Can investors bet on Varun Beverages to beat Ambani in cola wars?

For Ravi Jaipuria, it’s déjà vu — but with a twist. The man behind Varun Beverages, PepsiCo’s largest bottler outside the US, thought he had seen the worst of the cola wars. Back then, it was Pepsi vs Coke, a classic global showdown. But 35 years later, there’s a new fizz in the fight — and this time, the rival is playing to win at all costs.Enter Campa Cola, backed by none other than Reliance Group. Since its relaunch two years ago, the homegrown brand has been turning up the heat — slashing prices, ramping up capacities and rolling out new SKUs (stock keeping units) like it’s on a caffeine high.For Varun Beverages, which has long enjoyed a dominant position in Pepsi’s India playbook, this isn’t just a price war —it’s a full-blown market share battle. A 200ml Campa bottle was launched at just ₹10 in Andhra Pradesh in March 2023, undercutting Pepsi’s ₹15 pricing. The pressure worked. Both Pepsi and Coke responded with price cuts of their own.So far, Varun Beverages has kept its cool — holding margins and even clocking growth. But in a “winner-takes-all” game, resilience will be tested. For Jaipuria, this isn’t just round two of the cola clash — it could be the most critical chapter yet. Investors, buckle up — the beverage business is bubbling again.“Campa Cola is picking up in the UP (Uttar Pradesh) market. They have good pricing and consumers are liking the product. I believe it will take the market share away from both Coke as well as Pepsi even in big cities. The Reliance brand name is powerful and that helps Campa Cola,” says Rizwan Hasan, a Campa Cola distributor from Phaphund, Uttar Pradesh. He feels that while Pepsi has launched its low-cost drinks, they are available in glass bottles which does not work for consumers.Despite strong fundamentals, Varun Beverages’ stock has fizzled — down 29% in the past year, underperforming the Nifty FMCG Index (-4%) and Nifty 50 (+6%). This, even as CY24 revenues jumped 25% to ₹20,007 crore and net profit rose 26% to ₹2,594 crore, with healthy Ebitda margins of 24%.But brokerages aren’t worried. Morgan Stanley, Emkay and Axis Securities are calling it a solid ‘buy’, seeing up to 40% upside. Their bet? Jaipuria’s battle-hardened playbook in cola wars 2.0. A cola war veteranBack in 1991, Ravi Jaipuria was bottling Thums Up for Parle Agro when he got a game-changing call. On the other end was Ravi Dhariwal, then head of PepsiCo India, urging him to ditch Thums Up and start bottling Pepsi instead. Jaipuria saw the opportunity — and took the leap.Fast forward to today, and Varun Beverages bottles over 90% of PepsiCo’s drinks in India. The company holds exclusive rights to manufacture and distribute various PepsiCo brands not just across India, but in countries like Zimbabwe, Morocco, Sri Lanka and Nepal. Around 75% of its volumes come from carbonated soft drinks, with the rest split between packaged water (18%) and energy or non-carbonated drinks (7%).But the cola turf is getting crowded again — and this time, the challenger is homegrown and deep-pocketed.Reliance Consumer Products, led by T Krishnakumar — the former Coca-Cola India head for 17 years — acquired Campa Cola for ₹22 crore in 2022. They have since revived other legacy brands like Sosyo and are going full throttle: cutting prices, boosting capacity and expanding their footprint.Jaipuria admits Campa Cola is shaking up the market. But he sees that as a good thing. “Pepsi and Coke came up together in the ’90s and grew with the market. That growth story isn’t over just because Campa is back,” he told analysts in May.“New entrants at lower price points are expanding the category. India is still underpenetrated. As competition heats up, growth will only accelerate. There’s enough room for everyone to grow,” he said.Of the roughly 12mn FMCG outlets in India, Varun Beverages reaches about 4mn. For Jaipuria, that means there’s still huge headroom for expansion — especially by adding more chilling infrastructure to push cold drinks in hot markets.Varun’s strength lies in its diversified portfolio. Beyond cola, the company sells energy drinks like Sting, Red Bull, Dr Pepper and IRN BRU, while hydration products are growing at a scorching 100% year-on-year.And while Reliance has been splurging on IPL ads to build Campa’s visibility, Jaipuria has stayed frugal. “We are already an established brand,” he shrugged. “Let the new guys do the spending.”He also believes that branding still trumps budget. Pepsi and Coke have decades of equity — consumers instantly recognise their colours and bottle shapes. Campa Cola, on the other hand, hasn’t cracked the code yet.As brand strategist Shivam Bansal put it bluntly in a viral LinkedIn post: “Campa Cola looks like a relic from the ’90s that someone forgot to redesign. No amount of marketing spend can fix bad design. You can’t price or advertise your way out of it. Branding and packaging matter more than ever.”For Jaipuria, the message is clear: this cola war may be new, but the fundamentals of winning it remain the same — brand, reach and strategy over splashy spending. The mighty challengerReliance has a track record of entering mature markets late —and then swiftly capturing leadership. It did this with Jio in telecom, launching in 2015 when Vodafone, Bharti Airtel and Idea dominated the space. By offering ultra-low prices and bundling services, Jio quickly won market share and locked in users. The same playbook is now being rolled out across Reliance Retail and Reliance Consumer Products.With Campa Cola, Reliance is targeting smaller towns with lower price sensitivity — an ideal testing ground before going big in metros. Manufacturing has been ramped up in places like Guwahati and Begusarai to support this regional push.Meanwhile, Varun Beverages had a strong Q1 FY25. Net sales rose 29% to ₹5,570 crore, driven by a 30% increase in volumes. Carbonated drinks led the growth (up 38%), followed by juices (22%), and packaged water (6%). The company also reported healthy international performance, especially in newly acquired markets like South Africa and the Democratic Republic of Congo. Margins in India improved by 110 basis points, though South Africa saw a slight decline to 22.7%.To meet rising demand, Varun Beverages plans to raise ₹7,500 crore through a QIP (qualified institutional placement) and has earmarked ₹3,100 crore in capex for CY25, with ₹900 crore still to be deployed. New production facilities and product expansion are on the cards as competition heats up.However, challenges remain. Return on equity (RoE) dropped from 33% in FY23 to 22% in FY24. As pricing pressure intensifies, both RoE and margins could come under strain, weighing on the stock.The outlookWhile some brokerages like Morgan Stanley see a potential 40% upside, others like Elara Securities are more cautious. Elara recently cut its CY26 and CY27 earnings estimates by 4% and 2%, respectively, and maintains an ‘accumulate’ rating with a target price of ₹555, valuing the stock at 50x FY27 earnings. Currently, the stock trades at a trailing PE (price to earnings) of 55x.So yes, Varun Beverages remains a long-term story — but investors should temper expectations. The 40% uptick analysts expect may be a tempting one after a 30% decline. While Campa Cola is still proving itself, Pepsi is a known and trusted brand. The cola market in India is large enough for multiple players, and with Jaipuria at the helm, Varun Beverages looks well-placed to stay on top of its game. But the peak valuation of 85x PE may well have been pricked by a reborn Campa.