Richard Harrow has over 40 years’ experience in both the private label and frozen food markets in senior roles. This has helped him gain wide experience across marketing, sales, NPD, sustainability, EPR, DRS and supply chain management.
WIDE SCALE
An already battered retail and hospitality sector is facing even more environmental scrutiny over the next couple of years, as new legislation covering packaging waste is implemented.
In addition to the costs heading down the line from packaging taxes over the next 12 months, small retailers, restaurants, takeaways and delivery businesses are likely to face an administrative nightmare when the new Deposit Return Scheme (DRS) comes into play.
While many smaller operators with turnovers below £1 million and using fewer than 25 tonnes of packaging may have sighed with relief at exemption from having to pay taxes under the Extended Producer Responsibility scheme, they are nevertheless still likely to feel the pinch as suppliers seek to offset costs. For larger operators, the impact is substantial.
DRS just adds salt to the wounds by requiring food & drink businesses to carry the costs and administrative challenges of the scheme.
CASH OR VOUCHER?
What we know to date is that England, Scotland and Northern Ireland are scheduled to introduce a Deposit Return Scheme (DRS) in October 2027. Wales has indicated it will follow the same timeline, although we still await more details on this scheme, unless of course Westminster blocks it!
In the three devolved nations, the focus is the collection of plastic bottles (but not milk bottles) and cans ranging in size from 150ml to three litres. Consumers will be encouraged to return drinks containers which have had a deposit added to the price, which will then be given back to them either as a voucher or cash. Wales is planning to also add glass to the DRS, although there are indications that the system will be very similar to the one being introduced in the other devolved nations – but this will only be clear once details are published.
The principle of the scheme is simple. The deposit, expected to be 20p, is added to the cost of a product by the original producer, which is passed down the line via wholesalers and retailers to the consumer. This can then be redeemed in cash or a voucher by returning the container to any seller of drinks after use – they don’t need to have purchased them from that outlet.
DRS already applies in some 50 countries, with Ireland being the latest to launch a system in 2024 – 1.2 billion containers were returned in the first year alone. This has resulted in a 50% reduction in litter in public spaces, as consumers seek to get their deposits back.
A recent trial run in New College Lanarkshire saw 20,000 cans and bottles returned in one month, when students were given 20p per unit in vouchers through return vending machines (RVM).
CASE STUDIES
Around 6.5bn bottles and cans sold in the UK each year represent 43% of all litter, yet only 20% are currently recycled through kerbside collection. Experience in other countries is that DRS not only reduces litter but improves the quality of material that can be recycled effectively.
The scheme in England, Scotland and Northern Ireland is to be administered by a not-for-profit Deposit Management Organisation (DMO), under the chairmanship of experienced businessman John Bason. The remit is to set the level of the deposits charged and design the operational aspects of the scheme, which is where further challenges arise.
While the big retail stores are likely to install automated reverse vending machines, their starting costs will probably be over £3500. These machines will remove much of the administrative burden, reading data printed on drinks containers, collecting them, and issuing vouchers to consumers.
For retailers, cafes and sandwich bars, the alternative is to manually process returns. This will involve accepting them, whether they have been purchased in that location or not, and giving the customer a voucher or 20p in cash – plus registering the return by scanning the label in order to recover the voucher value, then storing the returns for collection.
But what about dealing with customers returning containers at busy times, having to find space to store returns and the hygiene risks, particularly when containers are not fully emptied? Moreover, the scheme is likely to lead to some consumers gathering discarded containers for the deposits – and these may be badly soiled.
Storing used containers with the bins at the back of a shop or café awaiting collection also becomes untenable, as they now have a value.
There is an added challenge for the likes of restaurants and cafés where products are consumed on-site, as the consumer still has the right to receive a 20p voucher or cash back on the packaging. In Ireland, restaurants have been investigated for charging the deposit but not giving the empty container to the customer. A complex situation that may give rise to bad press and even legal action.
DON’T DELAY
There is some leeway for micro businesses with premises that are less than 100 sq m, as they will not be required to be a return point. Exemptions can also be granted on other grounds, such as layout, design, construction and if other return points are close by.
However, there may be a case for electing to be a return point because DRS experience in other countries is that 80% of consumers spend the deposit in the return location.
And there is the possibility that small locations may opt out of charging consumers the deposit – however, this must be clearly communicated. They will still need to administer and store any empty containers for collection, in order to be reimbursed the deposit by the DMO, which they will have paid when they bought the product from their supplier.
While there are strong environmental arguments for a DRS scheme, the mechanics pose difficulties for smaller retail and hospitality businesses, many of which are already under enormous pressures.
If changes are to be made to the way the scheme operates, we need to lobby for them now with the DMO.
Are you happy with the proposals – or do you think there is a better/less onerous way the scheme could be administered? Send your thoughts to PAPA director Jim Winship (
