Varun Beverages Limited (VBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Varun Beverages Limited earnings conference call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q1 2021 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Chairman of the company; Mr. Varun Jaipuria, Whole-time Director; Mr. Raj Gandhi, Group CFO and Whole-time Director; Mr. Kapil Agarwal, CEO and Whole-time Director; and Mr. Vikas Bhatia, CFO of the company. We will initiate the call with opening remarks from the management, following which we'll have the forum open for a question-and-answer session. Before we begin, I would like to state that some statements made in today's call may be forward-looking in nature and a detailed disclaimer in this regard is available in the results presentation shared with you earlier. I will now request Mr. Ravi Jaipuria to make his opening remarks.

Good afternoon, everyone, and thank you for joining us on our Earnings Conference Call. I hope you and your families are all doing well and staying safe during this unprecedented time. I would like to begin the call by providing you an update on the current quarter, following which Mr. Gandhi will take you through the financial performance. We have started the year 2021 on a healthy note, delivering progressive performance across parameters in quarter 1. The company registered a strong volume growth of 33% year-on-year. The macro environment in the quarter was largely supported as consumption was almost nearing a sense of normality. The result -- this resulted in a healthy volume growth of 34% year-on-year for our India business. The growth momentum continued in our international territories, registering a 26% year-on-year volume growth during the quarter. On the profitability front, we were able to sustain some of the cost optimization measures implemented during last year that enabled us to report steady EBITDA margins at 17% in quarter 1 2021. This is -- this, in addition to a higher operational leverage and increased profitability from our international operations, resulted in improved profits in quarter 1, with PAT registering a growth of 128% year-on-year. Further, the repayment of debt as well as lower average cost of borrowings translated into reduction in finance costs during the quarter. From a demand standpoint, while we saw a noticeable recovery in the domestic markets in quarter 1, the environment has evolved now with the onset of the second wave of COVID infections in the country. [Audio Gap] 2020, primarily on account of supported demand environment during the current quarter and lower days of Q1 2020, due to lockdown, in the later part of March last year. Our organic volume growth was 24.7% in Q1 2020 over Q1 2019, leading to a 2-year CAGR of 11.7%. CSD constituted 78%, Juice mix 7%, packaged drinking water makes 23% of total sales volume in Q1 2021. Realization per case improved marginally by 0.6% to a level of INR 148 in quarter 1 2021, led by a change in product mix with higher contribution from CSD and juice. Gross margin reduced by 294 basis points year-on-year to the level of 55.8%, primarily due to change in product mix and lower margins from our international operations due to water mix. There was a marginal saving in average sugar and PET prices in India during the quarter. EBITDA increased by 40.7% to INR 3,816.2 million in Q1 2021 from the level of INR 2,711.6 million in Q1 2020. EBITDA margin improved by 86 basis point to the level of 17% in Q1 calendar year 2021 as a result of sustained cost optimization measures that were implemented last year. Depreciation declined by 0.3% to a level of INR 1,347.2 million as compared to INR 1,351.2 million in Q1 2020. Finance costs reduced by 33.4% to $579.4 million due to repayment of debt as well as lower average cost of borrowing. PAT increased by 127.7% to the level of $1,367.6 million in Q1 2021 from INR 600.6 million in Q1 2020, driven by higher revenue improvement in margins and higher profitability from international operations. Overall, during the quarter, we have reported an encouraging performance. Our operational and financial profile remains solid and stable, and our focus remains on generating strong free cash flows over the coming years. On that note, I come to an end of the opening remarks and would like to now ask the moderator to open the forum for any questions or suggestions that you may have. Thank you.

[Operator Instructions] The first question is from the line of Vivek Maheshwari from Jefferies.

A couple of questions. First, can you just talk about the scenario in April, although you did touch upon it, but April, both in terms of from a supply chain perspective as well as from a demand perspective as things are on the ground right now?

Well, April, I don't think we had any issues in supply chain. We are -- because we were pretty well stopped, and there were some challenges, but we were very well covered. So we didn't have -- faced any challenges at all. And as far as supplies are concerned. I mean at the end of April, the problems have started. Some states have got lockdown. So there are some issues. But as of -- as till end of April, it was not any major issue which we faced. The question is going to be the lockdown, which are going to come now or what is going to come now, we are not very clear.

