Varun Beverages stock gets a '7 Up' on Twizza acquisition

ET Intelligence Group: The acquisition of Twizza, a South African non-alcoholic beverages brand, will help Varun Beverages (VBL) to double market share in the region to about 20% by 2027. Analysts have raised target prices of the stock by around 7% citing consistent performance in the domestic market and long-term international expansion potential.

VBL, a franchise bottler of PepsiCo, is expected to achieve cost synergies through the ₹1,119 crore acquisition announced on December 21. Twizza, incorporated in 2003, is engaged in the business of manufacturing and distribution of own branded non-alcoholic beverages in South Africa. Its turnover grew 4% annually to ₹901.9 crore between financial years ended June 2023 and June 2025.

Analysts anticipate a portfolio-driven pricing uplift, presenting a significant opportunity given that VBL's realisations are nearly 50% lower than those of Coca-Cola Beverages Africa, a coke bottler in Africa. Twizza's fully integrated backward supply lines across its three plants, coupled with cluster-based cost efficiencies, are expected to enhance profitability in its existing operations within the geography. In addition, the acquisition will strengthen manufacturing and distribution of VBL in the region thereby enhancing penetration of PepsiCo products over the long term.

According to analysts, energy drinks form 14% of South Africa's beverage value share as against less than 10% in India, signalling strong demand. PepsiCo's portfolio including Rockstar and A Rush acquisitions, partnerships with Starbucks/Bang, and investments in Mountain Dew/Sting positions it to capture this segment through various offerings across price points.

Since, the company is net debt-free it offers opportunity to pursue growth, presenting scope to capture value accretive opportunities, stated Emkay Research in a report. It has reiterated 'buy' rating while raising the target price by 7% to ₹615, a 27% upside to Monday's closing of ₹484.4 on the BSE, citing consistent outperformance against peers and long-term international expansion potential.

"The profitability metrics of the acquisition are not known yet. However, back of the envelope calculations suggest addition to consolidated earnings per share (EPS) from the acquisition could be in low single digits," said Asit C Mehta Investment Interrmediates in a note. The broker has a 'buy' call on the stock with a target price of 615.

The stock has gained 7% since October 29 when the company declared the September quarter financial numbers thereby reducing the full calendar year fall to 24%. The stock came under pressure in 2025 amid rising competition and extended monsoon that affected demand for soft drinks.