The government’s Deposit Return Scheme arrives in October 2027 with the laudable aim of boosting recycling. But, behind that simple objective lies a complex and costly new system. Here at Hand Crafted Drinks Magazine we want to know whether producers, retailers and consumers are about to pay a high price for environmental benefits that remain far from certain.
If you’ve heard of the Deposit Return Scheme, which the government is planning to introduce in October 2027, you might be tempted to think that it’s very similar to what Carter’s, an East Midlands-based soft drinks manufacturer, introduced in the 1970s.
Their own deposit return scheme was ground-breaking at the time because consumers redeemed 3p for every Carter’s glass bottle that was returned to the store where it had been purchased.
The genius of the idea was that it locked in customers to their brand and it ensured that their proportionately expensive glass bottles were recycled. Entrepreneurial children could also top-up their pocket money by returning discarded bottles.
But, whereas Carter’s scheme was easy to administer, simple to understand and required no government interference, DRS is going to be costly to administer, complex and highly regulated.
Despite the coverage of DRS across various trade and consumer titles, I don’t think that consumers, producers and retailers have yet grasped the extent of this new regulatory regime, which, according to the government’s own website, will include drinks containers that:
“…are made wholly or mainly from aluminium or steel, or polyethylene terephthalate (PET) plastic; have a capacity of between 150 millilitres and 3 litres; [and] are likely to be used only once or for a short period of time.”
Interestingly, glass bottles — the very containers that were at the heart of Carter’s simple and successful return scheme — are excluded from DRS altogether.
Whilst few within the drinks industry would argue against increasing recycling rates, reducing litter or making better use of valuable packaging materials, why impose such a complex scheme purely on drinks containers? Most households have a dedicated recycling waste bin, so most of these containers are already being collected for recycling.
From what I understand of the DRS my question is this: will the environmental benefits justify the additional cost, administration and complexity being placed upon producers, retailers and consumers?
Let’s look at the three groups that will be impacted by this law.
Consumers will pay a deposit when purchasing an eligible drink in a plastic bottle or metal can and will have their deposit refunded when the empty container is returned.
A deposit fee of 20p has been widely discussed, but the actual figure will be confirmed by the government in the coming months.
Under DRS, consumers, many of whom continue to face a cost of living crisis, could very easily end up simply paying more for the same product if they choose not to claim the refund or forget to do so, or that they are just not aware that they have paid a deposit on certain containers — a situation that will disproportionately impact lower income households.
And, no one has thought about what happens to those who have home deliveries of their food. Will the delivery drivers have to allow space to take back the eligible empties or will consumers be forced to drive to the retailer?
What about the elderly, those with disabilities and people without cars, and those who deliberately use home delivery services because getting to a supermarket is difficult? How are they going to redeem their deposit?
It also means another storage container for those who want to claim the refunds, in addition to the recycling bins already provided by the local council (in addition to green waste and non-recyclable material), as previously mentioned.
Retailers are going to be burdened with additional responsibilities, including the provision of return facilities, refunding deposits to consumers, storing returned containers and arranging for their collection, and there are no details about who will foot the bill for the additional infrastructure or cover the cost of staff to operate the scheme.
The supermarket chains may decide to install automated reverse-vending machines, but smaller independent retailers potentially face a very different proposition, and the costs of implementing this scheme are likely to disproportionately impact the independent sector.
But, it gets worse for the retailers — they will have to pay back the deposits before they’re reimbursed.
As for the drinks producers, that’s another minefield.
Producers that sell eligible drinks will add the charge of the appropriate deposit, which will be passed through the wholesalers and retailers, a bit like VAT, which is ultimately paid by the consumer (although unlike VAT, consumers will be able to collect the refund).
Although the deposits are passed down from the producer to the consumer, where the buck quite literally stops, the cost of administering the new system will have to be absorbed by every company in the production-to-retail chain.
Drinks manufacturers will be subject to producer fees, new reporting obligations, potentially new labelling and packaging requirements, software and accounting considerations, and staff time necessary to understand, comply with and implement yet another complex regulatory system.
As with the multiple retailers, multinational drinks companies — producing hundreds of millions of identical containers — will be able to more easily absorb and administer the costs.
However, for an independent producer, the economics look rather different; DRS will do nothing but pile on additional costs to smaller businesses that are often just keeping their head above water.
But, there’s good news for the independent producers. Well, sort of.
There is the important 5,000-unit exemption, which means that a product line selling fewer than 5,000 units a year across the UK can potentially be registered as a Low Volume Product.
Those products would not have to carry a deposit or DRS labelling and, more importantly, would not attract producer fees, although the producer would still have registration and reporting obligations, which makes no sense — why should you have to register if your company is exempt?
Finally, who will oversee the system? I would have guessed at DEFRA, the Department for Environment, Food and Rural Affairs.
No, it’s actually going to be run by Exchange for Change, a not-for-profit private company, which has been appointed as the Deposit Management Organisation (DMO) to administer the scheme.
There are no figures relating to the cost of running this organisation, but it will be funded by the producers (a formula has yet to be announced as to how this figure will be calculated), the sale of recovered material and the unredeemed deposits.
Earlier, I suggested that not every eligible container will have its deposit redeemed and the government seems to have factored that in, which makes for interesting reading.
The government’s own impact assessment estimated the value of unredeemed deposits at around £453 million a year once the scheme is properly established. Its modelling actually predicted £1.36bn in 2028 and £905m in 2029, before settling down to around £453m a year — the unredeemed deposits will be reinvested in the scheme.
What powers will the DMO enjoy?
Exchange for Change will oversee the financial and material flows of the scheme, manage producer registration, set producer fees and the level of the consumer deposit, oversee return points, arrange collection and recycling, and will be responsible for achieving statutory collection targets.
The regulations also empower the DMO to require registered drinks producers to provide specified information. Where information is incomplete, or the DMO believes information supplied may be inaccurate, false or misleading, the matter can be referred to the relevant enforcement authority.
Formal enforcement remains with public bodies such as the Environment Agency and Trading Standards rather than the DMO itself. Nevertheless, the scheme creates a significant new layer of administration, reporting and oversight between drinks producers, retailers, consumers and regulators.
For smaller independent drinks producers and retailers, it is therefore reasonable to ask not only what this additional bureaucracy will cost, but how extensive the reporting burden will become and how proportionate that oversight will be.
With average recycling rates for the UK hovering around 45% (yes, we could do better), we can see the logic for encouraging consumers to recycle more, but with most households already recycling plastic, metal and cardboard — not just drinks containers — DRS seems like a rather large hammer to crack a nut that’s already open.
For more information visit:
https://www.gov.uk/guidance/deposit-return-scheme-drinks-producer-and-retailer-responsibilities