Canada's soft-drink industry has followed its U.S. counterpart in switching to non-refillable containers. The Canadian market share for soft drinks in refillable bottles declined from about 47 percent in 1985 to less than 5 percent in 1997 [XIE]. One Canadian province, Prince Edward Island, has successfully resisted this trend by imposing a ban on all types of non-refillable soft-drink containers. Less restrictive policies, such as New Brunswick's half-back deposit, have been unsuccessful in stopping the decline of refillables in the soft-drink market. In New Brunswick and in other provinces, the Canadian soft-drink industry has opposed or defeated pro-refilling legislation and promoted taxpayer-funded curbside recycling as the solution to beverage container waste [BBOX][POST][LORA][SAPH, pp. 246-247].
Canada's beer industry, on the other hand, prefers the refillable bottle mainly because it is the least-expensive packaging option, says Usman Valiante, a consultant for the Brewers of Ontario [UVA]. The crucial cost savings come from Canada's near-100-percent return rates, which help ensure that bottles are reused 15-20 times [BAC]. Consumers inveterately return bottles and do not regard returning them as an inconvenience [YVON]. The refillable bottle's appeal to generations of Canadian beer drinkers has also influenced the industry's choice of packaging [GREG]. In addition, some Canadian policies supporting the refillable infrastructure, such as Ontario's tax on non-refillable containers, may help Canada's beer industry remain competitive with U.S. imports.
Although the popularity of refillable beer bottles makes refilling laws seem unnecessary, a few provinces have policies to ensure their use. The beverage container policies of Prince Edward Island and New Brunswick apply also to beer containers. Quebec uses a quota to maintain a market for refillables, and Ontario uses a levy to influence the packaging mix of beer sold in that province. All of these policies have boosted sales of beer in refillable bottles, says Ed Gregory of the Brewers Association of Canada. Canada's beer industry has a well-established refilling infrastructure, and Gregory does not foresee any movement away from refilling [GREG]. In 2001, in fact, several major Canadian brewers and several microbreweries entered into a renewed agreement among themselves to continue their use of the refillable bottle. The Brewers Association of Canada prepared the agreement and presented it to the brewers [YVON]. This agreement should help maintain the 70 percent market share of beer in refillable bottles [BAC].
Only one Canadian province--Prince Edward Island--has successfully preserved refilling by compelling soft-drink companies to use refillable containers. Its success is due to a simple but robust policy: a ban on all non-refillable containers for soft drinks and beer.
Policy development. Prince Edward Island's movement to preserve refillable soft-drink bottles began in the early 1970's, when litter on beaches and roadsides led to the 1973 Litter Control Regulations. These regulations ban the sale of canned beer and require that beer be sold only in refillable containers [REFB][BANS][GGGH]. In 1977, Prince Edward Island began regulating soft-drink containers by banning non-refillable bottles for soft drinks which have at least a 26 percent market share.
In the early 1980's, most Islanders preferred refillable bottles, and local soft-drink producers did not use cans. At that time, however, out-of-province soft-drink producers were dumping canned soft drinks at low prices on the island during the summers. This dumping created more litter, some of which damaged farm implements. These events, limited landfill space [GGGH], the absence of aluminum recycling plants on the island, the presence of a glass recycling plant in New Brunswick, and the desire to preserve the local bottling industry led to the 1984 expansion of the 1973 Litter Control Regulations. The expanded regulations effectively banned cans by requiring that all carbonated flavored beverages be sold only in refillable containers [REFB][BANS]. Finally, in 1999, Jones Soda's attempt to evade the ban by not refilling its bottles with soda pop led to the revised legal definition of "refillable [MACK]." For further explanations of this definition, see [LCRA] and [GIDE].
The province's Environmental Protection Act grants the Lieutenant Governor in Council the authority to regulate the use of beverage containers [OLC]. Regulations establish minimum deposits and minimum refunds for different sizes of bottles and require retailers to take returns for any product that they sell. The minimum deposits by container volume are the following: 500 ml or less, 20 cents; 501-1500 ml, 40 cents; greater than 1.5 L, 80 cents. The minimum refunds are 17, 34, and 70 cents, respectively [REFB].
Deposit-return system. For every order of beverages, the retailer pays the bottler the associated deposits and then charges them to customers [CRI, p. 39]. Customers return their empty containers to stores or depots, and the bottlers retrieve them for refilling. While stores and depots may keep a minimum portion of the deposit to compensate themselves for handing and storage costs, most stores fully refund the deposit to customers. Soft-drink bottlers keep the unredeemed deposits, which compensate them for unreturned bottles. In 1999, this system brought Prince Edward Island a 98 percent recovery rate for soft-drink containers--the highest among all of the provinces [PEIS]. Results. The ban on non-refillables has helped control beverage container litter and has made Islanders more aware of the need to reduce litter and waste, according to Darin MacKinnon of the Department of Fisheries, Aquaculture, and Environment [MACK]. The province's policies have also brought economic benefits. Seaman's Beverages, the only soft-drink bottler in the province, employs nearly 100 full-time workers and 20 seasonal workers [GGGH]. About 10 of the 20 production workers at Seaman's help wash and process empty bottles. Rundell Seaman, chairman of Seaman's Beverages, guesses that he would probably employ 37 persons in all if he used only non-refillable containers [SEAM]. Nevertheless, the job security of all of Seaman's staff depends on the ban. A former sales manager for Coke's Atlantic Canada Region says that Seaman's would have to close if the province repealed the ban on non-refillable soft-drink containers [GGGH]. Rundell Seaman would agree [SEAM].