Sure. And Mr. Jaipuria, when you say supply chain, I'm sure manufacturing side would be far more under control. But let's say, on the distribution side, anything specific you are seeing in any of the states like Maharashtra, for example, or Delhi at the moment?

No. At the moment, of course, demand -- I mean supply has got a bit better because of the lockdown. So you are only able to supply X amount of store. Some stores are shut like hotels, restaurants have shut down. So again, it's the same scenario what happened last year, but much better than last year because last year was a complete lockdown. So -- and also, we learned a lot last year. So we've been able to manage it much better and the effect on sales is there, but it is not as bad as what happened last year.

Sure. Sure. And in the pockets of states where it is happening, is it fair to say that versus last year, the impact is rather more broad-based as against, let's say, rural, which did better after the lockdown was open?

But rural is still doing much better. Rural is even today doing much better even in the states or places where there is lockdown because the rural lockdown is never as severe as what the lockdowns are in the main cities. So even this year, we are finding that rural is performing much better for us. I mean if we look at the first quarter, the rural was flying for us. It was growing at 50% plus. So obviously, with lockdown, the growth can't be anywhere close to that. But rural is still doing well for us. So we are not finding that kind of challenges. As long as we are able to make the goods reach there, they're still performing.

Got it. Sure. The second one is on -- can you just talk about the input price environment, particularly on the sugar as well as PET? I know there is a there's a question mark on demand itself, but from a gross margin perspective, how are you seeing the next few quarters?

Well, sugar, I think, is very close to what it was last year. There is maybe a couple of points, it has gone up. But I think it keeps going up a couple of points and keeps coming down. So sugar is not a major issue. What has really gone up in the last couple of months is the price of resin. But fortunately, for us, we are covered for the year. So we had bought resin, and that's why our inventories are slightly higher. If we took that -- we saw that something as the oil prices were going up, China restrictions were happening. So we had covered ourselves, and we have covered practically for the whole season until maybe September, October. So we don't see any challenge for us this year.

Got it. Got it. And last small bookkeeping question. The tax rate in this quarter is 30%. On a full year basis, shouldn't it be closer to about 25, 26?

Vivek, this some provision made for -- which was earlier in [indiscernible] on the safer side. It's only the effect of COVID.

Okay. So on a full year basis, Mr. Gandhi, should we still be running at about 25, 26?

25, 26. That's right.

The next question is from the line of Anand Shah from Axis Capital.

Congrats on a good set of numbers. Just a couple of questions here. Just firstly on the quarter gone by, Jan to March, that we've delivered. I mean obviously, the volume growth even on a 2-year CAGR organic is also quite strong, double digit. So just wanted to get some color, what is driving this? Because it seems you're clearly outperforming most of the other categories in stable. So I mean is it, again, in terms of in-home consumption and the revived or out-of-home revived to that extent, which is driving this extra or in-home consumption is also showing similar growth. I mean any color you can give, a little bit granular that...

So a couple of things, which have done extremely well for us, apart from the regular business growing. One, our energy drink, which was launched a couple of years back, we rationalized the pricing last year. And that is actually growing at a few hundred percent actually. So that is the -- actually, my son is sitting and he's saying, we are actually growing at more than a 1,000%. So that is what is one, which is really pushing the volumes higher. Secondly, and it has been accepted by all -- most of the states in every outlet, and that is really flying out of the shelves. Secondly, we launched a new variant, which is to compete with the lemon drink of our competition with Limca, which was -- which is a Mountain Dew Ice, which is a lemony drink -- cloudy lemony drink, but has juice instead of just chemicals and carbonated only. So that has done extremely well since we have launched it, and we launched it this year only. So that -- -- these 2 things combined over and above -- our Tropicana juices have done extremely well, which we are -- which we have said we have started in a PET format, which was not available in the country. Slowly it took time for the market to accept it, and now it has been very well accepted. So apart from our regular go-to-market improvements and other things, these 3 specific categories, 3 products have really enhanced our overall growth.

