VARUN BEVERAGES Q2 CONCALL: PLANS ₹1,000 CR INDIA CAPEX & $90–100 MILLION INTERNATIONAL CAPEX IN CY2027; TARGETS 2 LAKH+ NEW OUTLETS ANNUALLY, EXPANDS AFRICAN CAPACITY & PLANS CALPIS LAUNCH BY DECEMBER–JANUARY

• Long-Term Growth Outlook: Management expects healthy double-digit volume growth to continue across India and international markets, supported by low beverage penetration, distribution expansion and manufacturing investments. • India Volume Growth Outlook: Management remains confident about domestic growth prospects following 22.5% YoY volume growth during Q3 CY2026. • International Volume Growth Outlook: Management expects continued strong growth in Africa, supported by capacity expansion, new market development and increasing per-capita beverage consumption. • Margin Outlook: Management expects operating efficiencies, backward integration and improved realizations to help offset elevated packaging material costs. • Gross Margin Recovery: Management indicated that gross margins may have reached a trough under prevailing input prices, provided there are no further significant commodity or geopolitical shocks. • Packaging Cost Outlook: Management confirmed that the impact of elevated crude-linked packaging costs has been fully reflected in Q3 results across India and international operations. • Pricing Strategy: Management is evaluating price-pack changes, selective price increases, pack-size reductions and trade-margin optimization if raw material inflation remains elevated. • CSD Pricing: Management confirmed that no broad price increase was implemented in its carbonated soft drinks portfolio during Q3. • Sting Pack Size: Company reduced Sting's pack size from 300 ml to 250 ml to partially offset higher packaging and production costs. • Further Pack Changes: Management may review additional product pack sizes and pricing depending on commodity costs, competitive conditions and consumer demand. • CY2027 India Capex Guidance: Management expects approximately ₹1,000 Cr of capital expenditure in India, including a new greenfield beverage manufacturing facility in Rajasthan and additional production lines. • CY2027 International Capex Guidance: Management expects approximately $90–100 million of investment across international operations to increase manufacturing capacity. • Africa Capacity Expansion: Management plans additional bottling capacity in South Africa, Zimbabwe, Morocco, Democratic Republic of Congo and Zambia. • Morocco Expansion: Company is investing in additional capacity after facing production constraints during the peak beverage season. • Zimbabwe Expansion: Management plans to add manufacturing capacity to support sustained market growth. • Zimbabwe Supply Arrangement: Zambia's available production capacity will temporarily support Zimbabwe's demand until local capacity expansion is completed. • DRC Expansion: Company is adding production lines to increase manufacturing capacity ahead of the peak consumption season. • South Africa Capacity: Management expects sufficient capacity for the upcoming peak season following the acquisition and integration of Twizza. • International Peak Season: Management expects South Africa and DRC operations to benefit from the November–January demand season. • Twizza Integration: Merger of Twizza with Bevco became effective on August 1, 2026, with management expecting further operational and cost synergies. • Twizza Synergies: Management indicated that backward integration, procurement efficiencies and economies of scale have already started contributing to international margins. • Kenya Market Expansion: Company commenced beverage operations in Kenya during Q3 CY2026. • Kenya Product Launches: Company introduced two beverage brands, Bolt Up and Extreme Fizz, as part of its African market expansion. • Zimbabwe Mondelez Agreement: Company signed an exclusive distribution agreement with Mondelez for its portfolio in Zimbabwe. • Mondelez Revenue Opportunity: Management indicated that Mondelez's existing Zimbabwe business is approximately $11 million, with potential for expansion through Varun Beverages' distribution network. • Mondelez Expansion Outlook: Management will assess opportunities to strengthen the Zimbabwe business before providing numerical growth guidance or pursuing additional countries. • International Currency Outlook: Management indicated that currency movements were relatively stable during Q3, with no significant net positive or negative translation impact. • African Market Opportunity: Management expects long-term