Varun Beverages sold more drinks than ever in the September quarter, but rising costs ate into how much it kept from each sale. The PepsiCo bottler posted healthy growth in revenue and volumes for Q3 CY2026, even as expensive packaging and supply-chain disruptions linked to geopolitical tensions squeezed its margins.
According to the company’s exchange filing on Friday, gross margin slipped 334 basis points year-on-year to 53.1%, while EBITDA margin dropped 140 basis points to 21.6%.
Packaging was the biggest culprit. The cost of preforms, shrink films, closures and cans all went up during the quarter. A shift in the sales mix added to the pressure. Sales of non-beverage products such as preforms and caps more than doubled, rising 104%. Because these items cost more to produce, their bigger share of sales pulled India’s gross margin down by about 100 basis points, the company said.
Sugar was another worry. Prices rose roughly 16% during the quarter, but the company managed to soften the blow thanks to its steady move towards healthier drinks. Low- and no-sugar products made up 88% of its India sales volumes in Q3, double the 44% share a year ago. With less sugar going into most of its bottles, the jump in sugar prices hurt far less than it otherwise would have.
The timing matters. Sugar inflation has been a headache across the consumer goods sector, with industry estimates putting it at 18–20% year-on-year. For categories such as fizzy drinks, biscuits and confectionery, sugar makes up 10–16% of input costs, and how well a company copes depends largely on its product mix and its ability to raise prices.
Premium products helped Varun Beverages hold its ground. Realisation per case rose 2.2% at the consolidated level, supported by higher-value categories and new launches such as Ad Rush and Evervess mixers. In India, realisation edged up 0.5%, helped by careful discounting and smart price-pack choices.
The headline numbers remained strong. Revenue from operations climbed 33.2% to Rs 6,607.6 crore, and EBITDA grew 25.1% to Rs 1,426.7 crore. Net profit rose 13.5% to Rs 830.6 crore. Overall sales volumes jumped 28.7%, with India up 22.5% and international markets up a sharp 39.9%.
The company said that while packaging costs weighed on margins, better pricing and the scale benefits of strong volume growth helped make up for part of the hit.
For now, the story is a familiar one in the drinks business: demand is booming, but holding on to profits is getting harder.