Bottling out

From 1 April 2025, a new tax on the packaging of a wide range of consumer goods will be introduced, known as Extended Producer Responsibility (EPR).

Under the new rules, businesses will be charged a fee based on the amount of packaging they use, such as glass, plastic and aluminium. The money is meant to help local authorities fund waste collection and aims to encourage recycling by shifting the cost of onto the manufacturer. Ministers hope to raise £1bn through the scheme.

The Government has said the reforms are about “minimising the environmental impacts of packaging and maximising the contribution that packaging reform can make to net zero and the protection of our environment.”

However, the scheme has been criticised by the food and drink industries on the grounds that it adds a further layer of cost and bureaucratic complexity, and will contribute to inflation at at a time when consumers are already hard-pressed.

A key aspect of the scheme is that it based on the weight of packaging, so higher charges will be imposed on glass relative to lighter materials such as aluminium, plastic and cardboard. This has obvious implications for the drinks industry, where a wide range of items, including most premium products, are packaged in glass.

This article from The Grocer, which is free to read, sets out the costs for various types of glass packaging. A typical spirits bottle will incur a cost of 12.2p, a wine bottle 10.4p and a beer bottle 5.7p. Comparing it with wine, I suspect the figure for beer relates to the 330ml size, and the charge on a 500ml bottle will be more like 8.5p. Once VAT and retail margins are added on, the increase at the point of sale could be up to double these figures. This has very significant implications for the bottled beer market.

Net zero threatens to kill off the beer bottle, brewers have warned. A looming “glass tax” meant to encourage recycling will shatter profit margins and prompt brewers to opt for cans instead, according to the industry. The choice of drinks on supermarket shelves will become more limited and bottles that are still available will cost more, ministers have been warned.

The British Beer and Pub Association (BBPA) said the new packaging tax, which will hit glass particular hard, could force brewers to abandon bottles altogether. Mark Kelly, a beer seller at London brewery Sambrook’s, said: “We think beer bottles will die off in the long term.”

This could potentially lead to a major shift in the market from bottles to cans. I ran a quick poll on Twitter/X, which showed that a slight majority of respondents would be unhappy with this, although just under half would either be indifferent or would actively welcome it.

POLL: What would be your reaction if your favourite bottled beer was put into cans instead?

— Pub Curmudgeon 🌸🍻 (@oldmudgie) February 10, 2025

So, while the potential cost savings will be compelling, there is a substantial barrier of customer sentiment to be overcome before drinkers can be persuaded to switch to cans. Bottles are generally perceived as classier and upmarket, while cans still carry something of a stigma, and are seen as an inferior container only suitable for low-quality beers. Quite a few drinkers will happily drink bottles, but draw a line at cans. There is also a persistent view that cans impart a metallic tang to beer, although this, while maybe true in the 1970s, hasn’t been the case for decades. Personally, while I recognise the aesthetic appeal of bottles, I’m really not particularly bothered, and recognise that the same beer will taste no different from either type of container.

The main categories of beer primarily sold in single bottles are “world lagers”, typically in a 660ml size, and “premium bottled ales”, mainly in 500ml. Some lagers are also sold in multipacks of 330ml bottles and appeal to those who like the ritual of drinking from the bottle, although these are generally also available in cans of the same size.

Most of these beers, in terms of overall volume, are sold by supermarkets, and they are generally sold in multibuy offers, such as 4 for £7 or 3 for £6. This tends to suppress the normal operation of the price mechanism, as they cover a wide range of products of different strength and perceived quality. There is no incentive to choose a particular bottle purely because it is cheaper. However, with recent duty rises, the economics of these offers must be under pressure now. Retailers and producers will have to think carefully whether it is best to take the hit of the EPR and increase the headline price of the offers, or take a gamble on customers accepting canned beers at a lower price.

A side-issue is the question of bottle-conditioned beers, which only account for a tiny proportion of the market, but assume a greater importance in the minds of many commentators. With a bottle, it is possible to see that the beer has cleared and then pour it carefully to ensure the sediment doesn’t enter the glass, but this is much more hit-and-miss with opaque cans. Some craft brewers have produced “can-conditioned” beers, but that is a market that is much more accepting of cloudiness. There have also been several examples of batches of cans exploding due to over-vigorous secondary fermentation. I can’t see strong imported Belgian bottled beers such as Duvel switching to cans, as their distinctive bottles are part of their appeal and they already command a substantial price premium.

There is, of course, an established precedent in that, over the past decade or so, the craft beer segment has pretty much entirely switched from bottles to cans, mainly in 330ml and 440ml sizes. They offer a bigger canvas for innovative graphic design, and they also establish a point of differentiation from the stuffy Premium Bottled Ales. Plus craft beer drinkers are by definition more open to innovation. But they have overcome any lingering stigma surrounding cans and proved that they can be sold by supermarkets as individual items and command a premium price. It also can’t have gone unnoticed that cans have better “green” credentials, as they are cheaper to transport due to their lighter weight, and can be more completely recycled.

Looking at the longer term, the government have said they will introduce a Deposit Return Scheme for England in the second half of 2027, but their proposals as they stand at present will exclude glass bottles. So might we see beers that had switched to cans to minimise EPR move back into bottles so they don’t need to add a deposit?

It’s hard to forecast how this will go – will the market reflect the higher desirability of bottles and bite the bullet on price, or will the cost pressures be so overwhelming that they will overcome customer resistance and compel a switch to cans? But it will be interesting to see how it pans out.