Okay. Okay. This is great. So essentially, product portfolio expansion on the new launches side is leading this extra growth. Anything on distribution also, especially in Southwest? I mean you were looking to ramp it up post the acquisition...

As I said, our go-to-market has been improved and we are keeping on improving every day. So that will keep on enhancing our volume and are going to the number of outlets every day. But that is a slow process, and it will keep on happening. These are a couple of things, which helped us over and above what our growth would have come. So that's where we are seeing the growth coming much faster. And of course, we are -- our investments in Visi-coolers or keeping equipment were much higher. So I think overall, everything put together, has helped and we focused a lot on the rural market, which has also helped us...

April-May essentially would be contributing how much of your volumes overall for the year? It will be 1/3 or more?

Second quarter...

About 27%, 28%, Gandhi?

Yes. 27 is the second quarter. So these 2 months, maybe like 68%...

Africa is weak in this time. So about 27%, 28%, could be 1% up or down.

Sure, sure, sure. And has this at all changed the mix post your Southwest acquisition? Because I would assume they are less seasonal, so has it at all changed? Or is this a minor change?

No it hasn't changed. It changed because Mount is still our strong. So it will change slowly. It will start making maybe 0.5%, 1% difference. And over the next few years, it will show a big change.

Right. Got it. Perfect. And just 1 last bookkeeping question. If you can share the debt number, is it possible, I mean, to get -- for this quarter? I mean how much has come down? Because we've seen incremental Q-on-Q also touched down.

From last March quarter to this March, we have reduced it by INR 600 crores, even though we had a tough year last year, but we were still able to reduce our debt by more than INR 600 crores.

The next question is from the line of Percy Panthaki from IIFL.

Congrats on a good set of numbers. My first question is basically on the acquired territories from Pepsi in South and West. Now I understand after acquisition, there was a pandemic and that really disrupted initiatives that we wanted to take -- I mean we wanted to put in place. But if you could give some idea of what improvements you have put in place? And how that has helped you? I mean at least on a relative basis versus the industry growth, has your growth been faster? And if you could also share whatever data points on this in terms of increase in Visi-coolers or increase in distribution points, or any other metric that you deem fit will explain what you have done in South and West?

Well, I think you already see the difference, which is showing in the numbers in the first quarter of March -- January to March. And the improvement is constantly going on. Our biggest improvement what we needed to do was increase the number of outlets in South and West, which we were not servicing, unfortunately, during PepsiCo's time. And that has been done by adding more people, by adding more vehicles and by adding more Visi-coolers. So all 3 have been done and which has started showing results in the first quarter, and hopefully, will still show decent results in the second quarter. Second quarter, again, being pandemic, being hit again in the second, we can't be very sure what is going to happen. But it is still going -- it looks like it's going to be much better than last year.

So would you be able to give any flavor on how much different the growth in South and West is versus your other organic geographies? I'm not looking for an exact number, but any kind of sort of input you can give on that will be helpful.

I think overall, we were much stronger in North as it is. So our North was always growing faster. Now I think the South and East has also started -- has joined and growing at reasonably the same pace. Although we were hoping now South and West would grow faster. But I think, unfortunately, we've really not had 1 proper year to really do justice to that delivery. And we were hoping it would be this year. But again, there is disturbances. So it's very difficult to really say now -- west has been locked down for the last 1 month already. So very difficult to really assess the growth and what is the real business when things are so up and down. So I think we still have -- it is clearly showing improvement, and our go-to-market has drastically improved, and that is what has shown the overall results. Because otherwise, we would have never had this kind of growth overall. But to pinpoint exactly being difficult right now, our staff, some of it is there. Some is not there. So we are a little bit struggling right now.

Sure. My next question is on CapEx. If you could give some guidance on how much CapEx you would be doing for CY '21? And also for CY '22? And also within this, is there any international CapEx component? Or it's going to be mainly India?

Well, we are going to try and stick to what we have said, not more than our depreciation between the year because some CapEx we will have to add for certain production capabilities in certain territories. But we are not going for any major expansion, which will be higher than our -- what we have suggested to you, which is the depreciation part.

