Industry expert urges industry to embrace the chance to cut excess packaging.
The impending due date for Extended Producer Responsibility (EPR) fees could yet increase tension between retailers and FMCG manufacturers as the latter seek to get the former to meet part of the costs, an industry specialist has warned.
Anthony Carr, Managing Director of FMCG and retail capability specialists Sellex, says it is possible that some manufacturers may be caught financially off-guard if they have not been putting fees to one side ahead of the due date for the first year of EPR fees on 1 April 2025. Most notable is the fact that charges will be calculated based on 2024 volumes delivered by brands.
“Given the background of the cost-of-living crisis over the past year or more, the last thing manufacturers or retailers want to do is to pass on additional costs to the consumer,” says Carr.
“For that reason, those who are perhaps less prepared are likely to look to retailers to share the cost burden. Retailers will almost certainly push back on this, and we are hearing of an increasingly stone-wall approach to price conversations amongst retail customers. This risks further increasing tensions between the two parties. And given that the retailers hold many of the cards, in terms of listing and delisting, particularly when it comes to all but the largest brands, the FMCG sector will need to be cautious how far it pushes this. Either way, manufacturers need to get ready to negotiate hard because a further separation between retailer and producer is not in anybody’s interest.
“The bottom line is that re-formulating packaging is going to take time, there will be increased pressure on P&Ls – so brands need to look at other inefficiencies and optimisation opportunities, which maybe they don’t seem to recognise but are very real nonetheless.”
In a recent article, The Guardian said that food companies and analysts had warned that the costs of the scheme would be passed on to consumers, with estimates of an extra 2p on a jar of mustard, 4p on a bottle of beer and 9p on a bottle of wine. However, the government has published new estimates for the base fees for the scheme that are lower than previous figures after lobbying from the industry over the costs.
A Defra spokesperson is quoted as saying that the reforms would create 21,000 jobs and stimulate more than £10bn investment in the recycling sector over the next decade.
“But against a backdrop of now subsiding food inflation,” continues Carr, “the short-term impact can only be to pass unwanted additional costs on to consumers. Shoppers have had enough.”
So, what could FMCG companies be doing now to mitigate the risk and offset the chance of conflict with retailers over the next six months or so. Carr says that whilst changing packaging will take time, one approach could be to fix compliance at source through cross-manufacturer compliance, harnessing the power of EPOS, inventory and observational data. There is so much wasted investment in point-of-sale materials, cardboard displays, aluminium display units etc. which don’t even get to the shopfloor, that there is an opportunity to support the P&L by working smarter.
“Re-formulating packaging strategies will take time, but at least EPR will create some much-needed additional momentum. Manufacturers should view EPR as an opportunity to sort out their excess packaging,” he says.
“EPR is a critical step in driving greater accountability amongst brand owners and retailers alike. It’s just that many manufacturers will not have their ‘eye on the ball’ on this one. What remains true is that, across the food and drink supply chain, we see waste – in the form of wasted point of sale material, in terms of poor compliance and in food waste. We see some fantastic initiatives in terms of instore recycling initiatives. These are a great step forward, but how about not throwing away tonnes of cardboard every year through wasted POS materials as a great start? Given the levels of big data in the consumer goods industry, this waste is criminal but visible every single day in stores”
EPR fees are environmental policy costs paid by producers based on the amount of packaging or products they put on the market. The fees cover the costs of collecting, sorting, recycling, and transporting waste, as well as creating consumer awareness. The regulations apply to all UK organisations that import or supply packaging. Manufacturers are required to collect and report packaging data for a given year if they are an individual business, subsidiary or group; have an annual turnover of £1 million or more; were responsible for importing or supplying more than 25 tonnes of packaging to the UK market in the previous calendar year or carry out any of the packaging activities .
