Varun Beverages Limited ($VBL)

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, Mr. Poojari.

Thank you. Good afternoon, everyone, and thank you for joining us on Varun Beverages Q1 CY2026 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Chairman of the company; Mr. Varun Jaipuria, Executive Vice Chairman and Whole-Time Director; and Mr. Raj Gandhi, President and Whole-Time Director of the company. We will initiate the call with opening remarks from the management, following which, we will have the forum open for a question-and-answer session. Before we begin, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you all 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've had a chance to review our results presentation for the first quarter ended 31st March 2026. We are pleased to report a strong performance in the first quarter of CY 2026, supported by healthy demand, disciplined execution and continued progress across our markets. Consolidated sales volume grew by 16.3% in quarter 1 CY 2026, driven by volume growth of 14.4% in India and 21.4% in international territories. Revenue increased by 18.1% year-on-year to INR 65,742 million, and EBITDA improved by 21% year-on-year to INR 15,289 million. In India, demand remained encouraging during the quarter, supported by our wide distribution reach, strengthened execution and continued investments in manufacturing capability and chilling infrastructure. We undertook targeted initiatives to drive volumes and strengthen our domestic portfolio, including pack upsizing, selective price point, launches in identified markets to onboard new consumers and new launches in the Energy and Juice based drink segment. The facilities commissioned over the last year have stabilized well and are expected to support growth and enhance operating efficiencies going forward. Our international business continued to make steady progress. During the quarter, we consummated the acquisition of Twizza in South Africa through BevCo, strengthening our manufacturing footprint and route-to-market capabilities in Africa's largest soft drink market. The acquisition is expected to generate meaningful operational and commercial synergies over time. We have also entered into an agreement to acquire Crickley Dairy through BevCo, which will further strengthen our presence in South Africa, subject to regulatory and other approvals. Across Africa, we continue to build scale in snacks and deepen our presence in high potential markets, in line with our strategy of broadening the portfolio and strengthening consumer relevance. In accordance with our dividend policy, the Board of Directors has approved an interim dividend of 25% of face value, INR 0.50 per share, resulting in a total cash outflow of approximately INR 1,691 million. Looking ahead, we remain confident in the long-term opportunity across our markets, supported by favorable demographics, rising income, growing urbanization and increasing beverage consumption with adequate capacity, a diversified portfolio and a strong distribution network. We are all well positioned to deliver sustained growth and create long-term value for all our stakeholders. I would like to invite Mr. Gandhi to share with the key highlights of our operational and financial performances. Thank you very much.

Thank you, Mr. Chairman. Good afternoon, and a warm welcome to everyone joining us today. Let me provide an overview of the financial performance for the first quarter ended 31st March 2026. Revenue from operations, net of excise and GST, increased by 18.1% year-on-year to the level of INR 65,741 million in QY -- CY 2026. Consolidated sales volume grew by 16.3% year-on-year to the level of 363.4 million cases as compared to 312.4 million cases in Q1 CY 2025. This growth was supported by strong volume growth of 14.4% in India and 21.4% in international territories. At the consolidated level, net realization per case improved by 1.6% year-on-year, supported by improved realizations in international territories, primarily due to favorable currency movement. In India realization per case declined by marginal 1.5% primarily due to volume growth initiatives such as upsizing of packs and selective price point launches in targeting our kits to onboard new consumers. CST constituted 73.6% of total volumes, while noncarbonated beverages and packaged drinking water contributed 7.5% and 18.9%, respectively. In line with our focus on healthier offerings, the mix of low sugar and no sugar products increased to the level of 63% approximately of consolidated sales volume during the quarter. Gross margins improved by 62 basis points to 55.2% supported by early stocking of key raw materials despite an inflationary input environment. EBITDA increased by 21% year-on-year to the level of INR 15,289.3 million, with EBITDA margins improving by 55 basis points to 23.3%. In India, EBITDA margins improved by 112 basis points, supported by operational efficiencies from strong volume growth and improved gross margins. PAT increased by 20.1% year-on-year to the level of INR 8,787 million, driven by strong volume growth across both India and international markets. Depreciation increased by 30.9% on about -- on account of commissioning of 4 new plants last year in Buxar, Prayagraj, Damtal and Meghalaya. Finance cost increased by 18% primarily on account of the acquisition of Twizza in South Africa, while income on surplus cash in India has been accounted for under other income. During the quarter, we completed the acquisition of Twizza in South Africa BevCo at an enterprise value of are ZAR 2,053 million. In addition, BevCo entered into a share purchase agreement for the acquisition of Crickley Dairy Proprietary Limited at an enterprise value of approximately ZAR 238 million, including new -- net working capital, subject to regulatory approvals. These transactions further strengthen our presence in the region and support our portfolio expansion in adjacent categories. Overall, we continue to maintain a strong financial position supported by disciplined capital allocation, efficient working capital management and a robust balance sheet. With the capacities commissioned over the past year, backward integration initiatives and a strengthened distribution infrastructure, we are well positioned to support growth and drive profitability -- profitability through improved operating leverage across markets. Despite the inflationary environment arising from the prevailing geopolitical situation, we remain confident in our ability to near-term challenges through focused execution and supply chain agility, while sustaining growth and profitability. On that note, I have come to an end of our 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 comes from the line of Vivek Maheshwari with Jefferies.

