New Zealand grocery shoppers are the most promotion-driven in the world. The latest data I’ve seen showed almost $6 in every $10 spent on groceries were sold on promotion (compared with $4 in Australia and $3 in the UK). Countdown and Foodstuffs have acknowledged “price, price, price” is the No 1 thing consumers expect when they’re shopping.
That trend seems to have increased since the Covid-19 lockdown as the pressure went on jobs and incomes, and it’s likely to continue into the foreseeable future as more jobs are forecast to be lost, putting further pressure on household budgets.
You would think, then, that this isn’t a great time to be talking about hiking prices. But that’s what will happen to the sales tickets of beverages sold in supermarkets if the Government introduces an unnecessarily large tax to pay for its proposed beverage container return scheme (CRS) and this is passed on through to shelf prices.
As I write this, a CRS Design Working Group appointed by the Government is racing to finalise a report on a design for a scheme that has good intentions: greater container recovery, a reduction in packaging pollution, and a step closer to a circular economy. That report was due to be sent to the Minister for the Environment in July, with the aim of making an announcement before the election.
Most people will like the idea of such a scheme, and it’s certainly right in line with the aims of the Food & Grocery Council and its members, who recognise New Zealand needs to be doing more to encourage recycling, reusing and composting packaging, and are keen to play a big part in that. Our Sustainability Committee, which is looking at a whole range of initiatives along those lines, has a group dedicated to investigating the best form of container return scheme.
Despite the Food & Grocery Council being left off the local council-dominated CRS Design Working Group, some of our members have provided input via representatives from the wider beverage industry, who were finally added to it. And rightly so, because industry has the expertise and experience after working with similar schemes around the world, including Australia.
The problem with the scheme as proposed so far is its design and the size of the redemption the councils want. The industry is facing an uphill battle as the council representatives push for control of the scheme that will give them a bigger piece of the revenue pie. A current proposal being discussed is for consumers to get a redemption of 20 cents – double that collected across Australia. When you add around 10c for processing costs and bureaucracy, and plonk GST on top of that, it’s not hard to work out that the cost of the scheme to the industry and to consumers will very high – probably more than 35c per container. It’s a cost that will have to be passed on and borne by consumers.
For example, by my calculation that means the retail price of a 24-pack of beer would increase by more than $8. At an estimated total cost of $600 million, the scheme would collect much more revenue than it needs to run it.
The working group can’t even claim the redemption must be 20c to incentivise consumers to return enough containers to make a difference, because in other countries 10c works perfectly fine: South Australia’s collection rate is 80%, while Sweden’s is 85% – exactly the return rate our Government wants to achieve.
The beverage industry is committed to playing a major part in container recovery to reduce packaging pollution and work towards a circular economy, but it wants it done in an effective, accessible, and user-friendly way that is not a money-making exercise for councils.
In Australia, where several states have had these schemes for many years, costs are met by the industry and profits are held in trust and put back into the community. That seems like a perfectly adequate method, but right now it seems the industry is the only one not wanting an expensive scheme that unnecessarily boosts the price of everything from beer, to water, to wine, to milk.
(originally published in Supermarket News)