Metal Packaging Manufacturers Association                            DRS0018

Written evidence submitted by the Metal Packaging Manufacturers Association

Introduction – The MPMA

1. The Metal Packaging Manufacturers Association (MPMA) is the trade association and lead voice of the UK’s metal packaging manufacturers. The MPMA has 21 UK based can makers in membership who between them have over 30 UK metal packaging manufacturing sites. Our membership includes all the UK based companies who make and sell metal beverage cans.

2. The Association supports and represents members’ interests on industry matters related to operational, regulatory and environmental issues.  In addition, the work of the Association promotes the benefits of metal packaging and the sustainable attributes of steel and aluminium through education programmes, industry awards and relevant communication channels.

3. The MPMA is run by a small management team which operates through committees and working groups made up of representatives from member companies, and who report to a members’ Council.

Executive Summary

4. The MPMA welcomes the committee’s call for evidence on the Next Steps for Deposit Return Schemes and we are responding as the representative body for the UK’s metal packaging manufacturers.

5. Our key objective in this response is to support the need for a variable deposit rate for a DRS and to highlight the very serious damage that a fixed deposit by container (irrespective of volume) poses. We would also like to suggest that an All-In scheme is by far the fairest for the beverage market as a whole.

6. In a recent IPSOS survey commissioned by our European metal packaging body, Metal Packaging Europe (MPE) showed that in the UK 7 out of 10 purchasers would be likely to consider buying a larger container (with 3 in 10 being very likely) if a fixed 20p deposit per container were to be employed.

MPMA Position: Deposit Return Schemes for the UK

7. The MPMA like many other organisations supports the introduction of a well-designed and well implemented   Deposit Return Scheme (DRS) in the UK. However, the MPMA, its members, and more specifically it’s beverage member group, Can Makers UK are all extremely concerned that the introduction of a DRS with a flat deposit rate for all containers, irrespective of fill volume or material, would lead to many consumers, particularly those on lower incomes switching from multipacks of aluminium cans to larger format plastic PET bottles to avoid the cumulative cost of the deposit fee on multipacks.

8. A significant proportion of aluminium beverage containers are sold in multipacks in the UK and so a flat deposit per container would have a disproportionate impact on the price of these single serve containers as compared to large format multi-serve PET plastic bottles.

9. The table below illustrates the impact of a 20p deposit container on 12 and 24 multipacks of 330ml aluminium drinks cans as compared to 1.25 and 2 litre PET bottles. The current selling prices of the containers were obtained on-line on the 4th March 2021 from a leading retailer’s website*.

11. As it can be seen a flat 20p per container adds £4.80 to the price of a 24 multipack of 330ml drinks cans but only 80p for the same amount of product in four 2 litre PET bottles. The same risk applies to 12 packs (as shown), and even multipacks of 8 or 4.

12. The MPMA are aware that a 2019 poll of consumers found a 20p flat deposit fee would encourage over 60% of individuals to switch to large PET bottles at the expense of aluminium can.

13. In addition, in a 2020 IPSOS survey commissioned by MPMA’s European metal packaging body, Metal Packaging Europe (MPE) the question was asked:

14. The Deposit Return Scheme set to be implemented in Scotland will see shoppers pay a 20p deposit when buying beverages in cans and bottles, regardless of container size, from July 2022. Subject to a second consultation, a DRS for England and Wales could be implemented in 2023.

• When choosing a beverage, how likely would you be to buy a single, larger container rather than a multi-pack, if it reduced the overall deposit paid as part of a DRS?

• Not likely at all, Quite likely, Very likely, Definitely

15. The survey showed that in the UK 7 out of 10 purchasers would be likely to consider buying a larger container (with 3 in 10 being very likely) if a fixed 20p deposit per container were to be employed.

16. The risk to purchasing behaviour was also highlighted by DEFRA’s own qualitative research which showed that a DRS was likely to cause switching away from consuming cans away from home to bottles.

17. The above survey results are of particular concern given that Nielsen data identified that in the UK 96% of beer and cider cans and 59% of soft drink cans are sold as multi-packs.

