DRS will create huge Scottish ‘grey’ market for cheaper drinks from England

FOR DECADES, ‘booze cruises’ brought cheap alcohol back to England from France and Belgium – but the DRS might move the tradition up to the Scottish/English border

Scottish brewer Innis & Gunn has warned that ScotGov’s misconceived Deposit Return Scheme will create a multi-million-pound grey market of ‘booze cruises’ bringing huge quantities of cheaper drink across the border from England, devastating all facets of the Scottish trade.

In a painfully detailed take-down of the DRS as it is currently designed, Innes&Gunn’s founder and master brewer, Dougal Gunn Sharp, warned that if the current ‘nightmare scenario’ is allowed to play out, hundreds of Scottish businesses will go under, resulting in tens of thousands of job losses and collapsing consumer choice.

Mr Sharp’s argument centres on the likely price shock the DRS will inflict on Scottish consumers, with the costs of the scheme expected to add between 35% to 40% to the price of bottles and cans of beer and cider, while soft drinks will be up by 100% to 150%.

The inevitable result, said Mr Sharp, would be mass avoidance of that extra cost via any means necessary – and in practice that would mean that both private individuals and unscrupulous retailers would make the journey over the border to stock up.

“The fact that we are launching ahead of England’s DRS scheme, with the associated exorbitant price hikes here, will create significant grey market risk for businesses in Scotland, that will inevitably impact businesses based here and the viability of the whole scheme, and result in significantly lower recycling rates than we currently enjoy,” said Mr Sharp.

“Much has been said of other countries operating successful DRS schemes and that is true, but none has implemented a DRS scheme after they already had kerbside recycling. And furthermore, no country in the world has introduced DRS within a region of the country, which is in effect what we are attempting in Scotland. It would be like the Norwegians trying to implement a scheme for Oslo only, and which lead to prices in Oslo being double those outside. What do you think shoppers, faced with a short drive for cheaper prices, would do?”

Addressing the looming deadline for Scottish producers to sign up to the scheme, Mr Sharp said: “I find it quite incredible that we are being forced to sign up to an open-ended contract for the Deposit Return Scheme, which could mean that if the scheme fails to go live by the 16 August, or subsequently fails, industry will essentially foot the bill by paying fines of up to £1.5M per month, that’s £18M per annum.

“It is absurd that industry is being asked to carry the can for an initiative that is so poorly thought through. I don’t believe this could happen in any other developed country in the world.

“With challenges looming in court, the OIM and from the UK Gov, a delay seems very likely,” he added. “Circularity Scotland, the scheme administrator, tells us not to worry. But we are being told by them, Lorna Slater, and the Scottish Government Gateway Review, that the full scheme cannot launch on the 16 August this year, so where does that leave the producers?

“Put simply, if this nightmare scenario plays out, hundreds of businesses right across Scotland, will go under resulting in tens of thousands of job losses and collapsing consumer choice.”

Politically, the I&G founder highlighted that introducing Scotland’s DRS and its additional costs at a time of financial hardship would be ‘deeply unpopular’ with voters.

“Westminster may well be saying they will accelerate DRS implementation, but my bet is that they will push back and let the devolved administrations stew in a potentially bad situation,” he speculated.

“There is widespread consumer support for DRS. We know that consumers have been asked: ‘Should we recycle more?’ but the significantly increased costs, or the changes required to their behaviours, have not been fully explained to them,” he said. “Indeed, there’s a cloak and dagger approach to this with headlines on recycling without the true costs made visible. When you put these aspects to them, support, as you would expect, drops off rapidly.

“DRS will recycle billions of bottles and cans. Yes, but we already have a system that recycles billions of bottles and cans, and it could be improved upon by investing in it and by educating consumers, without implementing the costly DRS.”

By way of a solution to the situation, I&G had the following to say: “All the above might suggest we, Innis and Gunn and other producers, don’t want to cooperate, but that could not be further from the truth.

“We don’t want to see the scheme fail, whatever we end up implementing. Our intention here is to set out the likely outcomes of the scheme as currently drafted, to allow us to honestly discuss how we might avoid the pitfalls. We are 100% behind a circular economy!

“Our recommendation… pause the scheme. Come up with a far less costly way to do it, and on a UK wide basis.”

But if such a u-turn proves politically impossible, I&G called for the following changes to be made to the Scottish version of the scheme:

  • Align the scheme with what is proposed in England;
  • Remove Hospitality from the scheme completely. They already recycle over 95%. CSL have confirmed that they would prefer it if hospitality was not in the scheme, and it would reduce CSL’s operating costs significantly which could be passed on in the form of reduced scheme fees;
  • Only levy deposits at the till in retail – this will cut cost and complexity for business and make the scheme more likely to succeed. It would also maintain consumer choice;
  • Remove glass from the scheme. Only include cans and PET which is simpler to implement – CSL are supportive of this. Invest more in consumer glass recycling with the aim of keeping glass out of the scheme altogether;
  • Introduce DRS in January 2024 when the market is far quieter;
  • Significantly reduce the deposit level and fees to prevent the issues outlined above;
  • 90-day credit terms on fees.