AJANTA PACKAGING –
A BRIEF
Subject – Management Communications
Name – Ananya Misra
Date of Submission – 21.07.2018
Memorandum
To: Deepankar Agarwal, Partner, Ajanta Packaging
From: Ananya Misra, Executive Assistant to Deepankar Agarwal
Subject: A brief of the situation Ajanta Packaging is facing and the implications of the
decision to be taken.
Date: 21.07.2018
The purpose of this document is to highlight the implications of the decision that Ajanta packaging has to
make on whether to continue with manufacturing just the glass bottle and maintaining the state of affairs
as they are or whether Ajanta packaging should try and maximize the profit in the declining glass market
or whether Ajanta packaging should try and explore the PET bottle and other packaging material, and if it
was the right time to diversify considering the present market scenario and the projections for the future.
The document also evaluates the demanding issues regarding the decision that is to be made considering
the important current market situation and future projections.
Acronyms
CAGR Compounded Annual Growth rate
PET Polyethylene Terephthalate
IMFL Indian Made Foreign Liquor
US United States of America
INR Indian Rupee
A brief on Ajanta Packaging
The report on the latest advances in Packaging Industry didn’t bring a lot of good news for Ajanta
packaging. It highlighted the changing dynamics of the packaging industry and the shift to various other
products like PET, Tetra pack cartons, and flexible Packaging etc. available for packaging industry.
The global packaging industry had a projection to grow at 3.1 percent 10 year CAGR by revenue. The
Indian packaging industry had a market capitalization of US$ 14 billion, which was constantly growing at
15% for the last few years. The market share of glass packaging stood at 11% in the year 2012. Initially
glass was a favourable choice for packaging because it was a chemically inert. But, the new packaging
materials, especially PET, had benefits like lightness, inertness, clarity, toughness, cost-effective and
provided a chance for innovative package design. The demand for PET bottles was growing at a
forecasted CAGR of 6.4%. Even, within the glass bottle packaging industry, the suppliers were trying to
intrude other customers leading to a competitive market and reducing margins on revenue. The increase
in the prices of the raw materials also led to decrease in profits.
The glass industry is majorly dependent upon three industries – Indian Made Foreign Liquor (IMFL), Soft
drinks and Pharmaceutical. The changing consumer inclination fuelled by higher per capita income,
increasing shift towards westernization, and changes in the policies of government had increased the
demand of PET bottles and decreased the demands for glass packaging. The INR 60 billion soft drink
industry was shifting to PET bottles and aluminium cans to reduce the cost and improved durability,
which also led to decrease in demand of glass for packaging. The requirement of printing the various
details made pharmaceutical industry look for alternatives and thereby, reduce the demand for Glass
packaging.
Ajanta packaging had a revenue of 95 percent from glass bottles, with 90% of the revenue also coming
from return customers. If Ajanta were to stay only in glass bottle industry or try to maximize the revenue
in the glass packaging, they have benefit of good service, customer’s loyalty, providing customized service
to customers, established supply chain, and lesser risks in the present scenario. The risk associated with
this decision is decreasing customer base, increasing competition, lesser margins, and obsolescence risk.
Their operating profit had dipped from 25.4 US$ million, in 2010 to 21.7 US$ million, in 2011.
If Ajanta were to diversify, they have benefit of established brand image, increasing customer base,
incremental profits, and experience of work in similar field. The risk associated with this decision is
decreasing faith of loyal customer, decrease in quality of service, and increased spending in marketing
which might not payoff. The strength of Ajanta packaging was their service of providing glass packaging,
they had an opportunity to move to other segments of packaging especially PET bottles. The threat they
were facing stemmed from growing PET market share. Their weakness would be to stay in the Glass
packaging and not evolve with changing times.
Word Count – 499
EXHIBIT 1: Growth rate of Global packaging industry (Expected)
Global Packaging Industry Growth
Global packaging industry in Dollars
0 1,000,000,000,000 2,000,000,000,000
2020 2010
Source: Case Study
EXHIBIT 2: Growth rate of market capitalization of Indian packaging industry (Expected)
Market Capitalization of Indian Packaging
industry in US$ Billion
60
50
40
30
20
10
0
2008 2010 2012 2014 2016 2018 2020 2022
Source: Case Study
EXHIBIT 3: Growth rate of Demand of PET Bottles in ton (Expected)
Demand of PET bottles in tons
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
2000 2005 2010 2015 2020
Source: Case Study
EXHIBIT 4: Financial Details of Ajanta Packaging (in US$ Millions)
Financial Details of Ajanta Packaging (in US$
Millions)
120
100
80
60
40
20
0
2008 2009 2010 2011 2012
Sales Turnover Other Income Total Income
Total Expense Operating Porfits
Source: Case Study
