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VBL has acquired 100% stake in Twizza (Pty), which manufactures and distributes own branded NARTD beverages in South Africa. With this acquisition, VBL’s volume market share is set to increase to ~20% in the geography by CY27E (vs ~10% now). Among new regions, South Africa gains significance as its NARTD market is large and is ~40% of India’s market, albeit growing at a slower pace (~3% volume CAGR). Though the market is mature, we are confident of a market share-driven double-digit volume growth in the geography, basis VBL’s strong track record for turnarounds in Zimbabwe and Nepal (>50% share now). Portfolio-led pricing gain is also a big opportunity, given ~50% lower realization for VBL vs CCBA, a coke bottler. In addition, Twizza has backward integration lines at all its three facilities, and clusterbased cost synergies should aid profitability gains for its existing operations in the geography (~13% vs ~23% for VBL). The valuation of the acquisition (Rs11.2bn; 1.2x trailing sales vs ~7.5x for VBL) is attractive and is largely in line with historical acquisitions; it provides a 5x-6x value creation opportunity (3-4% of VBL’s M-Cap). VBL’s solid balance sheet (net debt-free vs ~1.0x D/E historically) allows it to pursue growth, presenting scope to capture such valueaccretive opportunities. We reiterate BUY on VBL while revising up our TP (Dec26E) by 7% to Rs615 (vs Sep-26E TP of Rs575 earlier), given consistent outperformance vs FMCG peers and value creation in international geographies.

SA market is mature:brand/product investments and GTM to aid share gains South Africa (SA) is a large consumption market (1,250mn cases in FY24; ~40% of the India market), albeit relatively mature with ~70% urbanization and high per-capita consumption of ~100Lpa (~4x India’s). The Twizza acquisition would lead to VBL’s volume share rising to ~20% by CY27E (vs ~10% now), improvement in its distribution/manufacturing strengths, and better scope for in-roads for the highrealization/high-margin Pepsico products in SA. Proof points of success in Zimbabwe/Nepal (>50% share now after starting from scratch) and VBL’s best-in-class execution strengths grant us confidence on the company gaining market share in SA too.

Africa − A large and long-term growth opportunity :PepsiCo’s low penetration in Africa and sizable mix of regional brands offer it a long-term growth opportunity in the continent. Per our estimate, PepsiCo’s bottlers cater to 40-45% of the African market (value terms) via its presence in 15 countries, while The-CocaCola-Company TCCC addresses the entire African population of >1.25bn (>50 countries). Besides TCCC, which has a healthy share in most African markets, the other competition is regional and likely to be beaten via improving the affordability, affinity, and availability of PepsiCo’s products, in our view.

PepsiCo’s wider product portfolio offers a key advantage Energy drinks contribute a healthy value share of ~14% in SA (vs <10% in India), which suggests strong demand for the category in Africa. PepsiCo has built a robust energy-drinks portfolio via the acquisitions of Rockstar and A Rush, along with its partnership with Starbucks/Bang in USA and through organic investments in Mountain Dew/Sting. We reckon that a broad-based, energy-drinks portfolio across price points should help PepsiCo gain traction in this category in SA as well.

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