Drinks companies confirm price rises under NSW CDS scheme

Drinks companies including Coca Cola Amatil and Lion have confirmed the NSW Container Deposit Scheme will lead to consumers paying more at checkouts from December 1.

Coca-Cola Amatil has revealed in a statement that it will recover costs of NSW’s new container deposit scheme by raising prices.

“Coca-Cola Amatil intends to recover the fees of the CDS by passing these through to customers,” the company said.

“The recovery of the fees by Coca-Cola Amatil will constitute an additional charge being added to our pricing to customers.”

Scheme coordinator Exchange for Change released initial costs to the industry on Friday. It estimates there will be 3.5 billion eligible containers a year in NSW that will be subject to costs ranging from 11¢ to 14¢ a container.

Beverage suppliers are responsible for covering the cost of the 10c refund to consumers, along with the cost of managing the scheme.

Leading analyst David Errington from Bank of America Merrill Lynch has released a report suggesting the scheme will hit the discount end of the market hardest.

"The price increase is particularly pronounced for multipacks (such as 24x water) which may increase by about $3," he said.

"Given that private label multipack water currently retails for $6, this has the potential to change consumer behaviour significantly.

"Simplistically, this imposes a cost increase of at least $100 million for Coca-Cola Amatil – which is made of 10¢ per container in deposition and between 1¢ and 4¢ per container in handling costs." 

Lion has also informed retailers that costing estimates could see $2.84 to $3.38 added to the price of a 24-pack of bottled beer under the scheme.

Earlier this month, the Australian Beverages Council chief executive officer Geoff Parker told news.com.au that while his organisation broadly supports the scheme and the NSW government’s target to reduce litter, but family budgets would take a hit if administrative costs of the scheme hit 10c per container.

“That starts to impact NSW households pretty heavily, not just on a per container basis, but when families are buying a 30 pack of soft drink cans or a carton of beer, all of a sudden that starts to have a pretty serious impact,” he said.

Exchange for Change outlines costs and timelines for scheme

According to Exchange for Change, the total estimated range of fees for the first three months of the NSW CDS will start at 13.54c and go down to 10.94c for aluminium, 14.07c and go down to 11.36c for glass, and 13.78c and go down to 11.13c for PET.* 

The costs per container are calculated based on a number of variables to ensure they reflect actual redemption rates over time.

The first three months of fees are estimated, with subsequent invoicing periods to reflect actual redemption rates. As this is a new system and the database for returns needs to be established, the initial three months’ fees will be based on the past 12 months of containers produced, by market share, and an estimate of the initial return rate.  
The higher estimated cost in the initial months reflects a loading to account for uncertainties around the extent to which consumers may stockpile eligible containers in advance of the Scheme’s commencement.   

Any discrepancy between the estimates and actual data will be rectified with suppliers in early 2018. Ongoing, fees will be based on validated running costs and redemption rates for the 10 cent deposit paid and costs of returning containers via the scheme for recycling.  

Costs of running Return and Earn will change over time, as the scheme is established and consumers take up the opportunity to get cashback on eligible containers.  

The key factors affecting the fees are the numbers of containers returned (redemption rates), the type of material returned and the method by which they are collected – either via consumer collection points or traditional kerbside rubbish collection.  

The first invoice will be issued a month before the commencement of the Scheme, on 1 November, to ensure the system is liquid and ready to operate for the community on day one. 

Beverage supplier obligations 

To comply with the new legislation, beverage suppliers must do three things: 

1) Suppliers must have a supplier agreement in place with Return and Earn by 1 October. 
To encourage on-time registration, suppliers who do not have their agreement in place by 1 October, will face a short term, refundable fee of 2 cents per container. 

2) Suppliers must register each of their eligible containers with the EPA via a container registration portal by 1 November.  

Approval is needed for each class of container supplied and granted for five years. An EPA administration fee will apply.  

3) Suppliers must pay an initial invoice in advance of the commencement date of the scheme, which will be issued on November 1, to ensure the liquidity of the scheme.