A few questions. First, on -- Mr. Gandhi, where you ended on the geopolitical bid, can you just talk about the impact that you expect from a near-term perspective, especially on the packaging material and anything else that we should bear in mind across different markets because of higher oil prices?

Well, I'll answer this, Vivek. First of all, in our international markets, our effect will be in the raw material practically 0 to a couple of points maybe, because we are well stocked till even not this quarter, but the next quarter also. So we normally carry 6 months inventory in international, so our impact will be practically very low and -- which actually gives us an edge over our competition because I don't think competition carries anywhere close to 6 months. As far as India is concerned, we will have minor effect because, again, we were reasonably covered for this quarter. But for the next quarter, we will have some effect, which is -- but we are covering that by reducing our discounts and becoming more efficient, which is already starting to show and cutting our costs where it is -- wherever we can, and which is already showing in the first quarter results. And as long as the volumes continue, then I don't think there will be any effect on the bottom line. Does that answer your question?

It does. Beyond packaging material, anything else that we should be aware of any...

The only thing which can affect slightly, which you can't stock is, the transportation cost. And that there will be some effect, but that will be more than able to absorb it and it won't show any major issue on our P&L.

Got it. And Mr. Jaipuria, if you -- I know you have a very strong season upcoming. But do you also, let's say, worry about from a consumption perspective, if the higher oil prices feeds into -- in the form of higher inflation, does it imply some pushback from the consumers on the consumption of the products in general, not just your category?

I don't see it Vivek because consumption is very strong and we are going through a season, which is -- was terrible last year with all the rains and -- and with this, whether, I don't see any -- we are very happy with what is happening right now, what the sales growth are. And this quarter should be rather much better than what we've already had. More than that, I can't answer on the rain gods. So looking very positive.

Sure. And 1 -- another question on the point on the response that you just gave. When I look at your inventory buildup in the P&L, it doesn't look like to be very high compared to, let's say, what you have had 2 years back, for example, it is certainly higher than what it is last year. So just wanted to be sure the -- for India business, are you covered for most part of the season for this quarter or there will be...

We are completely covered for this quarter, and we have partly covered for the next quarter also.

In India business, also, Mr. Jaipuria?

Yes.

Okay. Nice. Okay. Lastly, on the realization bit, I know there had been a lot of concern in the last quarter. So I just wanted to I just wanted to speak about or discuss this point. Last quarter, the realization in India was down about 4%. This time around, it is 1.5%. I know the seasons are very different. The quarter context is very different. Can you just still elaborate on -- because I was just thinking in the context of like new launches that you have had done INR 10, higher volumes. This number has actually gotten better. So can you just elaborate a bit on this?

INR 10 is a very small part. We only use it where we feel it is necessary. So it would be less than 5% of our total volume or maybe even less than 2%. So practically, would not show we are using it only to make sure our distributors remain with us, and if they have a huge stress, then only we use it. So we are not really using INR 10, we have the products ready. If ever we need it, we can use it, but we are not using it. So INR 10 is not effect -- is not going to affect us. And also, as I said to you, once the season is reasonable, we have consolidated and cut some costs, and all our new plants have also come into effect further cuts our cost as all the new plants which are coming up are much more cost-effective and large where our production levels are much higher.

