P16028 P16036 Wac Ajanta Packaging 5e4b5x

A report on

AJANTA PACKAGING (Written Analysis & Communication)

By Rishi Kharbanda (P16028) Ketan Nalamwar (P16036) Date: 24/02/2017

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Memo Date: 24/02/2017 To: Mr Deepankar Agarwal From: Mr Ketan Nalamwar (Executive Assistant)

Subject: Strategy for future course of action for Ajanta Packaging considering the recent reports.

The report examines the present situation of Ajanta Packaging and the growth prospects of the company considering the growth in packaging industry. The report also analysis the option to time to take up diversification of company’s product range with a new product portfolio of PET bottles based on the market share, growth prospects and packaging trends. Recommendation is given after studying the current position and various growth opportunities and action plan for the same is provided.

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Executive Summary Taking into consideration the ever changing picture of packaging industry, it has become extremely important to ponder upon the future course of action for Ajanta Packaging. The company has tremendously benefited from the glass bottles production. Now, the better and the newer alternatives are coming in the packaging industry which is giving tough competition to the well-established trend of glass as a packaging material. The benefits and advantages of these alternatives are compelling the orthodox industry and challenging them to change their business strategy. The option available with Ajanta is either to diversify their portfolio and to enter manufacture polyethylene terephthalate (PET) or to continue with the current production. After doing the analysis and considering possible scenarios based on the market share of the company, growth prospects of the company and packaging trends in the industry, recommendation is given. Recommendation: Ajanta should diversify its portfolio so as to cater to the growing customers’ demand in the PET industry. Proper marketing and financial strategies should be implemented before actually start producing PET bottles.

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Contents Situation Analysis

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Problem Statement

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Options

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Criteria for Evaluation

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Evaluation of Options

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Recommendation

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Action Plan

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Situation Analysis The recent reports published on the glass packaging industry will make a huge impact on the industry as a whole. Since Ajanta Packaging mainly operates in glass bottles, this report

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should be looked after as a concern and newer strategies need to be formed so as to maintain its current position in the industry. Currently, the glass-bottle packaging industry is facing tough competition from various packaging options and substitutes available. Currently, glass packaging is for larger companies; however, quality conscious customers are looking for other options as well. Aesthetics is one of the growing differentiating factors which every customer wants. Soft drinks and hard drinks industry is shifting from glass bottles to polyethylene terephthalate (PET) and there is rising use of tetra pack as end s are more aware of the benefits of quality packaging. SWOT analysis for company is as follows -

SWOT Analysis Strengths 1. It is considered as one of the top suppliers of the glass bottles in the country. 2. Ajanta Packaging has a strong distribution network. 3. It leverages its advantage of being available at various locations. 4. It also excels in customizable and timely delivery of glass packaging solutions. 5. It offers just in time supply to buyers through their marketing offices present in Northern India. 6. Ajanta is also known for its superior quality and cost effectiveness of its products. 7. Almost 90% of Ajanta’s customers are repeat buyers which show Ajanta is very reliable in providing its service.

Weaknesses 1. Too much reliability on glass products as Ajanta’s 95 per cent revenues is from glass bottle sales. 2. Operating expenses are continuously increasing over the years. 3. Profitability is decreasing because of rising expenses and price sensitivity in the industry.

Opportunities 1. The growth rate of packaging industry in India is staggering 15 per cent annually. On the other hand, global packaging industry is growing at a CAGR of meagre 3.1 per cent. 2. Buyers are looking for flexible and alternative packaging solutions for their products. 3. Consumption of Indian middle class is growing rapidly which in turn is responsible for greater prospects in the packaging industry.

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4. With Indian people getting more urbanized, their necessities have changed immensely which can boost sales especially in Indian made Foreign Liquor (IMFL) and soft drinks industry.

Threats 1. There are various substitutes available for Ajanta’s glass bottle products such as PET. 2. The market for PET bottle is growing which is responsible for decreasing scope for glass bottle industry. 3. The competition in the glass bottle packaging industry has increased tremendously as the demand for glass bottles is getting reduced. 4. Due to the increase in inflation rate, Ajanta’s raw material costs are increasing and that is evident from the growing expenses over the years. 5. The Central Government’s policy of reducing the import duties on wine and spirits from 150 per cent to 50 per cent would eventually reduce the market for packaging industry in India. 6. The pharmaceutical industry in India due to various reasons is rapidly turning from glass bottle packaging to other substitutes such as plastic, aluminium, PET, etc.

Problem Statement Whether it is the right time to take up diversification of company’s product range with a new product portfolio of PET bottles?

Options 1) Yes, it is right time to take up the diversification of products range with PET bottles. 2) No, it is not the right time to take up the diversification of products range with PET bottles.

Criteria for Evaluation The options have been evaluated on the basis of following criteria in descending order of importance. The ranking of criteria is based on the firm’s mission statement which focuses on its clients, people and stakeholders. a) Growth prospects of Company b) Packaging trends c) Market Share

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Evaluation of Options 1. Yes, it is right time to take up the diversification of products range with PET bottles. a)

Growth Prospects of Company: With the growing packaging

industry, company’s revenues are also increasing from the past 5 years. However, the operating profit of the company remains around to an average of $24.8 million. This is because company’s 95 per cent of sales revenue is solely dependent on the glass-bottle sales. To increase the revenue and hence operating profits, diversification to new product portfolio is required at this time. Also, the PET bottle market is growing at a rate of 6.9 per cent and hence it is the right time to b)

diversify. Packaging Trends: The packaging trends in various sector is shifting from traditional glass packaging to other modes of packaging out of which PET bottles is emerging in packaging of most of popular products such as Soft Drinks, IMFL and Pharmaceuticals. By introducing new product diversification of PET bottles,

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company can meet the changing packaging requirements. Market Share : By introducing new product portfolio of PET bottles, the company can target the customers who are shifting to PET bottles. Acquiring new customer base will increase the market share of the company in this sector.

2. No, it is not the right time to take up the diversification of products range with PET bottles. a) Growth prospects of Company: By not introducing the new product portfolio of PET bottles, company’s 95 per cent of sales revenue may depend on the glass-bottle sales only. This may hamper the chance to generate revenue out of increasing demand of PET bottles in the market and hence may affect the growth prospects of company. Currently, company is generating considerable revenue out of glass-bottles but there is no significant increase in the operating profits and similar trends may follow in near future if product diversification is not done now. b) Packaging trends: The glass-bottle industry is dependent on major industries using glass

bottles such as IMFL, soft drinks and pharmaceutical companies, which are now moving 7

towards more durable packaging such as PET bottles. By not introducing new product portfolio of PET bottles, company may lose customer preferring the new packaging trends. c) Market Share: By continuing the glass-bottle packaging, the company’s market share in packaging industry is less likely to increase since the packaging industry is itself moving towards new packaging alternatives.

Recommendation It is recommended that company should now diversify the product range with new product portfolio of PET bottles.

Action Plan 1. Ajanta Packaging should acquire all the necessary resources to 2. New product’s financial analysis is to be done before investing in the new project so that it may not turn out to be a loss making investment. 3. Marketing strategy needs to be implemented to increase the awareness of new product in the packaging industry. Increased awareness will help in creating demand of the company’s PET bottles and hence will generate considerable sales revenue. 4. Ajanta should start their PET bottles sales with their existing customers and should also acquire new customers using their current customer relationship management expertise. And since the customer retention of Ajanta’s products is good it should use this as their differentiating factor over their competitors after entering into PET bottle packaging industry.

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