Okay. So this formula of CapEx less than depreciation applies for CY '22 as well, not just '21, right?

Final changes could happen depending on product mix, like our juice is doing extremely well. So we might have to expand little bit on juice because the Tropicana juice is doing extremely well. So those couple of changes might happen, but within very close to the framework of about the depreciation and not trying to go beyond that between the 2 years.

Okay. And lastly, sir, just 1 suggestion. It's not a question, but a suggestion if you could implement. Now you're almost synonymous with Pepsi Beverages, India. There are only a couple of small geographies which you don't cover. And therefore, apart from tracking your growth, it becomes very important for us to understand how the industry is growing and how your market share within that is moving. So going ahead, next quarter onwards, if you can share any industry growth data or market share data that would really be helpful to the analyst and investor community.

Okay. We will talk to Pepsi and try and get whatever is available and try and share with you.

The next question is from the line of Prashant Kutty from Sundaram Mutual Fund.

A couple of questions. Firstly, on the South and West side. Sorry for extending this a bit. You did highlight about that probably on a full year. But just wanted to understand from where we kind of acquired -- let's say, if you're talking about close to 140 million cases where we were or around there roundabouts, what would that number look like as of now, if one has to annualize that number? If you could probably help us in giving us that. We understand you said that you've not got a full year of operation.

See, how do you analyze that full number because the first full year we got was last year. And the last year was not really the correct year for us to look at it. And again, as we've started in the right format, now again, there are lockdowns coming. So how do you really analyze it? So whatever growth we were expecting -- I mean the same growth are not going to come. That is very clear because of lockdowns. To expect that business would be 100% normal is not going to be there. Although we feel the effect would be much lower to us, I think we have been able to get away with it for at least the first 4 months and coming forward also. Since we've got the experience now, we know how to manage lockdowns and manage what the issues were last year. And the lockdowns are weaker than last year. It's not 100% lockdown. I think we will do much better. But to exactly pull the numbers because I don't know what the government policy is going to be in the next couple of weeks.

Sure. Just want to understand, like you said, obviously, North has been a territory, and we continue to do well over there. But more at an industry level, this would be a fair assumption to make that otherwise also South and West would have been weaker, in general also? That's a fair assumption? Or that the industry itself would have been weak?

The whole country was growing. I mean the industry was growing. I mean I can't really tell you that we have grown faster. But I think the overall industry has done well.

To supplement what Chairman said, of course, the mix of South and West is lower than the East and the North because when we acquired that territory, that constituted 50% equally into our North and East share. Definitely, the mix in the countries, South and West mix is lower.

Sure, sure. So you spoke about the -- apart from your regular GTM initiative, you said the 3 products kind of helped a lot of growth. Any number to put up, sir, in typically, how much would have -- would they have incrementally added to our growth? Maybe either from this quarter's perspective or some of...

What I'm saying that peak season, when the real growth starts coming, is again got disturbed. So very difficult to say that what it would have added. I think you have to allow us to have one reasonable season for us to really give you what it has happened. But we definitely see the numbers improving. We have the numbers that are go-to-market. The number of outlets we are visiting is much larger. Now again, what happens is the number of outlets, some of them are shut down because of the COVID situation. So it's very difficult to analyze the whole thing. As soon as it opens up, yes, maybe in the next quarter or so, I'll be able to answer it very clearly.

Sure. No, I was just asking, sir, what was the contribution of, let's say, these 3 products to our growth? That's what I was just trying to check.

[indiscernible] Gandhi, otherwise, we can tell them off-line. I don't know if I have it handy to me.

Whatever I have, I can give you, Prashant. See, in the first quarter itself, there is a tremendous growth, of course, not as much as in North, but towards that. And as we have...

No. Products -- Gandhi, what 3 products I said, Tropicana, Mountain Dew Ice and Sting.

Yes. Sting...

[indiscernible]

Yes. Sting last year, we had grown about 2.5x over '19. And that volume, we have already covered more than that, in fact, in the first quarter of the current year.

See, Prashant. We grew 250% last year, even during COVID times over '19, in Sting. And that 250% growth, we have already covered in the first quarter. So the numbers for the full year have been covered in the first quarter.