18. The problem with a flat deposit rate approach is that it create two market inequalities instantaneously. Firstly, as indicated above, the approach penalises multipacks and single serve containers over the far larger multi-serve plastic bottles. Secondly, the flat deposit rate approach will also cause the deposit cost per litre of the packed product to vary vastly depending on the pack size.  Figure 1 below illustrates this over the range of pack volumes covered by the proposed DRS scheme.

20. Notwithstanding the compelling results from multiple surveys, the MPMA and its members believe that it’s difficult to imagine how these two financial impacts on aluminium cans in multi-serve packs could do anything but distort the current level of sales in favour large format PET bottles.

London Economics Research into deposit charges – Alupro Commissioned Study

21. MPMA supports the excellent recycling initiatives, Every Can Counts and Metal Matters from the recycling organisation Alupro. As part of this relationship Alupro shared with the MPMA the results of a study on DRS that Alupro commissioned from London Economics, a leading research consultancy.

22. The aim of the study was to conduct research into consumer behaviour, the different impacts of a flat or variable rate in the UK and the resulting economic, environmental, and public health consequences.

23. The output from the report not only confirmed the concerns of both the MPMA and its members, but also showed that a variable rate of deposit based on container size has other benefits which would help the proposed DRS scheme meet the proposed outcomes and objectives for the Government.

24. The key findings on a variable rate were:

• A variable rate, as used in the successful Nordic schemes, will deliver significantly higher return rates in the first two years of operation.
• A variable rate DRS is less costly to operate because there will be higher revenues from unredeemed deposits and the sale of recyclates derived from the collected containers.
• A variable rate has a lower financial burden on producers as product fees can be set lower.

25. The key findings on a flat rate were:

• Compared to a variable rate system, a flat rate deposit would have a dramatic impact on the aluminium packaging sector, meaning 2.5 - 4.7 billion less cans sold, £117- £211m less revenue, and a 24% - 73% reduction in demand for aluminium cans in large multipacks
• A flat rate DRS could lead to higher amounts of product wastage
• A flat rate DRS could lead to increased portion sizes

Environmental Benefits of Metal Packaging

26. Apart from damaging the metal packaging industry, the negative impact of a flat deposit per container would also have a negative impact on the environment.

27. The aluminium beverage can already has a 76% recycling rate in the UK and with industry led initiatives this is set to rise still further. The recycling infrastructure in the UK for aluminium drinks cans is such that a used container can be recycled, remade, refilled and back on the shelf of a retail outlet all within 60 days.

28. On top if this is the fact that metal is a permanent material (as defined in the British Standard BS 8905:2011, Framework for the assessment of the sustainable use of materials) and can be infinitely recycled with no loss of quality and as such is the perfect example of a Circular Economy material. In fact it has been estimated that something 80% of all the metal ever produced is still in use today.

29. When aluminium is recycled it uses 95% less energy than when it is produced from primary ore. The other environmental benefit of supporting and not damaging the aluminium drinks sector is that aluminium cans are easy to extract from the waste stream via eddy current units, and even if the cans are missed at the Material Recycling Facility (MRF) and end up in a waste incinerator, the metal from the aluminium cans can still be collected from the bottom ash and recycled.

Financial Benefits of Metal Packaging

30. In addition to the environmental benefits of supporting and not damaging the aluminium drinks can sector, there is also a financial benefit to any proposed DRS scheme. Scrap aluminium cans are the most valuable part of the waste stream by far. In fact, according to the Lets Recycle website https://www.letsrecycle.com/prices/metals/aluminium-cans/aluminium-can-prices-2021/ the price of scrap aluminium drinks cans in both January and February 2021 was between £770 and £810/tonne.

31. By comparison, Lets Recycle quotes Clear (and light blue) PET as being between £150 and £185/tonne over the same period. It is therefore clear that if the deposit type employed by the DRS causes aluminium cans to be substituted by large PET bottles then the revenue for the scheme will be significantly reduced.

Waste Considerations

32. There are also waste issues to consider if the structure of a DRS scheme were to increase the use of large format containers over single serve containers.  Carbonated soft drinks are listed as one of the top 10 most wasted food and drink items, with roughly 15% of all drinks purchased are wasted in the UK. Thus a flat rate scheme, leading to increased consumption of large-format PET at the expense of multipacks of smaller single serve cans is likely to lead to higher amounts of product wastage.