That's interesting, sir, because I always thought that you were already very efficient. So new plant angle I get. But my point is that will still not show up on the realization side, right, realization last quarter, minus 4% this quarter, minus 1.5%. So -- in fact, there were worries that this number could actually be worse than what it was in the December quarter. What explains this delta then?

Vivek, in fact, we have premiumized a lot of products [Audio Gap] growth of something like 60% in our dairy realization is 3x than the normal. So focus is everywhere to compensate from the system itself for major part. Secondly, the tax cut in the 22nd September on the also is going to help us. And although we had reduced the prices, but with the cost going up, it will not be paid by the consumers. So I don't think end of the day, they will be that much affected by this.

And also, as I said, we are running it more efficiently and making sure discounting is reduced a little bit.

Next question comes from the line of Abneesh Roy from Nuvama Wealth Management.

Congrats on a very good set of numbers. My first question is on aluminum cans. So you have tied up your inventory for PET and most of the packaging quite well. And I do understand that your salience to aluminum can is much lower than the other large national players. If you could tell us how -- is there any shortage which you are facing and here, what will be your sale in terms of percentage, aluminum cans?

Well, I think, first of all, our aluminum can sales is less than 2% for us. So it's very, very small. Secondly, we have tied up a reasonable quantity to more than cover our 2% volumes and maybe a little higher. So we will be able to get cans. They are slightly more expensive. But that again, as I said, wherever we are finding a large cost up, we are cutting discounts in giving less discounts in the market because there is shortage of -- for everyone. And the costs are going up for everyone. So if the demand is there, then we are making sure that overall, our bottom line is not getting affected.

And customers must be shifting, right? If there's a can shortage, there is a section of customers who will not sacrifice their consumption, right? They will switch to...

Absolutely. Absolutely. Absolutely. So if you can't get a can, then you go and go for PET or you go for glass, mostly PET.

Right. My second question is on water. So if I see the Reliance presentation which has come up, they are saying that they are now India's third largest branded water player. So if you could comment in terms of your standing within the top players, you have always been there. So I wanted to understand, is the market share changing? Second is the volume growth initiatives in carbonated have done quite well, which is visible in last 2 quarters, double-digit volume growth. In water at some stage, would you need volume growth initiatives there also?

No. We don't overpush water. We try and make sure our basic margins remain and we want to make sure our monopoly customers and our visi-coolers, which we are -- which is close to 1 million plus in the market, on those outlets, we make sure our water is serviced properly. But water is like a commodity. You can increase your sales as much as you want. You just have to give discounts, which we are not in the game of that's why we can sustain our margins.

Sir, last question. So in terms of energy drink portfolio, how has been done? And you had also mentioned in the previous quarter, in terms of expansion of that portfolio, including the scaling up of mid-priced address, if you could tell us how has Sting cans done? How has the overall portfolio done? And how has Ad Rush done?

So Ad Rush has done phenomenally well. Ad Rush, we are feeling some pinch of get the shortage of cans because we had not expected Ad Rush to do as well as it is doing. So there is slight pain there. And also, we've got energy drink, Sting in cans with our new classic Sting, what we call, which has been launched and is doing extremely well. And again, the demand is much higher than what cans we can get, but it's much better than what we had planned. So we'll be doing better than what we had planned, but still, there will be some crunch on that. But we have put the Sting Classic in PET bottles also, which is doing extremely well, but it has gone only in this in April only in the market. So you will see a big response of that in this quarter.

And sir, 1 last follow-up. Essentially, if I see this quarter results, all the FMCG results have been ahead of expectations. Obviously, yours, Nestle, Bajaj Consumer and then GST industries. So overall consumption, at least March quarter, are you picking up that overall trends have accelerated? Of course, now we have to take quarter to quarter but based on your understanding and what you are seeing in the results, would you say that there is an uptick?

There is definitely an uptick. I mean unless until the market is growing because there is Campa in the market, and they are very aggressive and they are growing the volumes in the market and even Coke is growing. So there is -- overall industry is growing. I don't know if we are growing faster, but Campa is definitely, as they are adding capacity, they are growing in the market. So definitely, market is growing at a huge pace. And I think as there is enough competition, everybody is more in the market, putting more chilling equipment, more outlets are being opened. So I'm very bullish on the Indian market, and I believe this should continue in double digits for the next 5, 10 years, at least.

