with a profit of around £56.87 million. The recent £3.3 billion merger between Carlsberg and Britvic has positively impacted shares of A.G. Barr and Fevertree. A.G. Barr's new CEO is confident the company will meet its full-year guidance ahead of interim results set for September 24, 2024. A.G. Barr's strong performance and strategic growth initiatives signal robust health in the beverage market, which reflects shifting consumer preferences towards diverse and premium drink options, signaling long-term growth potential for players who can innovate and adapt [e27ebb59].