I understood. I got it, sir. I got it. Sure. Just 1 more -- 1 last question, if I may, actually, sir. It's actually a very commendable effort that given that there's been so many lockdowns and given that last year -- until last year, we were always confirming -- generally, carbonated is considered to be a very impulsive and out-of-home consumption product. But I presume that there will still be a proportion of out-of-home consumption is still there. I think last year, if I vaguely remember, you told a number of some 40% was out-of-home consumption. That number has now come down to something like a 20-or-something, is what I heard around in one of your con calls. Just trying to understand that, even after that not being there, we have still kind of achieved a much better-than-expected organic growth rate. So can we actually say that once that also kind of comes through, the organic growth rate itself would increase versus whatever we were expecting earlier? Is that the way I look at it?

No, Prashant, that is clearly showing in the first quarter. No, I don't have to say once the things were normal -- like it was not 100% normal still you've seen a growth, which is unprecedented. The first quarter has grown at 34%. So that has only happened because the demand is there. It's just that our additional go-to-market, our additional putting Visi-coolers and the number of trucks we've added, the routes we have added, that is all starting to show. Clearly, it is showing. It can't be just normal organic growth of 33%, 34%.

The next question is from the line of Devanshu Bansal from Emkay Global Financial Services.

Congrats on a good quarter. Sir, I wanted to understand on the growth of CapEx front, how do we see the growth CapEx in terms of placement of Visi-coolers in CY '21? And question is to basically understand whether CY '22 can be clear as if COVID actually did not happen? Or there is going to be some impact that we are going to see of due to 2 weak years in between?

So '22, of course, we don't know, I mean, what is going to happen. But '21, I mean as far as Visi-coolers are concerned, most of the Visi-coolers have already been placed because the season has already started. So our placement of Visi-coolers for this year has already been done. And I'm not very clear on what you want in the second question. It's not very clear to me.

Sir, basically, I wanted to understand, as in -- if COVID had not happened, so basically, in CY '20 and '21, we would have placed a certain number of Visi-coolers. So still, with COVID, have we placed -- do we plan to place a similar number of Visi-coolers in the market or it would be slightly lower?

Visi-coolers, as I said, is placed before the season starts. So we have placed the Visi-coolers for this year, what we had to place.

Okay. And second question is on stand-alone other expenses front. So these are up about 50% in Q1. So what is the reason for this? Is there any one-off here?

I don't know. Gandhi, can you answer that, please?

Yes. Here are 2 parts. One, as the volume has gone up, the expenses, most of them are variable in nature. They have gone up. If the volume is up by 34%, naturally, the expenses have to be up by that. Apart from that, because we had a good profitability, we had reviewed all our asset base. There had been certain molds, which were not to be put in news because the size of the designs had changed. So we have taken a written of that. And the third thing is we had 1 glass line at Bazpur. And the mix of glass with COVID is coming down, and we were thinking that it may not be put to use for a little longer period. So we have taken a write-off of that also. These 2 things together, INR 15 crore, and then pro rata, the expense growth because of the volume growth will make good -- the other expenses comparable to any other year.

Okay. And one last, sir, from my side. In terms of international profitability, there has been a healthy improvement, largely led by our Zimbabwe operations. So are these margin levels sustainable going ahead in this year as well? And secondly, you also talked about some reversal of currency-related provisions in earlier calls. When can we start seeing these reversals?

I think the profitability of the international operations should keep on surprising you now on the very positive side every time. And hopefully, the quarter, which is going on, maybe we may start every quarter-on-quarter reversal of INR 127 crore reserve for the currency for Zimbabwe.

And this would be over how many quarters, sir? Any idea on that?

How the currency behaves. So I mean -- I can only say my foreign currency exposure is reducing. And to a great extent, the Reserve Bank of Zimbabwe has honored the commitment. And we -- every quarter, as the -- my foreign currency exposure will get reduced, pro rata, we will be taking this provision to the P&L.

The next question is from the line of Deepak Poddar from Sapphire Capital.

