Situational Analysis: Ajanta Packaging

Situational Analysis: Ajanta Packaging

According to world packaging organization, the global packaging industry is estimated to have made US$500 billion in revenue in 2010 with the 10-year compound annual growth rate of 3.1 percent. Over the past few years, the industry has witnessed changes in packaging trends from conventional packaging solutions (glass, aluminum, tinplate) to alternative packaging solutions (PET bottles, cans, flexible packaging, aluminum foil, and blisters). This shift is due to the added advantages that alternative packaging solutions have, such as, durability, cost-effectiveness, lightweight, increased product safety, transportation convenience. Global PET demand is growing at a CAGR of 6.9 percent and is expected to reach 23,452,281 tons by 2020 from 6,472,350 tons in 2000.

Indian packaging industry, standing at US$14 billion, is growing at 15 percent per annum over the last few years with food and beverage segment contributing the most. Moreover, increasing urbanization, growing middle class, changing consumption patterns and expanding modern retail are expected to accelerate the growth rate of the Indian packaging industry. In 2010, the conventional packaging had more than 80 percent share of total Indian packaging industry with the rest 20 percent as flexible packaging. By 2012 the glass packaging had only 11 percent market share. In the last few years, consumers demand, and expectations have changed at a drastic rate, they have started to expect higher quality products because imports influence their aesthetic and quality norms.

Ajanta Packaging being among the top supplier of glass bottles has a diversified product range, but it is highly dependent on glass-bottles and, 95 percent of their business comes from to form glass-bottles. Ajanta Packaging has a very loyal customer base, about 90 percent order comes from repeat customers. The recent economic collapse and rising inflation have hurt the glass packaging industry due to consumer spending constraints, increase product cost and reduced profit margin (refer exhibit 1 for SWOT analysis of Ajanta pack). However, the Indian packaging industry is showing a promising growth rate. Indian alcohol industry is expected to grow at a CAGR of about 29 percent to reach INR 1400 billion by 2015 from the current estimate of INR 507 billion. Soft drink industry is growing at 5-6 percent annually. The pharmaceutical industry continues to improve over last two decades and is estimated to become a US$ 15,490 million industry by 2014. But along with this growth, these industries have started to shift from glass-bottles to PET bottles owing to the added benefits of PET bottles. All these changes have projected challenges and opportunities to Ajanta packaging (refer exhibit 1).

Exhibit 1

SWOT Analysis

a) Strengths