HIMANSHU AGRAWAL & SAUMYA RANJITH

P16002 & P16046

IIM NAGPUR
Ajanta Packaging

.... 4 Problem Statement...................... 6 Criteria for Evaluation................ 7 1 ................................................................................................................................................................................................................................................................................................................................................. 6 Options................................................................................................ 6 Recommendation................................................................ 6 Evaluation of Options...................................................................................... 3 Situation Analysis........... 7 Action Plan..................................................................................................................................................................Contents Memo....... 2 Executive Summary....................................................................................................................................................

Regards. Enclosed is the report on whether Ajanta Packaging should diversify into PET-bottle varieties.Memo Date: 24th April’ 2013 From: Saumya Ranjith To: Deepankar Agarwal Subject: Report on future course of action for Ajanta Packaging. 2 . Dear Mr. Agarwal.

It will align the product range of the company with the evolving market trends and customer preferences. 3 . Since. changing consumption pattern. is generated by glass bottle. increasing urbanization. 95% of the revenues of Ajanta Packaging. glass packaging industry has been negatively impacted due to increasing competition from the better substitutes like PET bottles.4%. rising income levels. aluminium cans. Tetra Pak etc. However. Enhancing Ajanta Packaging product range with more PET bottle varieties would help the company increase its market share considering its forecasted CAGR of 6. the profitability of the company is at risk. and expanding modern retail.Executive Summary Indian packaging industry has been growing at the rate of 15% as a result of prosperous FMCG sector.

cost effective. Rising raw material prices and increasing competition is negatively impacting the profitability. The growth is expected to further accelerate with increased urbanization. low lead times. The current scenario of Ajanta packaging: Strength (Internal) Weaknesses (Internal) 1. Able to offer just-in-time supply to 3. 3. time bound and customised packaging solutions. cosmetics and beer. 5. change in the consumption patterns and expansion in modern retails. especially for soft drinks. Offer quality focused. 4 .  Plants are located nearby user industries so that the transportation costs can be decreased. Glass-industry has following properties:  Dominated by a few large players. Profit margins are decreasing because of customers via their marketing offices due to rising prices and increasing competition. Good products and professional expertise along with wide range of products allowing negotiation with suppliers. Food and beverage segment contributes most to the packaging industry growth because of prosperous FMCG sector. revenues comes from it. Increasing raw material prices and rising sales realization yields are good. Recent economic collapse and increasing inflation had hurt glass-packaging industry. 4. Established a niche position as one of the 1.  Long credit periods to maintain the customer loyalty.1 per cent. 2. net 2. Due to excellent distribution network.Situation Analysis Indian packaging industry has grown at 15% over last few years as compared to the global industry CAGR of 3. operating expenses.  Increased usage of PET bottles and other substitutes is the biggest challenge faced by industry Consumers in glass industry can be segmented as follows:  Large buyers  Quality conscious buyers had begun using alternate forms of packaging material  Prioritize aesthetics  Highly seasonal demand. growing disposable income of middle class families. Overreliance on glass products as 95% primary glass-bottle suppliers.

Competitors of Ajanta Packaging are targeting few glass bottle customers leading to a price war. 5 . Therefore. Hence the threat of new entrant is low. Estimated CAGR of 3. Increased inflation negatively impacting 2. Rise in use of substitute products like packaging industry. Bargaining Power of Suppliers (Low) Suppliers have less bargaining power due to increased competition in the industry spread across the globe. 2. availability of many substitute products have further increased their bargaining power. and easy to use. 3. the raw material prices. Opportunities (External) Threats (External) 1. tetra Pak. tough. Level of competition in packaging industry Threats of New Entrants (Low) Companies are recognizing the decline of glass-packaging industry and diversifying into other businesses. low environmental impact and are easy to stack such as aluminium cans. Increasing use of flexible packaging. Threat of substitutes (High) Threat of substitutes for Ajanta Packaging’s glass products is very high. grown at 15% in last few years. Growing PET market is reducing glass bottle usage and giving tough competition. Industry Rivalry (High) Competition is very high in the industry due to shrinking market size. increasing urbanization with changing 3. Indian industry has PET. substitute packaging. Also. and PET bottles. Ajanta can maintain a certain product portfolio in glass and charge a premium. Presence of warehouses in multiple locations give Ajanta some power in negotiation as compared to others. But the threat of new entrant in PET packaging is huge as the industry is on rise and every company is trying to diversify into PET market. Bargaining power of Buyers (High) Buyers have strong power of negotiation as the glass bottles are considered as a commodity product without much differentiation.1% for global 1. Growing middle class disposable income. have better shelf lives. 4. Customers and even the entire industries are moving towards packaging material which are lightweight. Shift of pharmaceutical industry towards consumer patterns.