opportunities from low beverage penetration, population growth and increasing availability of packaged beverages. • Zimbabwe Market Development: Management highlighted growth in its Zimbabwe volumes from an earlier market base of approximately 35 million cases to nearly 75 million cases over six to seven years. • CY2027 Distribution Expansion: Management is planning aggressive expansion of both numeric and weighted distribution across India. • Annual Outlet Addition Target: Management expects to add approximately 2 lakh or more retail outlets annually to its distribution network. • Current Retail Reach: Company's Indian distribution network covers approximately 42 lakh outlets. • Distribution Productivity: Management expects route optimization, distributor consolidation and digital systems to improve coverage, delivery efficiency and product availability. • Distribution Network Investment: Management is working with distributors on additional vehicles, warehouses and distribution capabilities following improved CY2026 demand. • AI-Based Distribution Optimization: Company uses digital mapping and AI-enabled tools to optimize retail coverage, distributor territories, route planning and delivery efficiency. • Retail Outlet Mapping: More than 40 lakh retail outlets and associated distributor routes have been digitally mapped. • Distributor Order Management: Management highlighted centralized visibility into SKU orders, truck utilization, distribution frequency and brand availability. • Bandhan B2B Application: Company's retailer ordering application has approximately 5 lakh monthly retail users within six months of launch. • Digital Retail Expansion: Management plans further adoption and personalization of its B2B ordering platform to support repeat orders and retailer engagement. • Cooler Infrastructure: Company has deployed more than 10 lakh coolers across its distribution markets. • Cooler Monitoring: Management uses digital image collection and analytics to monitor cooler utilization, product availability and merchandising standards. • Calpis Launch Timeline: Management expects to be ready for a Calpis beverage launch around December 2026–January 2027. • Calpis Launch Strategy: Company plans initial launches in selected Indian markets with available production capabilities before considering a wider rollout. • Calpis Marketing Strategy: Management expects to finalize its marketing approach around the year-end planning cycle, with broader promotional activity potentially beginning in February–March 2027. • Premium Product Expansion: Management is expanding higher-value categories through products such as AdRush, Everest mixers and dairy beverages. • New Beverage Categories: Management expects continued innovation and premiumization to support revenue realization and product mix improvement. • Kiva Spirits Incorporation: Company incorporated Kiva Spirits and Company Limited to explore opportunities in alcoholic beverages, ready-to-drink products and related categories. • Ready-to-Drink Opportunity: Management highlighted industry growth of approximately 13–15% in RTD beverages and sees opportunities in India and Africa. • Alcoholic Beverage Strategy: Management intends to focus on premium and prestige-plus products rather than enter low-margin mass-market categories. • Alcoholic Beverage Partnerships: Company is exploring partnerships with international brands and is open to inorganic opportunities. • Kiva Investment Outlook: Management has not finalized investment requirements, partnerships or commercialization timelines for the new business. • Long-Term Diversification Strategy: Management expects the existing non-alcoholic beverage business to remain its largest operating segment over the next 5–10 years, while exploring additional food and beverage categories. • Sting Demand Recovery: Management indicated that Sting volumes are recovering following earlier regulatory uncertainty surrounding energy drink labeling. • Sting Market Position: Management expects the brand to retain a strong position in the energy drinks category as distributor and retailer confidence normalizes. • Low-Sugar Portfolio Strategy: Company continues expanding low- and no-sugar beverage offerings to reduce sugar cost exposure and align with changing consumer preferences. • Consumer Acceptance: Management indicated that low-sugar variants have been well accepted in approximately 85–90% of the markets assessed, while certain regions retain a preference for higher-sugar formulations. • Sugar Inflation Management: