In business, as in life, it’s lonely at the top, but not for long. Sooner or later, someone comes knocking.
For Asian Paints, the knock came in February 2024.
For Varun Beverages, it came in October 2024. Both companies had gotten very comfortable. Too comfortable. The kind of comfort that makes you believe moats are permanent. That market share is destiny. That margins are immune to gravity.
Asian Paints had spent decades building an almost insurmountable lead. With over 50% of the decorative paints market, it wasn’t just a brand, it was a category.
In a country where repainting a house is still a festival-time indulgence, Asian Paints was omnipresent. Its supply chain, often compared to FMCG majors, ran like clockwork. Investors referred to it as a compounding machine.
But then came competition.
Not from the usual suspects, Berger or Nerolac, but from a new breed: JSW Paints, Birla Opus, and Pidilite’s Haisha. Deep-pocketed, distribution-hungry, and aggressive. Suddenly, Asian Paints wasn’t the only one who knew how to build dealer loyalty.
Margins cracked. Volume growth slowed. Realisations declined.
For the first time in decades, the company saw a sharp dent in both topline and bottom line. Revenues fell 4.5% YoY in Q4FY25, EBITDA dropped 20%, and margins contracted a steep 300 basis points. PAT declined over 30%.
The company has modest growth outlook for FY26, with EBITDA margin at 18–20%. Demand is to remain weak, especially in urban areas, though rural and Tier 3/4 markets fared better. While monsoons, tax cuts and soft inflation may help, competitive intensity is high and the current pricing aggression is likely to last some more quarters.
After a long time, Asian Paints looked vulnerable.
When Dominance Becomes the Risk
Across the aisle in the consumer universe, Varun Beverages, PepsiCo’s largest bottler outside the US, was having its own reckoning.
Until October 2024, the narrative was clean.
The penetration was rising and soft drink volumes were surging. The new categories like energy drinks and hydration were gaining traction. Varun Beverages was adding visi-coolers by the thousands and entering new territories with confidence.
Then came the headlines: Campa Cola was back, backed by Reliance this time. Regional players were flooding the Rs 10 price point.
Beverage shelves started looking a little too crowded. This begged the question: can Varun defend its margins when everyone wants a piece of the pie?
Varun’s Q1CY25 numbers, though, didn’t suggest any panic. Volumes were up 30% YoY, driven by organic volume of 15.5% and and consolidation of South Africa & DRC in the current quarter. Revenues grew by 29%. EBITDA margins were flat YoY.
These aren’t numbers of a company under siege.
But the market doesn’t deal in numbers alone. It trades in expectations. And those expectations have started to reset.
Growth Without a Strategy Is Just Luck
The parallel with Asian Paints is too strong to ignore. Both companies command leadership and operate in high-growth consumption segments. Both have historically boasted margin stability and return on capital that most manufacturing businesses can only dream of. Both, until recently, were darlings of institutional portfolios.
And now, both are under pressure. Different stages of the curve, perhaps. But similar inflection points.
Asian Paints, of course, has seen this movie before. In the early 2000s, it fought off ICI, Berger, and Nerolac not by slashing prices, but by building what would become India’s best-in-class supply chain. It turned inventory forecasting into an art. It tracked colour preferences by PIN code. It used data when the rest of India still swore by gut.
But what do you do when the competition isn’t just about distribution? When the enemy has both capital and time on its side?
That’s the question Asian Paints is grappling with now. And the question Varun must prepare for.
Yes, Varun’s category still has room to grow. Per capita soft drink consumption in India is still a fraction of global averages. Distribution is still being built out. With only 4 million of India’s 12 million FMCG outlets currently covered, the company is ramping up cold-chain capacity, widening its retail footprint and sharpening its product mix to drive deeper market penetration.
It is also driving volumes by improving affordability. And expanding beyond carbonated drinks, into hydration, dairy and snacks.
But at some point, category growth will slow. Penetration will plateau.
And then, the competitive edge will no longer be access, it will be experience.
Meanwhile Asian Paints is investing heavily in vertical integration. From Vinyl Acetate Emulsion (VAE) plants to white cement JVs, it wants control over quality and cost. It’s spending Rs a lot over the next three years. It has the balance sheet to do it.
Varun, to its credit, is also in strong financial shape. As of March 2025, it is net debt free. Its expansion is funded through internal accruals. Its cold chain is growing. It is readying for the long haul. Its expansion is funded through internal accruals.
Moreover, the heavy lifting in capex is largely done.
After a phase of aggressive plant building, including new facilities in Kangra, Prayagraj, Bihar, and Meghalaya, VBL now enjoys peak capacity. This means capital intensity may ease even as revenues rise, translating to better free cash flows.
The Market Isn’t Your Friend, It’s a Voting Machine
But will that be enough?
Asian Paints has discovered the hard way that defending a moat requires constant reinvention. Brand, distribution, pricing, innovation, none of them stay defensible forever.
Varun Beverages still has time. But time isn’t a strategy. It’s an opportunity.
The market, for now, is watching both with suspicion. One is trying to protect its crown. The other is trying to make sure it doesn’t lose its throne before it’s fully seated.
This isn’t the end for either of them. Far from it. But the message from the market is clear: the age of easy dominance is over. The next leg of growth, for both paint and pop, will be earned, not inherited.
Because eventually, someone always comes knocking.
Where does that leave us investors?
This isn’t just a battle of brands or market share. It’s a test of execution. For investors, the lesson here is as much about narrative risk as it is about numbers.
Varun’s growth story is intact. But scale brings challenges ranging from managing a wider footprint to sustaining momentum across verticals and regions. As the company pushes deeper into markets, expands categories and digests its recent capex cycle, the risk of execution missteps rises.
Yes, the peak phase of investment in manufacturing and logistics is behind it. That offers comfort. But the next phase requires balancing growth with efficiency, especially as the competitive landscape gets noisier.
Asian Paints offers a cautionary tale here. For years, the stock was priced for perfection, until it wasn’t. The company didn’t falter fundamentally, but expectations ran ahead of delivery. When competition bit into margins and growth slowed, the market reacted sharply.
Varun isn’t there yet. But with the stock still commanding a premium, trading at over 55.6x earnings valuations offer little comfort. And such momentum assumes flawless execution. That’s a high bar.
In a tough consumption environment, where discretionary spends are uneven and input cost benefits are tapering, steady delivery becomes more important than ever. Investors would do well to watch not just the growth numbers, but the quality of that growth, how sustainable it is, and what it costs to deliver.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
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