6 . tetra Pak cartons and especially PET bottles that are becoming increasing popular due to its light weight.The future growth prospects of Indian packaging industry is characterized by rise of substitutes like aluminium cans. their retention is taken care of. if emphasis is laid on attracting more customers for glass-bottle packaging.Problem Statement Whether Ajanta Packaging should diversify their product portfolio to PET bottles? If Yes. toughness and inertness to oxygen & carbon-dioxide along with the added advantage of convenience and ease of use. Criteria for Evaluation Evaluation of options will be done mainly on following three criteria:  Future growth prospects  Market share  Customer preference Evaluation of Options Continue with the existing product portfolio of glass – bottles and attract more customers –Recent economic collapse and increased inflation which had affected the prices of raw materials and the relevant operational expenses like warehouse rentals. there is some potential existing in beer.IMFL) and pharmaceutical industry. The weight reduction of the bottles by 25 – 30 % due to new technologies and improved control over glass distribution make glass packaging convenient for customers. PET bottles industry has a forecasted CAGR of 6. the growth opportunities in this industry are huge. Low market share. There has been a shift in the preferences to PET bottles in soft drinks. is expected to decline further. Diversify into new product portfolio of Polyethylene terephthalate (PET) bottles . when? Options  Continue with the existing product portfolio of glass and attract more customers. increase in western style consumer spending and expected CAGR of 29%. Customer loyalty and superior customer relationship management practices are crucial for the company as 90% of the revenue comes from the repeat customers. interest and freight costs show that the future growth prospects for this industry is not satisfactory. However. This is due to increase in expectations of Indian consumers and competition from imported products with respect to the quality and its aesthetic value. Therefore.  Diversify into new product portfolio of PET bottles.4%. wine & spirits industry. clarity. With ease in regulations. alcohol industry (especially Indian Made Foreign Liquor. which reached to 11% of total packaging industry in 2012.

especially in PET bottles as it would increase its customer base. Action Plan 1. After considering future growth prospects of PET bottles and to avoid decreasing market share of glass bottles. The main factor attributing to this shift is increasing consumption of packaged. light- weight. 2.INR 60 billion soft drinks industry which is growing at 5 – 6% annually have also shifted to PET bottles. frozen and other processed foods by the growing Indian middle class. Their acceptance is supported by brand differentiation PET bottles offer and easy display of products to its target consumers. Synergize the existing marketing & supply chain systems in favour of PET bottles. There is growing preference of customers for PET bottles due to its convenience.490 and its shift in preference to PET bottles is also a crucial factor in attaining high market share. Provide more incentives or discounts for PET bottles to have an edge over competitors. 3. it is the right moment to shift the focus to PET bottles. Company should improve its offering of customized services. the focus is shifting from rigid packaging to flexible packaging. Due to changing trend & preferences of customers. Continued growth of Indian Pharmaceutical industry to become US$ 15. (Word Count: 1172) 7 . Recommendation Diversification into new PET-bottle varieties and decrease over-reliance on glass-bottles are recommended to deal with the declining profitability of the glass-bottles. innovative packaging designs.