33. The Censuswide consumer survey found that for those respondents who did throw out some beverage products 40% of them wasted at least 10% from the large plastic bottles, whereas just 25% of people wasted this percentage from cans. In addition, a tenth of those surveyed regularly throw away a quarter of the liquid from large plastic bottles. These figures are hardly surprising for anyone with children given that they rarely replace the screw caps tightly enough on large bottles and then refuse to drink the contents when it has gone flat.

Public Health Considerations

34. One of the benefits of smaller beverage containers is they automatically control portion size by their very volume. By consuming beverages in 2L bottles instead of 6-packs of 330ml cans consumers may have less control over the portion of beverage they drink ‘in one go’. This is particularly true when it comes to children pouring out their own servings. The portion size is then more controlled by the size of the glass or receptacle and not the container.  The World Health Organization found that exposure to larger portions and/or bigger packages significantly increases the consumption of food and beverages. A meta-analysis of the portion size effect in food and beverages, found that doubling portion size increased consumption by 35% on average.

35. The other risk of course is that a rise in larger format beverage containers over single serve ones could actually hamper Governments attempts to reduce sugar intake to help tackle both obesity and the worrying increase in diabetes in children.

Economic Impact on the Aluminium Can Industry Consideration – Units Sold

36. Studies have shown that any DRS will have a negative impact on can units sold, regardless of a flat or variable rate. However, a flat rate is worse in every scenario modelled by London Economics. It has been estimated that a flat rate DRS could cost the industry 2.5 billion more in lost unit sales than a variable rate DRS, even where the model assumes that most people understand that the deposit is a refundable and therefore their purchasing decision is relatively unaffected by a DRS.

37. However, where the model factors in consumers who are unsure if they will return their containers and make their decision at the point of purchase, a flat rate DRS could cost the industry 4.7 billion more in lost unit sales than a variable rate DRS.

DRS Scheme Scope Considerations

38. The MPMA and its members believe that to avoid market distortion, all competing drinks packaging formats should be included in a DRS. However, it should be noted that the recycling rates for aluminium drinks cans are already high, at 76% even before a DRS is introduced.

39. A Resource Futures report identified that the recycling rate for all aluminium packaging would reach 85% by 2025 and at least 90% by 2030, even without a DRS being in place. The report concluded that a DRS could deliver a modest 5% improvement in the recycling rate for aluminium beverage cans over and above what would be achieved through a reformed producer responsibility system.

40. That said, the MPMA and its members support the introduction of a well-designed, and equally important a well implemented DRS and believe it is an effective route to increasing the recycling of plastic bottles. Furthermore, the MPMA believes that all competing materials within the DRS should have the same challenging recycling targets to ensure a level playing field.

Potential Impact of DRS on Local Authority Kerbside Collections

41. Given that the MPMA represents all metal packaging manufacturers we have a concern over how the introduction of a DRS may affect LA kerbside collections. As has already been shown in paragraph 30 aluminium beverage cans represent the most valuable packaging material collected, thus the removal of this from kerbside collections must have a financial impact on kerbside collections, which may in turn affect the costs of the proposed Extended Producer Responsibility (EPR) scheme.

42. Consideration therefore has to be given to the idea that the financial benefit from any monies collected from DRS containers placed in kerbside collections should be used to subsidise those collections.

43. Given the potential impact of DRS on kerbside collections it is essential that any new EPR scheme and Consistency of Collection scheme promote the use of packaging that can easily and economically recycled, and that there is a commercial market for the resultant recyclate so that it will be reused and contribute towards costs.

Regulatory Divergence Considerations

44. The MPMA would like to see the same scheme implemented for England, Wales, and Northern Ireland as the alternative divergence of regulation would be disastrous particularly for the smallest markets where the economics of having to produce modest numbers of containers with the necessary unique bar codes, QR codes, or the like could be questionable. There would also be the risk of economic tourism at borders depending where the consumer felt the most advantageous deal could be had.

45. With the above in mind the MPMA would welcome any decision by the Scottish Government to join in with a single UK wide DRS based on a variable deposit fee related to container volume.

March 2021