How will the Deposit Return Scheme impact whisky producers?
A deposit return scheme (DRS) is set to be implemented in Scotland on the 16th of August 2023, but alcohol and drinks producers have to register for the programme by the 28th of February 2023.
Although the environmental benefits are clear, the financial strain for, especially smaller, whisky distilleries could add to the problems faced by the industry as a whole.
What is the Scottish Deposit Return Scheme?
A DRS has been in the works in Scotland since May 2019, and then first put into law in May 2020.
When purchasing a drink in an eligible container, an additional 20p deposit is added to your purchase which will be refunded when you return your empty bottle or can for recycling at one of 30,000+ points throughout Scotland.
Any drinks container made from polyethylene teraphthalate, glass, steel, or aluminium, sized between 50ml and three litres can be deposited as part of the scheme.
Since the original launch date of July 2022 was delayed following an independent review in December 2021, drinks producers have continued to raise concerns about the implementation of the programme.
For further information on the legislation read The Deposit and Returns Scheme for Scotland Regulations 2020
How will the scheme work?
Every single-use drinks container will have a barcode that will allow easy returns at one of the 30,000 return points throughout Scotland.
These points will be located at any place that sells drinks, including distilleries.
If you make a purchase online, eCommerce retailers will have to offer pick-ups of empty containers.
Drink producers will have to register any new container they intend to sell.
Every container will feature a barcode that allows a customer to return it, so a registration of each product will need to be completed 6 weeks prior to sale.
There are some exceptions for online sellers.
Why are drink producers pushing back on DRS?
Drink producers have accepted that they need to do more to help reach environmental goals. However, they have three main issues with the scheme:
- It is happening too fast with many producers not ready to implement the required changes.
- The scheme is expensive to implement at a time of multiple financial pressures.
- Other UK countries are will not implement similar schemes until 2024.
Although there have been several years since this scheme has been discussed in public, drink producers feel the financial climate over the last few years has made it difficult to work with these changes.
As with all industries, the drinks industry has been hit with COVID, Brexit, supply chain issues, skyrocketing energy prices and the cost-of-living crisis so this change adds additional pressure.
England, Wales and Northern Ireland are seeking to implement their own schemes in late 2024. This lack of national alignment has been a cause for concern with consumers potentially visiting other countries to purchase drinks that are not part of the scheme. On top of this, England and Wales will not include glass in their schemes.
How will this impact whisky?
There is a lot of concern for smaller distilleries that rely on producing and distributing their stock as quickly as possible to stay afloat. A 6 week wait before distribution and an increase in prices could cripple many of these businesses.
Coupled with a few recent proposed legislations around the alcohol advertising ban and the lack of an alcohol duty freeze whisky producers are feeling aggrieved at DRS.
It is a worry that whisky is constantly growing, and a shining light in Scotland following the report that over £6 billion in whisky was exported in 2022 alone.
The Scotch Whisky Association has joined three other trade associations in Scotland in writing an open letter to the Scottish minister for green skills, circular economy and biodiversity, Lorna Slater. The letter asks for an 18-month legal grace period for smaller producers.
It argues that smaller producers will not be able to sell their products in Scotland as they will not have the capability to make the required changes in time for the 16th of August.
The joint statement said: “There are now only a few weeks left to save thousands of small producers that will be banned from selling bottles and cans in Scotland from August.
“They lack the finances and resources to meet the scheme’s requirements on time, and need an 18-month legal grace period in the regulations and the option to opt in.”
“Without this certainty, it’s likely that consumers will lose out through reduced consumer choice and increased prices.”
Colin Smith, chief executive of the Scottish Wholesale Association, gives us an insight into what smaller producers have to face. He said: “A grace period will allow them to overcome the significant challenges they still face trying to get ready to go live with DRS because there remain fundamental unanswered questions on key issues such as VAT, price-marked packs, IT system requirements, and what happens to stock in bonded warehouses.”
“In addition, our request for a de-minimis on SKUs below a 50,000-unit-per-annum threshold would protect the availability and choice of a wide range of unique or limited low-volume SKUs that many wholesalers and their customers stock. This differentiates their offering versus their competitors.”
With only a few days until the 28th February deadline, it should be a priority for Scottish ministers to reconsider their decision.
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