So I just wanted to inquire about your margins. Basically, earlier we were of the view that CY '21 should be a year where we should be seeing a normal kind of margins, like 21%, 20% that we have been doing. So is there any impact of raw material prices or the second wave? So how -- this do you changing somewhat may because of these reasons recently. So any kind of comment on those would be helpful.

Actually, your line was not very clear.

You were fast and too loud. Can you go through the...

Hello. Am I audible?

Actually your line is...

Mr. Poddar, if you can, take your speaker a little far from your mouth, please?

It's audible now?

Yes, sir.

Okay. Okay. So sir, just wanted to understand more on the margin front because earlier we were of the view that CY '21 is a year where we should be seeing the normal kind of margins. So is there any kind of change in view on that front because of the second wave or the recent prices that we have been talking about or the sugar availability? So any comments on those kind would be helpful.

Yes. As I said earlier also, that we have covered resin for the year, so we don't see any challenges for ourselves. And I think sugar prices are reasonably under control. So I don't see any challenges in our margin structure. So we'll have a different margin than what we've had actually.

Okay. So this 21% kind of the normal margins that we have been doing is what one should look forward to, right?

Well, that's what our margins have been. And I don't see any major challenge. But exact margin, nobody can say. It would depend on the volumes also, so.

The next question is from the line of Shirish Pardeshi from Centrum Capital.

Heartiest congratulations. I have 2 questions. If you take out the West and South acquired territory, in the core markets, your East and North, what is the growth? And the follow-up on that, if you compare the number with Pepsi coverage for West and South, what is the growth which you have achieved Y-o-Y?

North and East, the growth is maybe 4% higher than the mean of 34%, and that much is lower in South and West. Because there, we need a little more time, as have been said, to meet the corrections, which we wanted to. In spite of COVID, we have...

It's been a little faster for us than South and West. And so we see a lot of headroom available for us for South and West. As we keep on making the corrections, we will see huge growth coming out of there.

That's right. That's correct. Yes.

Okay. Let me just -- when I look at -- and when we spoke to channel partners, I think northern market is more of a juices market. So would you be able to help me understand this Tropicana growth, which falls under juices, the growth is fast -- I mean only Tropicana I'm talking about versus carbonated. Is the shift in consumer behavior happening from juices to carbonated drink or carbonated to juices?

I think it's still too small. I think Tropicana itself is doing well. But doing well still in the overall category is still very small. So I think till it expands, it can't really change the complete scenario because this -- Tropicana is not more than 3%, 4% of our volumes. So I think it's still a long way off, but the growth in juices is coming.

Yes, let me go ahead and answer that. This is Varun Jaipuria. Essentially, we've taken over the Tropicana business recently. And I think Mr. Jaipuria was sharing earlier that we've actually got into PET. So this is only being done in Tetra by Real. Real is the market leader. Now since we've taken over, we're expanding the distribution of this very rapidly, and our distribution is much more than any other company, especially Real. So Real, you will find more in major metros and Tier 2 trading cities. But in the smaller villages and all the other places, due to our strength of the retail distribution, we're able to take this product everywhere, especially, PET as well. So due to that expansion and the organic market, core markets also, we're able to distribute this product much highly in the growth of them.

Got that, Varun. Just 1 follow-up. While we speak to many channel partners, and I think what is the crux during this Jan, Feb, March period, I think consumer has clearly upgraded to from 500 mL to upwards say maybe a liter or 2 liter. So would you be able to share what kind of contribution upwards of 500 mL the company enjoys at this time in the PET bottle?

I think the main difference, I don't think we'll have the exact numbers handy, but you can offline get whatever you need. But the biggest difference what has happened is the in-home consumption because of lockdown last year, a lot of people have started consuming these products much more at home than they used to. And I think that is continuing. And that is what is partly showing in the growth, which has gone faster, is when the -- on-the-go market also started. The in-home consumption did not stop. So apart from the in-home consumption, which had increased last year, the on-the-go consumption also started, and combined both of them have made the market grow much faster. And that is why you see such huge growth of 32%, 34%.

The next question is from the line of Suvarna Joshi from Axis Securities.

