How Will the Deposit Return Scheme Impact Whisky Producers?

The Scottish Deposit Return Scheme (DRS) is poised for implementation in Scotland on August 16, 2023, with a registration deadline for alcohol and beverage producers set on February 28, 2023. While the environmental advantages of this initiative are evident, the financial challenges, particularly for smaller whisky distilleries, could exacerbate the broader industry's woes.

Understanding the Scottish Deposit Return Scheme

The inception of the DRS in Scotland dates back to May 2019, and it was officially enacted into law in May 2020. The concept is straightforward: when purchasing a beverage in an eligible container, an extra 20p deposit is added to the cost, which will be refunded upon returning the empty bottle or can to one of the 30,000+ collection points across Scotland. Containers made of polyethylene teraphthalate, glass, steel, or aluminum, ranging from 50ml to three liters in size, can be deposited as part of this program.

Despite its original launch being postponed following an independent review in December 2021, concerns among beverage producers regarding the scheme's execution have persisted.

How the Scheme Operates

For Consumers:
Every single-use beverage container will bear a barcode, simplifying returns at the numerous collection points scattered throughout Scotland, including distilleries. Even online retailers will be required to offer pickups of empty containers.

For Producers:
Beverage manufacturers must register any new container they intend to sell. Each container will feature a barcode enabling customer returns, necessitating registration six weeks before the sale. Some exemptions apply for online sellers.

Challenges Faced by Beverage Producers

Beverage producers acknowledge the need to contribute to environmental goals but have raised three main concerns regarding the DRS:

1. Rapid Implementation: Many producers feel that the scheme is progressing too swiftly, leaving them ill-prepared for the required changes.
2. Implementation Costs: The scheme's expenses come at a time when the industry faces multiple financial pressures.
3. Lack of National Alignment: Other UK countries are not planning to implement similar schemes until 2024, leading to concerns about consumers crossing borders to purchase beverages not covered by the scheme. Additionally, England and Wales exclude glass from their schemes.

Impact on Whiskey Production

Smaller distilleries, dependent on quick production and distribution to stay afloat, are particularly worried. A six-week wait before distribution and potential price hikes could pose a significant threat to these businesses. In combination with recent proposed regulations, such as the alcohol advertising ban and the absence of an alcohol duty freeze, whiskey producers are voicing their discontent with the DRS.

Despite these challenges, the whiskey industry continues to thrive in Scotland, with over £6 billion in whiskey exports in 2022 alone. The Scotch Whisky Association and three other trade associations in Scotland have collectively appealed to the Scottish minister for green skills, circular economy, and biodiversity, Lorna Slater, requesting an 18-month legal grace period for smaller producers. They argue that these producers lack the financial means and resources to meet the scheme's requirements in time for the August 16 deadline.

Colin Smith, the CEO of the Scottish Wholesale Association, sheds light on the challenges faced by smaller producers, emphasising that a grace period would allow them to address critical unanswered questions and protect the availability of unique or limited-volume whiskey products.

With the February 28 deadline fast approaching, it is imperative for Scottish ministers to reconsider their decision.

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