Ajanta Packaging

Once considered a leading solution to packaging problems, glass is finding fewer takers in market due to availability of cheaper, sturdier and flexible products. Ajanta Packaging (AP), has focussed mainly on the glass packaging sector with minimal market share in PET packaging. Building on its business principles, AP has built a strong base of loyal customers, who still prefer glass bottles. However, decline of the glass market is inevitable, whereas market for PET, etc. shows promising growth over the next decade or so. In such a scenario, there is a need to determine suitable strategy that AP should implement in order to maximise profits and stay in the market.

With increasing acceptability of PET bottles, the domestic glass industry growth rate and market share percentage is expected to decline. Assuming fall in the market share from 11% to 8% over the next 6 years, value of glass industry is expected to change from USD 2 billion in 2013 to 2.3 billion in 2015 and 3.34 billion in 2020 (Exhibit 1, 15% average growth rate of packaging market maintained every year). Hence, absolute value of the glass industry will continue to rise in the short run. With a major chunk of resources in this sector, AP’s revenues are likely to follow a similar trend as well (USD 1.28 billion in 2015 and USD 1.62 billion in 2020 - Exhibit 2).

Majority of AP’s revenues come from the IMFL and beer industry (Exhibit 3, assuming that contribution of a sector to AP’s revenue is proportional to its market share). Due to high aesthetic value of glass bottles, the demand from this sector will continue to remain strong. With a tremendous projected growth rate, AP can realize huge profits in this sector. The major cause of concern for brewers is the rapidly increasing price of glass bottles due to inflation. Technological advances in this area (like blow-technology) promise significant reductions in glass used per bottle. Less glass used implies increased output per unit input, hence, lower operating costs (~12% net reduction - Exhibit 4).