[Operator Instructions] Next question comes from the line of Aditya Soman with CLSA.

So 2 questions. Firstly, in terms of new products, can you give us a sense of what new launches, how the new launches have done, particularly around Nimbooz, you mentioned that things have done well. as well as the milk-based beverages, if you can give us some sense of what the contribution is and how the growth has been? And secondly, in terms of summer now you've indicated that obviously, we've had a strong start. And is there any sort of risk to this in terms of unseasonal weather at any specific part of the country? Or do you expect summer this year to be very strong?

What we are hearing is summer looks to be very good now. The fear of rain coming. I can't answer you, but if the weather gods are not with us, which they were not last year. But overall, it's already a month has passed. So the trends are looking very good. If the weather remains like this, there's no reason why we shouldn't do extremely well. And our products are doing extremely well. Our Dairy is growing at 60% to 70%. Our Nimbooz is growing at 50%, 60%. Tropicana PET is growing at, I think, more than 100%. So all and the new energy drink, which we launched at mid-price, which is at INR 60, Adrenaline Rush is doing extremely well even our energy drink in the cans is doing extremely well, and the new launch of Sting Classic, which is the Golden Black has started only about a few weeks back, but the initial response is fabulous, and we feel it will become another Sting. Hopefully, and at the moment, is looking very positive. Anything else?

We have lost the line of the participant. We will promote the next in line, that is Devanshu Bansal from Emkay Global.

Many congratulations on a strong set of numbers. Sir, first question, I wanted to check in the base quarter, the rain disruption was across all the 3 months last year or it was more towards the second half of the quarter, if you could provide some color?

Well, it was mainly end of April to end of June, for sure, and even continuing to the third quarter. But for this quarter, I think it was mainly May and June was really disaster and April end was not great, fundamentally May and June.

Okay, okay. And there are some supply chain issues, right, so which might have impacted the opening of new plants for competition. On the other side, we have sufficient capacities. So I wanted to check, can we benefit from this or the competitive intensity that you were anticipating is on those lines itself?

I think competition is there, but I think there is enough market for everybody to take as I have said that every time. And as I said there, we are adding about close to 0.5 million and maybe more chilling equipment, which is between Campa, Coke and ourselves and plus the individual outlets are buying 400,000, 500,000. So there's 1 million chilling equipment, refrigerators going in the market on a year-to-year basis, that is expanding the market drastically. And I think it's only going to be whoever does good go-to-market and whoever can expand its distribution will win the game. We are trying to do that. We are expanding at about 300,000 to 400,000 outlets every year, and we are doing the same. Hopefully, this year, we might expand 0.5 million outlets. And I think that's what is giving us the growth.

You mean 0.5 million visi-coolers or new outlets?

Half a million new outlets, we don't give visi-coolers to everyone.

Okay. Understood. Understood. Last couple of bookkeeping questions. For Twizza and Crickley Dairy, what is the revenue and margin run rate that can be baked in for CY '26, if you could provide some color? And second one, what is the expected CapEx?

Well, I think what we have told the CapEx, what we have bought it at, which is what, Gandhi? Twizza, we have bought at INR 800 crores revenue. And we have paid INR 1,140 crores.

Sorry, I was checking for the consolidated CapEx for the company, sir, and the revenue and margin run rate for Twizza and Crickley Dairy in CY '26.

Well, our CapEx is not going to be very large this year because we have enough capacity. We are most probably going to only have 1 plant and which will be less than what is the -- so our CapEx will be less than INR 500 crores, INR 600 crores this year. It will be very low this year. We have enough capacity, except the new plant which we have bought. Does that answer the question?

Yes. Sir, just the revenue and margin run rate also for Twizza and Crickley Dairy?

Revenue was INR 800 crores for Twizza and about INR 160 crores for Crickley. About -- consolidated maybe close to INR 1,000 crores between the two. And margins, I think it's a bit too early. Let us take it over -- probably it's been 10, 15 days only or a month. So we are going to correct the margins. I mean, obviously, it was doing all right. But with the -- with the consolidation of both BevCo and tza, we have enough room, and they have got enough production capability, which we were struggling in BevCo, so which will help us give growth going forward. without putting too much CapEx.

Next question comes from the line of Anand Shah with Axis Capital.