Congratulations on a good set of numbers. Sir, I had just 1 question. Most of my questions have been answered. So you talked about rural market growing better or ahead of the urban market. But we have been reading in the newspapers that some Gram Panchayat's have kind of put a ban on sale of soft drinks and ice creams for the fear that it may spread COVID for known or unknown reasons. So do you think that this can challenge the rural growth if it becomes more stringent? That is part one. And part 2 to the question is, what would be the rural versus urban contribution? That's it from my end.

See, I don't think that this more news -- it's not really happened in any of the towns we really or the villages we really are serving. I mean we have not heard that seriously. So I don't think we should take that much -- maybe a couple of panchayats and some village have taken it and somebody has picked up in the media. So it still not happened, so. Let's hope to that and it stays like that. So I don't want to comment more on that. But it's not a serious concern for us at the moment. And rural is still growing much faster than the urban.

Would you be able to share the contribution of rural versus urban in terms of our volumes or revenues?

I don't think I have it handy. So the exact numbers, I don't have it handy. I would suggest if you can go on offline and just ask for it, we'll be able to provide you. I don't have it really, and I don't...

Sure, we'll take it offline.

The next question is from the line of Sivakumar from Unifi Capital.

Sir, 1 question with regards to the new territories of South and West. Are you done with the market level interventions, which you had in mind in terms of establishing new Visi-coolers or increasing the penetration?

Well, we keep trying and before we start something or the other keeps coming. So the same thing happened last year, before we could really do justice to the market, I mean, the complete lockdown came. And this year, of course, some of that, we were able to do so, which is what is showing the results. But again, 100% -- unless until you go through at least 1 full year of normal year, very difficult to say that have you been able to do complete justice or not? So we really are happy that we are seeing results in the positive side. But I think still there is a lot more to be done. And in the disruptive state unfortunately, you can only push people to a point and especially today's market [indiscernible]. There is a limit to what you can push the market. You have to let the natural things go by. And I think fundamentally, we are on the positive side. Things are improving. But if you really ask me, have we done everything we would have liked to do? No. And I think it would take a year or 2 years more, minimum for us, to really start feeling that we have done what we wanted to do.

Got it, sir. Sir, from your own sense of the markets now, you have seen them for almost more than a year, are these markets similar to the -- do they hold the same growth potential as what the North and East markets hold? Or these are more mature markets?

Well, they're slightly more mature than North and East because, one, the population is much higher in North and East. Second, I think the weather is much more different there. So it's a year-round business there. So -- and the penetration was there whereas in the North, especially in East, because of power situation, there was very low penetration in the rural market. And the per caps in East was especially so low. So I think the same growth are -- might not come in North and South, which can come in North and East -- in South and West, sorry, against North and East. But at the same time, for us, the growth will come because our share is very low there and because we were not going through the number of outlets we should go to. So as we penetrate and keep going to the right number of outlets, I think our growth will be also high for the next couple of years, and then they will start stabilizing. Has that answered your question or anything I missed out?

That's helpful, sir.

The next question is from the line of Nihal Jham from Edelweiss.

Sir, 2 questions from my side. You obviously alluded to the growth of Sting, which I would assume is more of an urban product portfolio. Specifically for your rural market, which has grown at 50%, are there any specific brands, which have driven this growth, if you could highlight that specifically?

Well, I think Sting has grown everywhere. So it's not an urban market drink. I think you are seeing more truck drivers and the youngsters all over the place having it. So it's not really an urban drink. It's been taken as a regular drink, all across, anybody who wants to get a kick wants to have it. And who could not afford Red bull at one time is now having kick Sting. And I think it's just expanding in a way which is out of proportion. So it's just that we see huge potential, and this will become an important part of our portfolio.

That's helpful. Would it be that -- you mentioned about launching the Tropicana PET bottles, also similar to your competitor. Is that also one of the key reasons for rural doing better?

But the only issue with Tropicana PET is our facilities right now is only 1 or 2, which we are expanding. As we keep expanding, that will also grow at a huge pace because we were practically running out of capacity in the 1 plant in the peak season this year.

That's helpful. Sir, just 1 last question. In the recently acquired South and West territory, you mentioned about reaching majority of the outlet. Just as I said, currently at present, what proportion of the outlets you think we are reaching? And, obviously, the related question would be that how much more can we increase our footprint by in that acquired job?

