Varun Beverages Ltd (VBL), PepsiCo’s India franchise bottler, was in focus on Friday after Jefferies retained its ‘buy’ rating for the stock despite the buzz around Reliance Industries' entry into the carbonated beverages segment with the ‘Campa’ brand.
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“We continue to rate VBL as ‘Buy’ and see strong (summer) season as a near-term share price trigger,” Jefferies said in a note.
The firm gave a price target of Rs 1,540 on the stock, implying a potential upside of 18 percent from Thursday’s closing price.
On Thursday, a Business Standard report said that Coca-Cola has cut the price of its 200ml glass bottle to Rs 10 from Rs 15 earlier in certain states, as a reaction to Reliance’s foray into the segment. After the news, shares of Varun Beverages closed 3 percent lower on Thursday on fears of a price cut.
However, Jefferies said in the report that the news flow on price cuts by Coke was ‘unsubstantiated’ as channel checks indicate otherwise.
“Our checks indicate that the lower prices were effected almost a year back and were in the normal course of business,” the report mentioned.
Jefferies also noted that despite deep pockets, industry interactions indicated that a ramp-up was not easy in the space, given supply-chain challenges. “RIL will take time and, hence, is unlikely to be a medium-term threat,” it said.
Reliance re-launched ‘Campa Cola’ in March 2023 after acquiring the brand in August 2022. It has started with three flavours and five sizes, in the Andhra Pradesh and Telangana markets, with plans to roll out pan-India over time.
Campa’s 200 ml PET pack is priced at Rs 10 compared with Rs 20 for Pepsi/Coke’s 250 ml PET bottle. However, Pepsi and Coke also have a Rs10/200 ml glass bottle as access packs across most markets.
Shares of Varun Beverages are trading 0.3 percent lower at Rs 1,305 after cooling off from the day's high.
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