Ajanta PackagingOnce 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).
The projected value of revenue from the IMFL and drink industries is also very low due to growing demand across the board with a significant increase in the cost of beer (Exhibit 5).
Exhibit 3, Distribution of Beverage in US Industry (2015-18)
Glass bottles in America as a Percentage of US Consumer Sales:
US Beer
Source: Glass Distribution Survey 2010
Glass sales to US consumers increased by 11.6% and sales of beverage-containing beverages to consumers increased by 9.7%.
Glass bottle sales increased in 2011, while glass bottles became a much more common source of beverage consumption in the US (Exhibit 6).
United States Glass Industry
Glass bottles in the US market:
Source: Glass Distribution Survey 2010, 2013
In July 2012, data by industry, according to Glass Distributions, showed Glass sales in 12 US States, and that number has continued to climb, despite the rising cost of glass bottles (1.4% net decline in July 2012, and the recent decline in sales of wine). While prices of glass bottles declined with the availability of new glass, the new revenue stream of glass was in line with current trends (exhibit 7).
Beer Distribution in the United States
To evaluate the distribution and price patterns of beer in the US, we evaluated the two main categories of glass:
a large number of small and medium sized craft distributors selling non-alcohol beverages and beverages to the public are responsible for the production (production and marketing) of the craft beer.
A small group of craft distributors selling to the public are responsible for the brewing of craft beers (exhibit 8). In order to control for trends and market changes in craft beer from the retail market, craft distributors are responsible for both the supply and demand of beer for distribution by craft breweries in the US (exhibit 9). Thus, the number of small brewers responsible for the supply of craft beers is likely larger in the U.S. Beer distribution as a share of craft beer retail sales is significantly higher than at any point during last decade (See Figures 1 and 2 for the distribution and price patterns of craft beer at different time points and periods in time, Table 2, Figure 1 and Table 2 (2016, 2016, 2017, 2018))
Figure 1: Distribution of CraftBeer in the United States as a Share of Production by Craft Brewers
The US Craft Brewers Tax Office, as a Share of Production
In 2013, the US Department of Agriculture determined that the brewing of craft beers and liquor that are brewed to the United States would be taxed at a lower rate than those produced on US soil in accordance with the general exemption for small producers who are responsible for