Congratulations on a good set of numbers. Just a few questions. So firstly, can you give some granular details on how the international has grown? I mean you've grown almost 21%, which is quite strong. So it seems your South Africa business would have driven bulk of this growth, but if you can give some granular color there?

No, it's not only South Africa. Actually, all our international businesses have grown.

To your Zimbabwe and all, which were relatively, I mean, ex South Africa was growing in, let's say, mid-single digit to high single. Is that also now come back to double-digit now?

No, no, absolutely. South Africa is growing at close to EBITDA. Average is 21% International. South Africa is very close to what the international market is growing.

Okay. And ex of South Africa also would it be double digit?

Yes, yes. All international market. Otherwise, we wouldn't be able to average 21.4%. I think was [indiscernible] the only 1 which was weak last quarter and that was because of Ramazan being preponed.

Okay. Got it. Got it. And sir, on the food distribution, if I do the math between consol and stand-alone, it seems that branded has moved from -- I mean, Q1 last year was, of course, the start, so it moved from INR 40 crore, INR 50 crores to INR 120 crores. I mean last year, you highlighted INR 350-odd crores for CY '25 for food distribution in Africa. So how do you see that scaling up this year?

Anand, the food in the first quarter, this year is INR 112 crores, which was last year, INR 52 crores in the first quarter.

Okay. Okay. So you will consistently see further ramp-up as well, right, I mean, in this -- in terms of the run rate as well?

Absolutely because Zimbabwe plant has just come up last year, end of last year, -- so there is consolidation and growth coming.

Next question comes from the line of Harit Kapoor from Investec.

Most of my questions are answered. Just wanted to get your sense on market share. So on a very high base, we've done an exceptionally good number. Also, given the availability issues which you are able to tide upon, just wanted to get your sense about do you see opportunities in the market where maybe some of the other players have not been able to do as well as you in the current situation and that could play out in terms of at least near-term market share gains? How do you see the situation on ground right now?

I can't answer for other people. The only thing I can say, we are fully prepared and we have enough capacity that even if we get a 50% growth, we can comfortably do it without adding any capacity. So we are fully prepared. We have the raw material. We have the back end covered. So we only hope to go to give us the good weather and then we should get a good set of results.

Got it. And the second question is on distribution. So you do mention a certain number that you would like to do every year in terms of growth. So this year, calendar year, that a 8% to 10% type of addition number is the year we are panning out consistent with that?

Yes. That's what I have just said that practically, this year, we have added more than 10% outlet. So that's why we are hoping to add close to 0.5 million outlets with a base of about 4 million, so we are aggressively increasing our go-to-market, and that is what is actually giving us the results.

Next question comes from the line of Latika Chopra with JPMorgan.

Two follow-up questions to your earlier comments. One was on availability of raw material, particularly PET. You mentioned you have reduced sales of packing materials, so I was just wondering, have you started to see any visible signs of challenge for the smaller unorganized players in the market? And the second bit was in your assessment with this kind of inflation, which is going to come up, not necessarily for you but for the industry, do you see potential for price increases ahead as the broader industry price to offset the inflation impact?

Well, I see the B brands and the other players selling water. They are already they have not increased the price, but they have reduced the discounts. So that we are already seeing in the market because the costs are going up. And I feel that will further happen once I think the gasoline prices go up. So I mean, there will be some pain, but I think we are hopefully reasonably covered. I can't say fully covered because I don't know what the prices will be. But at the moment, for this quarter, we are covered with our raw materials now gasoline price, I don't know. So that is the only vulnerable part, and that is not such a large part in a scheme of the whole thing. And if it happens, it is higher, then we will further reduce our discounting to some level and make sure manage our -- and if our volumes are good, we are mainly concerned about our volumes if the weather remains like this, and we can grow at the same pace or better than this, then I am not worried about few pieces.

Understood. And initially, you had explained the difference of realization for India business at 1.5% decline from 4% in the prior quarter. This was on account of product mix and also lowering of discount sequentially. Assuming status quo and other things, but is 1.5% more like what we should build for rest of the year, assuming the current levels of discounts are maintained or because of seasonality, this number could use?

It might even become lower because it depends how strong the season is or it could remain there. But that gets more than covered, as I said, if the numbers start happening, our costs start reducing drastically. Our efficiencies go up. So this 1% or 2%, we can cover easily. If the numbers are right, we feel the numbers are going to be good this quarter.

