Restaurant India News: PepsiCo and Varun Beverages Plan Entry into India’s Alcohol Market with RTD Drinks

In a move that could reshape India’s beverage landscape, PepsiCo and its largest bottling partner outside the US, Varun Beverages Ltd (VBL), are exploring a collaboration to distribute and sell alcoholic drinks in the country. Ravi Jaipuria, Chairman, RJ Corp, which owns VBL, confirmed the development, saying, “We are talking to PepsiCo if we can start with some of their ready-to-drink, low-alcohol products. They (low-alcohol products) are becoming large all over the world. There is a good scope here also (in India).”

The talks come shortly after VBL announced a distribution partnership with Carlsberg Breweries for select African markets. Globally, PepsiCo has already ventured into the alcoholic beverage space through collaborations with major spirits producers such as AB InBev and Diageo.

In Canada, PepsiCo partnered with Labatt Breweries, a subsidiary of AB InBev, to launch SVNS Hard 7Up — an alcoholic version of its popular lemon-lime soda. At launch, PepsiCo had remarked that “consumer demand for premium RTD (ready-to-drink) products is undeniable.” In the UK, the company also teamed up with Diageo to release a beverage combining Captain Morgan rum and sugar-free Pepsi Max.

Jaipuria clarified that the Indian talks are still at an early stage. “We are looking at it. We have free cash flows. We have to utilise our cash. We have to grow the business,” he told analysts during VBL’s post-September quarter earnings call. If finalised, this would mark the first time in over 30 years that PepsiCo and VBL would move beyond their traditional soft drink portfolio.

PepsiCo’s archrival Coca-Cola has already entered the segment with partnerships involving global alcohol brands. The company has teamed up with Pernod Ricard for Absolut vodka and Sprite, and with Brown-Forman for Jack Daniel’s and Coke. In India, Coca-Cola made its first move into alcoholic beverages in 2022 with Lemon-Dou, its global RTD alcoholic drink.

In a filing with the stock exchange, VBL stated that it intends to “test opportunities for expansion into ready-to-drink and alcoholic beverages, including beer, wine, liquor, brandy, whisky, gin, rum and vodka in India and abroad.” Jaipuria added that the company plans to expand “slowly and one by one” across countries. “We are starting with Africa and let’s see what we can do in India,” he said. “We feel it’ll be much easier for us to grow in other categories in markets where we have stable business.”

Industry executives point out that venturing into alcoholic beverages will require navigating complex distribution systems and regulatory requirements distinct from soft drink operations. “Also, with significant regulatory compliances needed, the companies will seed the market only gradually, despite it being a growing category,” said an industry expert.

According to a September report by Future Market Insights, demand for ready-to-drink alcoholic beverages in India is expected to grow at a compound annual growth rate (CAGR) of 6.0 percent between 2025 and 2035 — higher than the global average and second only to China. The report attributes this growth primarily to metropolitan cities such as Mumbai, Delhi, and Bengaluru, where rising disposable incomes and Western lifestyle influences are driving demand. “Urban millennials and Gen Z consumers are increasingly seeking convenient, premium alcoholic beverages for social occasions and home entertainment,” the report noted, adding that regulatory hurdles and taxation remain constraints but liberalisation supports long-term growth.

The timing of this potential move aligns with a challenging phase for the soft drink market in India. This year, major beverage companies, including PepsiCo, have faced slower sales due to a weak summer season and intensified competition from regional and new-age brands. As consumption trends shift, the proposed diversification into alcoholic RTD beverages could represent a strategic step for PepsiCo and VBL to expand into higher-margin categories and adapt to evolving consumer preferences in India’s dynamic hospitality and beverage sector.