Varun Beverages posts US$696.8M revenue as packaging costs cut margins

INDIA – Varun Beverages has reported revenue from operations of ₹6,607.56 crore (US$696.8 million) for Q32026, a 33.2% year-on-year increase, even as higher packaging material costs contracted the EBITDA margin by 140 basis points to 21.6%.

Consolidated sales volumes increased 28.7% to 354.4 million cases from 275.3 million cases a year earlier, driven by a 22.5% rise in India and a 39.9% surge in international territories. 

The international figure included 15.3 million cases contributed by the acquisition of Twizza in South Africa during the quarter. Profit after tax rose 13.5% to ₹830.59 crore (US$87.6 million), while EBITDA increased 25.1% to ₹1,426.71 crore (US$150.5 million).

Packaging Costs Drive 334 Basis Point Gross Margin Decline

Gross margin declined 334 basis points to 53.1%, primarily due to higher packaging material costs including preforms, shrink films, closures and cans, driven by geopolitical supply chain disruptions. 

On the earnings call, management noted that packaging cost contributed approximately 300 basis points of pressure on gross margin. 

Sales of non-beverage products such as preforms and caps in India increased approximately 104% during the quarter, and given their higher cost, these products had an impact of approximately 100 basis points on gross margin in India.

Sugar Price Increase Offset by Low-Sugar Portfolio Shift

The impact of around a 16% increase in sugar prices was largely offset by a higher proportion of low-sugar and no-sugar products in India, with their share increasing from 44% in the third quarter of 2025 to 88% in the third quarter of 2026. 

Despite supply chain disruptions and input cost pressures, EBITDA margins in India remained broadly stable year-on-year during the nine-month period.

Nine-Month Revenue Rises 23.3%

For the nine months ended September 2026, revenue grew 23.3% to ₹21,814.55 crore (US$2.3 billion), EBITDA rose 19.9% to ₹5,274.58 crore (US$556.2 million), and profit after tax increased 15.5% to ₹3,202.30 crore (US$337.7 million). 

The company declared an interim dividend of ₹0.50 per share, entailing a total cash outflow of approximately ₹169.10 crore (US$17.8 million). 

Management said improved realisations and operating leverage from strong volume growth helped partially offset packaging cost pressures.

Subscribe to our email newsletters that provide busy executives like you with the latest news insights and trends from Africa and the World. SUBSCRIBE HERE