As soft drink sales flatten, PepsiCo’s largest bottler eyes India’s growing RTD alcohol market, signaling a potential pivot in its three-decade partnership
A Strategic Shift Brewing
In a significant development, Varun Beverages Ltd (VBL) is in early talks with PepsiCo to jointly enter India’s alcoholic beverage segment. If successful, this would mark the first time in their 30-year partnership that the duo ventures beyond soft drinks.
- Ravi Jaipuria, chairman of RJ Corp (VBL’s parent company), confirmed the exploratory discussions around ready-to-drink (RTD), low-alcohol beverages.
- The shift reflects a strategic response to evolving consumer preferences and soft drink stagnation in key markets.
“We have free cash flows. We have to grow the business,” Jaipuria noted in a recent investor call.
Building on Global Momentum
PepsiCo has already been experimenting globally with RTD alcoholic products:
- In Canada, it partnered with AB InBev’s Labatt Breweries to launch SVNS Hard 7Up, an alcohol-infused version of 7Up.
- In the UK, PepsiCo collaborated with Diageo to create a cocktail combining Captain Morgan rum with Pepsi Max.
Similarly, rival Coca-Cola has tied up with Pernod Ricard (Absolut + Sprite) and Brown-Forman (Jack Daniel’s + Coke), already launching Lemon-Dou in India, a pre-mixed alcoholic drink.
India: A Market Ripe for Disruption
India’s RTD alcoholic beverages market is poised for growth:
- Future Market Insights projects a 6.0% CAGR from 2025–2035, ahead of the global average and second only to China.
- Demand is driven by urban millennials and Gen Z, especially in cities like Mumbai, Delhi, and Bengaluru.
- Consumers are seeking convenient, premium drinks for social and at-home occasions, reflecting Western lifestyle adoption.
“Premium RTD demand is undeniable,” PepsiCo had said during previous global launches.
Expansion Strategy: India and Beyond
While discussions are still exploratory, VBL appears keen to test waters slowly, starting with Africa (through its recent Carlsberg partnership) before diving deeper into India.
- In a stock exchange filing, VBL said it will explore beer, wine, whisky, gin, vodka, and more—both domestically and internationally.
- Jaipuria hinted at a phased approach, starting with markets where VBL has a stable presence, like parts of Africa.
“It’ll be easier for us to grow in other categories in countries where we already have a stronghold,” he said.
Regulatory Headwinds, but Room for Play
Industry insiders caution that the alcoholic RTD segment in India faces unique challenges:
- Licensing, taxation, and distribution regulations differ from soft drink norms.
- Alcohol cannot be mainstream advertised, limiting traditional marketing strategies.
- Nevertheless, liberalising norms and rising disposable incomes suggest a long-term growth runway.
“The RTD category is growing, but companies will move gradually due to regulatory complexities,” said an industry executive.
Soft Drink Slowdown Spurs Diversification
This pivot comes at a time when India’s soft drinks market is cooling:
- The 2025 summer was weaker than expected due to heavy rains, affecting peak-season sales.
- Additionally, new and regional competitors are chipping away at market share.
For VBL, expanding into adjacent high-growth categories could offer hedging and diversification amid changing beverage consumption patterns.
Varun Beverages is in talks with PepsiCo to distribute alcoholic RTD beverages in India, marking a possible expansion of their long-standing partnership beyond soft drinks. As urban demand for premium convenience drinks rises, this move could help both companies tap into India’s evolving alcohol market.
