- Varun Beverages plans to manufacture and sell PepsiCo's "Simba Munchiez" snacks in Zimbabwe and Zambia
- The snack food industry in these regions is projected to grow to $177 million in Zimbabwe and $156 million in Zambia by 2024
- Varun's expansion into snacks aims to further strengthen its presence and competitiveness against rival Delta Corporation
Harare- Varun Beverages, the second-largest PepsiCo franchise bottler globally, is venturing into the snacks business after a successful performance in the beverages segment.
The company, founded in 1995 and headquartered in India, has operations in India, Nepal, Sri Lanka, Zambia, and Zimbabwe.
According to a recent exchange filing, Varun Beverages plans to establish franchising opportunities for snack production and sales through its subsidiaries, Varun Foods (Zimbabwe) Pvt. and Varun Beverages (Zambia) Ltd.
Through these subsidiaries, the company aims to commence manufacturing, distribution, and sales of "Simba Munchiez," a popular PepsiCo snack brand.
Production is expected to start in Zimbabwe by October 1, 2025, and in Zambia by April 1, 2026.
This decision comes amid a promising growth outlook for the snack food industry in these regions.
The snack market is estimated to reach $177 million in Zimbabwe and $156 million in Zambia by 2024, with consistent growth anticipated.
The proposed manufacturing facilities are expected to have an annual capacity of around 5,000 tonnes, catering to various product variations to meet consumer preferences.
Varun Beverages entered Zimbabwe in 2018, selling Pepsi's soft drink brands such as Mountain Dew, Mirinda, and 7-Up. The company commissioned a $30 million plant in Harare in 2018 and invested at least $150 million in the country between 2018-2023.
In 2019, Varun’s aggressive market entry and discounted pricing strategy led to a decrease in Delta Corporation's market share, which fell as low as 35%.
Beyond beverages, Varun Beverages expanded its portfolio in 2022 by striking a deal to sell PepsiCo snacks, including Lay's, Doritos, and Cheetos, in Morocco.
The company's African operations currently account for around 15% of its revenues.
In the beverages sector, Varun Beverages remains the biggest competitor to Delta Corporation, with both companies now selling soft drinks at $1 for two.
However, in 2023, Varun Beverages became more aggressive, selling its 1-litre soft drinks for only $0.50, compared to Delta's $1 price.
In the snacks business, Varun Beverages will compete with National Foods, the largest food producer in the country, which makes popular brands such as ZapNax snacks, Cairns' Willards, and Popticorn.
Therefore, Varun Beverages' success will depend on its market penetration, publicity, quality, and product differentiation in the already competitive snack market.
Analysis
The entry of Varun Beverages is expected to intensify competition in the local snacks market, traditionally dominated by players like National Foods. This increased competition could put pressure on the profit margins of local producers, forcing them to focus on further product differentiation, quality improvements, and stronger brand building to remain competitive. Smaller local snacks producers may also become acquisition targets for Varun Beverages or other large players looking to quickly gain market share.
From a consumer perspective, Varun's foray into the market will bring greater product choice, more competitive pricing, and potentially higher-quality snack offerings as local producers adapt to the new competitive landscape. Additionally, consumers can expect to see more aggressive marketing and promotional activities, including discounts and other incentives, as Varun Beverages and the local players vie for market share.
Overall, Varun Beverages' expansion into the snacks business in Zimbabwe and Zambia is set to reshape the industry dynamics, posing both challenges and opportunities for local producers, while ultimately benefiting consumers through greater choice and more competitive pricing.
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