Assignment 1: Ajanta Packaging

A report submitted to
Prof. Gita Chaudhuri

In partial fulfillment of the requirements of the course

Written Analysis and Communication I

By
Arpit Jaiswal
Section A
ROLL NO. 166024

On
03-07-2016

MEMORANDUM

TO: Deepankar Agarwal

FROM: Arpit Jaiswal , Executive Assistant
DATE: 30th April, 2013
SUBJECT: Situation analysis and future growth prospects of Ajanta Packaging
I am enclosing the report after comprehensive analysis of the situation of Ajanta Packaging and
keeping in view of future prospects of the company an appropriate course of action.

Outline of the Report

Stituation Analysis:

Ajanta packaging one of the top suppliers of glass bottles in India in 2012 face industrial threat in

packaging solutions as different durable options for packaging has evolved in recent years.
Glass packaging benefits of inertness and transparency were outweighed by its weight and fragile nature

when compared to its substitute PET (polyethylene terephthalate) bottles.

Rising prices of glass bottles coupled with emergence of PET bottles made fast-moving consumer goods
(FMCG) manufacturers, alcohol, soft drinks and pharmaceutical industries to look for alternative solution
to glass packaging leading to shrinkage in glass bottle market.

Problem Statement:
Regarding future growth prospects of Ajanta Packaging is this the right time to diversify its product range?
Options:

Focus on immediate diversification of Ajanta Packagings product range to PET bottles.

Focus on widening customer base to the current product range.
Ensuring full market utilization of glass bottle packaging and gradually diversifying product range to PET
bottles beyond pharmaceutical industry.

Criteria:

Sales, penetration of market of different products and operating profit has to increase.
Ensure customer loyalty and continue being leaders in glass bottle packaging.

Evaluation of Options:

Immediate diversification of Ajantas products will increase sales and profit but customer loyalty will be
compromised and market penetration of glass packaging will be underutilized.

Customer base expansion could only be done in alcohol industry which will not lead to long term survival
financially.
Gradual shift in product range would ensure full market utilization of glass bottle packaging market and
also prepare Ajanta Packaging for technological shift in packaging industry and its economic survival.

Recommendation:
Gradually move diversification of product range beyond glass bottle packaging and pharmaceutical PET bottles but
not sacrificing glass bottle market of alcohol industry having growth rate of 29 per cent.

MAIN REPORT
Situation Analysis:

Ajanta Packaging company, were suppliers of primarily glass bottles in India. To start off the company supplied
glass bottles , jars and vials to fast moving consumer goods (FMCG) , pharmaceutical manufacturers and only
bottles to liquor companies. In 2010 glass bottles contributed to 95 per cent of its business. The company was in a
leading position due to its strong supply chain system to eliminate operations risk. Repeat customers were the
ones contributing to 90 per cent of the revenues as lower freight costs were offered to customer base so as to obtain
high net sales realization yields. Ajanta Packaging was among top suppliers of glass bottle in India in 2012.
In period (2001-2010) global packaging industry grew by 3.1 per cent (compounded annually) and made US$500
billion revenues in 2010. Compared to this Indian packaging Industry grew at 15 per cent and stood at US$15
billion. Looking at the financials of Ajanta Packaging company over last 5 years the net operating profit is more or
less the same in spite of inflation factor. This indicates to declining trend in profit margins though sales are on an
increasing trend and had crossed US$100 million mark in 2012. The ratio of rigid packaging to flexible packaging
was (80:20) in 2010 but in 2012 glass packaging market share fell to only 11 per cent. This is all indicative of
shifting technology trend in packaging industry.
Emergence of PET bottles and other substitutes like aluminum cans, Tetra Pak cartons have weakened growth
prospects of Ajanta Packaging. Global PET bottle demand has been growing at the compounded rate of 6.9 per cent.
Though glass packaging is advantageous in its inertness and transparency but brittleness and cost outweigh it to give
way other packaging designs which are more cost effective. Also, increase in cost of raw material and operations
have reduced profit margins of glass bottle industry.
The FMCG , Soft drink industry growing at 5-6 per cent rate annually and pharmaceutical industry with 15 per cent
growth rate have all started shifting to PET bottles from glass ones due to its durability and ease of transportation
and other convenient factors.
Only silver lining in this crisis situation is alcohol industry having a compound growth rate of 29 per cent though
looking for alternative packaging but is still major consumer of glass bottle industry.
Problem Statement:
Keeping in mind of future growth prospects of Ajanta Packaging Company is this the right time to diversify its
product range?

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Options:

Focus on Ajantas products to have more diversification by improving on range of products so as to include PET
bottles for various industries besides Pharmaceutical Industry in which it is already offering PET bottles.
Current portfolio of the product i.e. glass bottle packaging , printing services on glass bottle and crown cap trading
with a more widened customer base is sufficient for it to survive in the market.
Wait and watch policy is to be adopted so as to perfectly time the increase in variety of product range rather than
shift to supply of PET bottles and flexible packaging materials. Currently focus on alcohol industry which has a lot
of potential for glass bottle supply.
Criteria:
Sales turnover of Ajanta Packaging is to be at least maintained if not improved upon.
Operating profit is to be increased.
Practice of maintaining customer loyalty is to be ensured as use of Ajantas resources is improved while offering
services requiring customization.
Maintain the hold on glass bottle packaging industry to continue on the legacy of being market leaders in it.
Improvement on the front of penetration in the market.

Evaluation of Options:
By enhancing product diversification and increasing on range of products by supplying more PET bottle varieties in
different industries the sales turnover and operating profit will definitely be taken care of because of increasing trend
of usage of PET bottles in packaging industry. As various industries will grow penetration in the market of PET
bottles will only increase due to its huge demand of 23,452,281 tons predicted by year 2020. But customer loyalty of
existing glass bottle consumers by offering customization services will be compromised.
In sticking to current product portfolio glass bottle market penetration, its customer base retention will be fulfilled.
Seeing the increasing trend of industry growth and their reluctance towards glass bottle packaging even widening
customer base wont help, in the long run, on operating profit due to rising price of raw materials and operations.
Sales will be maintained by exploiting capacity of vast Indian alcohol industry having valuation of INR 507 billion.
Company at present is still in profit and sales are on increasing trend. By focusing Indian alcohol industry which has
total evaluation of INR 507 billion, operating profit could 4
be maintained for a year at least. Customer loyalty would
be ensured and full market penetration of glass bottle will be capitalized upon in via alcohol industry till gradual
shifting of Ajanta Packaging towards PET bottle industry takes place.

Recommendation:
Ajanta Packaging does not need to press the panic button now but as it diversified its product range into
pharmaceutical PET bottles and started different product range besides glass bottle packaging , it needs to gradually
move towards PET bottle packaging.
Action Plan:
In year 2012, sales of Ajanta Packaging have increased by 17.24 per cent and operating profit too by 19.35 per cent.
The company should have a regular eye on these two figures and start diversifying its product range to PET bottles
without compromising on wine and liquor bottle packaging. Tough local domestic brewers in alcohol industry are
pursuing different modes of packaging but still glass bottle packaging industry is still to be utilized to full potential
in alcohol industry, especially Indian made foreign liquor (IMFL) with its sales mix favoring premium brand. Also,
at the same time it needs to learn on customization of different packaging modes according to consumer needs to
improve on its resources and getting customer loyalty towards new range of products.

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References: iimu.ac.in
Word Count: 1000