Varun Beverages expects its gross margins to stabilise after higher packaging costs weighed on profitability in the September quarter, with the company saying the impact of elevated input prices is now reflected in its latest results.
“Based upon the present price trends, we can broadly say yes,” President Raj Gandhi said on the company's September-quarter earnings call on Friday, responding to an analyst's question on whether gross margins had bottomed out. He added that there could be further improvement through changes to product pricing and pack sizes.
-
Indian Markets Turning Corner After Two Tough Years, Says Sandeep Tandon -
NDTV Profit Ignite 2026: Experts See Opportunity In Equities, Stay Bullish For Long-Term -
Buy Right, Sit Tight Does Not Work for Individual Stocks, Says Dinshaw Irani -
'Worst Is Behind': Quant MF Sees Market Bottom, Flags 'Extreme Euphoria' In Midcaps -
India's Mutual Fund Industry Could Become A $1 Trillion Opportunity, Say Fund Managers -
'Foreign Investors Are Baraatis': Raamdeo Agrawal's Take On LTCG Tax -
Stay Invested Through Market Cycles: Raamdeo Agrawal at NDTV Profit Ignite -
Ramesh Damani Remains Bullish On India For Next 20-30 Years, Sees Bargains Amid Market Weakness -
CAS Came After A Long Consultation Process: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFIT IGNITE -
Aim To Cut FPI Onboarding Time From Mth To Five Days: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFI
Varun Beverages' gross margin fell 334 basis points year on year to 53.1% in the September quarter. Management attributed around 300 basis points of the decline to higher packaging costs, including preforms, shrink film, closures and cans, following geopolitical disruptions.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
The company said these higher costs were fully reflected in the September quarter in both India and international markets. The impact on gross margins was around 300 basis points in India and 272 basis points in international markets.
ALSO READ | Varun Beverages Q3 Results: Net Profit Rises 14% To Rs 828 Crore; Declares Dividend Of Rs 0.50 Per Share
Price And Pack Changes Remain An Option
Executive Vice Chairman Varun Jaipuria said the beverage industry was discussing ways to respond if input costs remained elevated. These could include price increases, smaller packs or lower trade margins.
Varun Beverages has already reduced the size of its Sting energy drink bottle from 300 ml to 250 ml. Jaipuria said the company would review other products depending on market conditions and competition.
The company has not raised prices across its carbonated soft-drink portfolio. Jaipuria said improved realisations in India came from operational efficiencies, distributor consolidation, higher production at larger plants and lower trade spending.
The company also said a shift towards low-sugar and no-sugar beverages helped offset higher sugar costs. Their share of India's sales mix rose to 88% in the September quarter from 44% a year earlier, cushioning the impact of a roughly 16% increase in sugar prices.
Management said further margin improvement would depend on input-price trends and the pace at which it can implement changes to its product and pack mix.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