Next question comes from the line of Percy Panthaki from IIFL Securities.

Congrats on a great set of numbers. I'm looking at the stand-alone P&L and you've done an 11% sales growth here on a fairly high base of close to 18% in the same quarter last year, which is like a 14% 2-year CAGR growth. Now if I look at the 2-year CAGR growth for the previous quarter, it was 8%, even for the last 4 quarter average, the 2-year CAGR growth was 8%. I'm using 2-year CAGR, so as to sort of offset any sort of high base, low base and seasonality and so on and get the underlying growth trends. So what do you think is the reason that the 2-year CAGR has accelerated so sharply from about 6% to 8% to 14% this quarter. Is it just the summer season being better? Is that the main part of it? Or do you think that the rate of market share gain by the new incumbent has probably slowed down and that is why the growth is more visible now? Or is there a third reason I'm not getting?

I think we have never had a 6% to 8% growth, except last year when the weather was really bad and India did not grow. We've been average growing at a CAGR of 23%. So I don't know where you are getting 6% to 8% growth.

Sir, like, for example, Q4 CY '25 was 6% on a base of 9%. So that gives me a 2-year CAGR of about 8%.

Percy, last year was the 1 exceptional year. That's what I'm trying to say. Otherwise, on an average, we've been always growing in double digits. And with some new acquisitions, we have grown at more than 20% but double-digit growth have been there. If you look at last 5 years, 10 years, it's only last year, India because of the weather, our growth was lower. That's the only reason. So we still believe and still we would say we definitely would grow in double digits going forward. For the next 5, 10 years, I don't see any challenges, but -- of course, our business is partly seasonal. So in case there's some abnormal rains or something happens that I can't answer you. But overall, CAGR will definitely be more than that.

Understood, sir. I was not talking only of last year. I was looking at 2-year CAGR, but anyway I'll take this off-line. And similarly, just wanted to ask on international business also. This quarter, there has been a significant acceleration in growth versus what we have seen in the past few quarters. Just wanted to understand the reason for that as well.

Again, everywhere, we are, when we take a new territory, it takes us a little bit of time to stabilize that territory. Last year, actually, we had just taken South Africa and DRC has just started for us. So some challenges and then with the Gaza war, we had some other challenges. So all those things put together last year was a tough year for us. But if we don't have external issues, our growth, we would still believe should not be less than double digits comfortably outside or in the country.

Understood, sir. And my last question is on the input cost. While it has been discussed in detail, and we know you have covers for 1 or 2 quarters, but if crude remains at $100 for several more quarters, at some point of time, you will either have to increase your prices or reduce your discounts or take the hit on the P&L. So my question was a little bit longer term, a few quarters down the line if the input cost scenario remains where it is. do you think you would be able to hold your margins? Or it is a fair assumption to say that maybe margins might take a hit a few quarters down the line?

It's very difficult to answer, but the only thing I can tell you, we might be the only company which is holding 6 months inventory. So I think other people will blink before I blink so I think we have to wait and see either everybody will take the prices slightly up to cover the cost or take a hit. I can't answer you that, but I don't see us taking that hit because I think other people have a much bigger issue than I have.

Next question comes from the line of Jay Doshi Kotak.

Congratulations on good set of numbers. My question is with upsizing of packs from 250 ml to 400 ml, are you seeing more consumption and maybe hence, do you expect industry volumes to be growing faster by a few percent points versus the earlier growth rate? Or are you seeing the consumers who are earlier buying larger INR 50, INR 35, INR 40 packs are now buying 2 units of INR 20 SKUs? Basically, is consumption going up in liters versus because of this upsizing of packs for yourself and industry? So that's question number one.

Well, the consumption is going up in liters as well as in numbers, both ways. Just if it goes up in liters is not good enough for us. We need the numbers to go up also and liters to go up also. So both are happening, and that is why you are seeing such large growth coming.

By any chance as a one-off, would you be able to give us some color in terms of what the broad growth at a unit level in terms of number of PET bottles or whatever, versus 15% volume growth, which is in liters?

So we are giving in 8 ounce, and that's what we quote. Otherwise, each size, we have to start measuring, some much smaller, some are much larger. So it becomes very difficult. That's why we give an 8 ounce, which is the best way to.