Sugar prices increased approximately 16% YoY, but management indicated that portfolio reformulation and product mix helped substantially offset the cost impact. • Recycled PET Strategy: Company is increasing the use of recycled PET through internal backward integration and external procurement. • R-PET Contribution: Management indicated that recycled PET accounts for approximately 25% of the relevant packaging mix. • R-PET Cost Advantage: Management indicated that recycled PET is currently cheaper than virgin PET, providing partial protection against crude-linked packaging inflation. • R-PET Capacity Expansion: An additional recycled PET facility is expected to become operational within approximately one to two quarters. • R-PET Mix Outlook: Management expects the share of recycled PET in packaging to increase as new capacity becomes available. • Packaging Cost Impact: Higher prices of PET preforms, shrink film, closures and cans resulted in approximately 300 bps of gross margin pressure. • International Packaging Impact: Management indicated packaging inflation had an approximately 272 bps margin impact in international operations. • Cost Mitigation: Management expects higher volumes, larger manufacturing facilities, lower-calorie formulations and procurement efficiencies to partially offset raw material inflation. • Trade Spend Optimization: Management highlighted rationalization of distributor and trade incentives as one contributor to improved realizations. • Non-Beverage Packaging Sales: Sales of preforms, caps and other non-beverage products increased approximately 104% YoY during Q3. • Non-Beverage Margin Impact: The higher share of packaging product sales reduced India's reported gross margin by approximately 100 bps because of their lower gross margin profile. • Non-Beverage Sales Strategy: Management expects to continue selling surplus packaging products where they generate incremental contribution and improve fixed-cost absorption. • ₹10 Price Point Strategy: Management does not plan to aggressively expand its ₹10 beverage portfolio because of unfavorable unit economics. • ₹10 Pack Contribution: Products at the ₹10 price point contributed approximately 0.2–0.3% of total volumes during Q3. • Core Portfolio Growth: Management expects dairy, energy drinks, carbonated beverages and packaged drinking water to continue contributing to long-term growth. • Domestic Market Competition: Management highlighted strong growth opportunities for both established and regional beverage companies due to India's low per-capita consumption. • Water Business Outlook: Management indicated that packaged drinking water has benefited from stronger competitive conditions as smaller players face higher packaging costs. • Q3 Consolidated Volume: Sales volume increased 28.7% YoY to approximately 354.4 million cases. • Q3 India Volume Growth: Domestic sales volume increased approximately 22.5% YoY. • Q3 International Volume Growth: International sales volume increased approximately 39.9% YoY. • Q3 Revenue Performance: Revenue from operations increased 33.2% YoY to ₹6,607.6 Cr. • Q3 EBITDA Performance: EBITDA increased 25.1% YoY to ₹1,426.71 Cr. • Q3 EBITDA Margin: Margin stood at approximately 21.6%, down 140 bps YoY. • Q3 Gross Margin: Gross margin declined 334 bps YoY to approximately 53.1%, primarily because of higher packaging costs. • Q3 Net Profit: PAT increased 13.5% YoY to ₹830.6 Cr. • Q3 Revenue Realization: Consolidated beverage realization per case increased 2.2% YoY, including approximately 0.5% improvement in India. • Q3 Product Mix: Carbonated soft drinks contributed 73.3% of volumes, packaged drinking water 21.9% and juice-based beverages 4.8%. • Q3 Depreciation & Finance Costs: Depreciation increased approximately 34.5% YoY and finance expenses increased approximately 53.5%, mainly reflecting the Twizza acquisition and associated financing. • 9M CY2026 Revenue: Revenue increased 23.3% YoY to ₹21,814.6 Cr. • 9M CY2026 EBITDA: EBITDA increased 19.9% YoY to ₹5,274.6 Cr. • 9M CY2026 Net Profit: PAT increased 15.5% YoY to ₹3,202.3 Cr. • Interim Dividend: Board approved an interim dividend of 25% of face value, with an indicated total payout of approximately ₹169.1 Cr. • Key Challenges: Sustained packaging inflation, geopolitical uncertainty, currency volatility, competitive price points, African capacity constraints, execution of CY2027 capex and commercialization of new product categories remain important factors.

VARUN BEVERAGES LIMITED

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