I think we are not even 50%, 60% there. We have a long way to go, my friend. So I think it will take us a long time to reach there. But we hope in the next 2 years to 3 years, we will be there. It's a long-drawn battle, it requires a lot of investment, a lot of manpower, Visi-coolers, so which we are putting at a reasonably fast pace. And we are improving our reach quite rapidly, but it will still take us at least, I would say, 2 more years.

[Operator Instructions] The next question is from the line of Sumant Kumar from Motilal Oswal Financial Services.

So you talked about the rural is growing at -- is growing. So can you talk about the semi-urban and urban growth and demand scenario over 15 to 20 days?

When you say 15 to 20 days, which item? Are you talking about the 14 -- the next 14 days, 15 days coming or...

I'm talking about, say, last week of April and coming this year?

It would depend, which city was lockdown and which was not. So wherever there is no lockdown, the business was happening fine. Wherever -- like the city like Bombay or Rajasthan, Jaipur and big cities, Delhi, there is -- the business has suffered. So it would depend on city to city. And as the lockdowns are more prevalent in the urban towns, it further takes a hit. That is what is creating an issue. Not really -- the market is -- I think the soft drink market is ready to take a big leap and jump, which is what has happened in the first quarter. But in-home consumption is happening, that's why you don't see the sales dropping so much, even though when there is lockdowns.

Also in semi-urban market because there is a partial lock down, so there is no much impact.

Pardon me?

So talking about semi-urban markets, there is a partial lockdown. So is there any demand impact?

No. There is some impact, but it is not as severe as the major towns. And rural, somehow, even though there are lockdowns in some places, it's not so effective because rural, I don't think, people really lock themselves down. So some of the rural market keeps -- is still open and is still buzzing.

Okay. And how is the ramping Pathankot facility?

So Pathankot, as I said, Tropicana is pretty well. We are up to our full capacity utilization. So we could actually do better maybe if we have more facilities, which we have to seriously look at now.

The next question is a follow-up from the line of Devanshu Bansal from Emkay Global Financial Services.

Sir, just wanted to pick your thoughts on the product pricing front. Recently, we took a price cut in December-Jan period on select SKUs. And I recently happened to see some Mobikwik cash back also on our larger packs. So what is the strategy? And how long do we plan to keep this pricing differential vis-à-vis the competitor?

There's no price differential between the competitor. Competition is -- and we are practically at the same price unless until they have some specific agenda or we have some specific agenda. So there's nothing else being differential to the competition.

So just to highlight, as in select 1.25 and 600 mL, I think we did some promotional packs at least in Mumbai.

That's the initiative we took last year, and it has really worked for us. So now it is up to the competition to decide what they want to do. So we have not -- I mean it's not the question of -- we believe that, that's the right price point for that category, and it has done extremely well. And especially when you got in-home consumption and people don't have so much money, it's right path for a family to be able to drink and have -- enjoy the product. And that has shown us huge success. So we don't want to change it.

The next question is a follow-up from the line of Suvarna Joshi from Axis Securities.

I just wanted to understand in the in-home consumption space, would the growth rates have been similar to what we clocked in Q4 of CY '20? Or they would have shown more improvement because of the season that we have been in?

No. Of course, seasonality makes a difference. I mean once summer comes, the consumption totally changes. But overall, as a percentage, if we look at, the in-home consumption has gone up drastically because a lot of people when they are staying home, not going out as frequently as they used to, even when the markets were open. And they've got used to -- because they've got used to staying home, they've got used to drinking at home also.

I think I just wanted to add is that the 1.25 liter, what we've done is, we priced at INR 50, and we were the first ones to do this in the industry. And since larger are not happening, that means people are not in major cities are going for 2 liter. They're going to 1.25. And looking at the price point is well what we're able to offer, that's really been on fire for us. So that's been one of a lead back in terms of getting the in-home consumption growth as well.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

Thank you. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarification or would like to know more about the company, please feel free to contact our Investor Relations team. Thank you once again for your interest and, and for taking the time to join us on this call. Look forward to interacting with you soon. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Varun Beverages Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.