Second is with in -- got it. Second question is with upsizing of 250 ml to 400 ml across the country across portfolio. Do you expect any more sort of changes in your pack price architecture? I heard you comment earlier that there is no need for you to actually step up focus on INR 10, INR 15 price point. But is there any pack price architecture change that is left in your view?

Well, I don't want to say something, but only thing is we will see what the market requires and we will play with that. And I really -- if I had something in mind, I would not be able to divulge it anyway because that's not good for us.

Understood. And last thing on profitability, should we expect that PET inflation aside for the crude-led inflationary thing aside, should we expect that you broadly be able to maintain your margins in India business so that 50 -- 400 ml upsizing has actually not do you only had any meaningful or any impact at all on your India business margins? That is what we see in March quarter, but is this something that we can extrapolate at a full year level? PET inflation, I can understand that you can...

No, but a full quarter, we had the sizing. So whatever effect had to come has already come.

Costs have been absorbed by the...

So our volumes and our efficiencies have absorbed all that. And as I said, our larger plants are much more cost efficient and our cost of production is considerably half of what we were doing in our smaller plants. So scale is what is in the strength and cost reduction and which is what is playing with us. So we are able to consume some minor cost upsides, which we can easily absorb.

Next question comes from the line of Robert Marshall Lee with Kusana Capital.

So just a couple of simple questions. Firstly, just in terms of the impact on the new plants, is there any kind of material impact from utilization rates? Where are you running the new plants? Do you have any fixed cost leverage there? And secondly, just in terms of global sugar prices have been falling. Is there any impact on the Indian market at all?

There is some, sugar prices are reasonably consistent here. Fortunately, they have not gone up, which is the positive side of the international prices. And in the international market, definitely, we had a gain of sugar costs. So wherever we are -- international prices have come down significantly. But in India, it's been reasonably constant Fortunately, it's not gone up.

And in terms of utilization of new plants, just is there any kind of material impact there?

Utilization is definitely helping. As our volumes are going up, the plants are getting more utilized and the bigger plants that we are using more, and we have shut down a couple of our real high-cost plants, which were very small and which were very old. So overall efficiencies are helping, cost-cutting is helping. And looking at the situation, looking at the costs, which are going to go up, we have tried to curtail our costs and make sure -- run it a bit more efficiently than we would have, I guess.

Next question comes from the line of [indiscernible] with Systematics Group.

Yes. So I just have a quick question on the sales mix of the new products as well as the...

Mr. Jain, there's a lot of disturbance in the background. Can you come to a place where there is less background noise.

I was just asking the sales mix currently as well as the sales mix, which is expected in a few years down the line, especially with the traditional Coke and new alternative starting or Gatorade?

I'm not getting your question properly. I mean our mix is this keeps changing on a year-to-year basis. Energy is definitely becoming a big part of the portfolio. And Dairy is becoming a big part. Hydration is becoming a big part. But this will keep changing year-on-year. Very difficult to say the new Gen Z keeps on asking for something new all the time. And we have everything to support whatever is required. So because it's the same machines to produce it. So it's just changing the flavor or changing the packaging.

And also, like you said that you are opening a new plant, and they are much more efficient than the previous one. So like what is the expected payback period for these?

Payback period for what?

Of these plants.

I mean, we need capacity. And so one, it's a different I mean we have to open plants, otherwise, I can't keep on increasing my sales. If my sales are going up, they have to be backed up by -- the only thing we are saying is now we are not opening smaller plants and our plant efficiency being larger plants is much better than what it used to be in the older plants. Just to give you an example, if we had 200 bottles per minute line, now we have got 1,000 bottles per minute line, and the manpower is the same. So it's 5x more production, but using the same manpower. So those are the efficiencies I'm talking about.

Okay. I was asking for the payback period.

It depends on -- it's very difficult to answer for each plant. Normally, we work on a 3- to 4-year payback.

Ladies and gentlemen, that was the last question for today. We have reached the end of question-and-answer session. 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 clarifications or would like to know more about our company please feel free to contact our Investor Relations team. Thank you once again for your interest and support and for taking the time out to join us on this call. Look forward to interacting with you soon. Thank you very much.

Thank you. On behalf of Varun Beverages Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.