I don’t ever recall seeing an investment bank so directly call for a change in an industry’s practices as in the latest bulletin from Rabobank‘s beverage analyst team which unambiguously calls for a return to returnable, recyclable bottles.
The benefits are significant. Anheuser-Busch InBev, the world’s largest brewer, says switching to returnables can reduce the greenhouse gas (GHG_ emissions impact of glass packaging by 80%. When Coca-Cola introduced a new returnable PET bottle, it figured the consumer who returned the bottle paid 32% less than the consumer who purchased a nonreturnable bottle. It gets better: Coca-Cola also found the use of returnable bottles leads to a 15% higher likelihood of repurchase. “It’s hard to imagine another innovation having an impact of that magnitude.”
Both Coca-Cola and AB-InBev are focusing their efforts right now on Africa and Latin America, home to a disproportionate share of the world’s returnable packaging systems. “It’s far more cost-effective to protect those returnable systems that haven’t yet been destroyed than to build a new one from scratch,” Rabobank says. AB-InBev is partnering with startups that enable them to dramatically redue the wate and chemicals required to wash reusable bottles.
It’s a bigger challenge, of course, in wealthy countries that have evolved away from returnables. Germany did just that and is now scrambling to revive the practice. The problem in wealthy countries is that non-refillable bottles reduce cost for the supplier. But it’s not just the supplier. Big box retailers also are “obsessed with efficiency,” Rabobank says, “something that doesn’t jibe with the complex logistics of handling and storing reusable packaging.” And consumers in wealthier countries are more willing to pay for convenience, which makes it hard to influence behavior through deposits.
Even in markets like the US, there are still pockets of the market that rely on returnable, refillable packaging. The two most obvious examples are draft beer and those big, blue,
five-gallon jugs of water used in office water coolers and home services, like Nestlé’s ReadyRefresh program.
Rabobank lays out a program to boost the amount of returnable bottles that are used.
Step 1 is to begin with on-premise and owned accounts. “On-premise accounts act as natural aggregators of empty returnable packaging; return rates are essentially 100%. And since manufacturers/distributors are already regularly visiting those accounts to replenish stocks,
collecting those empties is relatively simple and minimally disruptive.”
Rabobank suggests that smaller produce4rs of beer, wine and spirits that face the highest price increases and scarcity of packaging, who also sell most of their product out of their taprooms, may be able to incentivize patrons to return spent bottles to be washed and reused. It notes that most people who sign up for a small winery’s wine club live within 50 miles of the winery, so asking them to return bottles shouldn’t be a big deal.
Step 2 is to standardize packaging. Coca-Cola is using a universal bottle for both carbonated and non-carbonated products.
Step 3 is to bottle closer to the consumer, reducing most of the freight and logistics expense.
Step 4 is likely to be a lot more difficult — convincing large retailers to support a returnable packaging system.
Step 5 is to get government involved. “When it comes to creating more sustainable packaging systems, the slow progress is not for lack of a solution, but a lack of will. Returnable packaging systems are an economically sustainable solution to reduce greenhouse gases and plastic waste, but this viable system is invariably subsumed by the drive for efficiency and expanding profit margins. There are people at food & beverage companies pushing to do the right thing, but their efforts are continually undercut by the hypocrisy of the industry’s actions,” Rabobank says. Solution: Government will have to mandate returnable packaging systems.