Outlook. In spite of Coke's aggressive lobbying to repeal the ban on non-refillable soft-drink containers, the provincial government has firmly upheld it [GGGH]. In fact, the government is considering extending the ban to newer types of beverages such as sports drinks. With the government's firm support of the ban, the future of refillable soft-drink bottles appears secure in spite of the threats against the policy. These threats come not only from Coca-Cola, but also from residents of the island. Expansion of recycling programs has caused some Islanders to question the need for the ban [MACK]. Other Islanders apparently have been spending about $4 million a year on purchases of canned soft drinks from the mainland, according to a 1998 University of Prince Edward Island study that was sponsored by Coca-Cola Beverages, Ltd. [GGGH][PEIS].
While Prince Edward Island has enjoyed success with its beverage container policies, its mainland neighbor, New Brunswick, has encountered many obstacles to reviving a market for refillable soft-drink bottles. In the early 1990's, New Brunswick legislators proposed beverage container deposit laws that emphasized the use of refillables but ultimately passed only part of the legislation [NBEN][LORA]. One of the surviving provisions, a full refund of the deposit for refillable containers and only a partial refund for non-refillables, has yet to result in a viable market for refillable soft-drink bottles in the province. In fact, less than two percent of the soda pop sold in New Brunswick comes in refillable bottles [JAHG]. New Brunswick's experience provides valuable lessons about the difficulties that come with proposing legislation to promote refilling and about the insufficiency of deposit incentives.
Policy development. Concern about litter motivated the government to propose beverage container deposit legislation. The 1991 legislation, the Beverage Containers Act, originally required bottlers to supply refillables in all locations and to give them the same exposure and pricing as non-refillables. Lobbyists from the soft-drink industry successfully persuaded legislators to reject this provision and to reduce the mandatory deposits [NBEN][LORA]. The deposit is 10 cents per single-serving container for any non-alcoholic beverage, and the refund is 5 cents for non-refillable containers and the full 10 cents for refillables [DELG]. This "half-back" deposit provision is the only part of the Act which explicitly promotes the sale of soft drinks in refillable containers. Another part of the original legislation required retailers to take bottle returns, but lobbyists from the retail grocery industry successfully defeated this provision [RENB].
Results. "Shortly after the legislation was proclaimed, refillables started to disappear from store shelves. Within about 8 months, it was difficult to find them," says Mary Ann Coleman of the New Brunswick Environmental Network [NBEN]. Joanne Glynn, a waste management planner in the New Brunswick Department of Environment and Local Government, adds that New Brunswick consumers now do not have many choices of soft drinks in refillable containers [JAHG].
The negligible market share for these soft drinks has been attributed not only to the weakened legislation, but also to the province's deposit-return system. In this system, the consumer receives five cents for returning each empty single-serving non-refillable container. The other five cents from the 10-cent deposit is ultimately split between the provincial government's environmental trust fund and the beverage companies. The portion that goes to beverage companies helps them finance their recycling operations [DELG]. These funds appear to be a strong disincentive for the beverage industry to package its products in refillable bottles.
The beverage industry not only has an incentive for resisting refillables, but also an instrument for doing so. The industry and New Brunswick retailers operate a consortium, Encorp Atlantic, that manages the province's deposit-return system. When Seaman's Beverages tried to put its products on New Brunswick's store shelves in refillable bottles, Encorp insisted that only its redemption centers could legally collect the empty bottles. Seaman's, however, wanted to retrieve the bottles directly from stores during delivery stops because this is more efficient than making separate stops for delivery and for retrieval. Rundell Seaman, chairman of Seaman's Beverages, says that New Brunswick's system effectively bans refillables. High stocking fees and the vertical integration of the grocery industry also have discouraged Seaman's from marketing its old-fashioned soda pops in refillable bottles in New Brunswick [SEAM]. Outlook. Any movement toward stronger refilling legislation for soft drinks appears to be non-existent. Both Coleman and Glynn say that they know of no citizens' campaigns to persuade the provincial government to make laws that further promote the use of refillable soft-drink bottles [NBEN][JAHG]. Furthermore, New Brunswick consumers perceive the Beverage Containers Act as "environmental legislation," but it really "is not driving a positive environmental change [NBEN]." Such complacency about beverage container waste could undermine any movement to strengthen the Act. The availability of curbside recycling also could extenuate any demands to improve refillable beverage container policies. In fact, the only policy change that Glynn foresees is an increase in the deposit from 10 cents to 15 or 20 cents [JAHG].
While Canadian soft-drink bottlers have dismantled most of their refilling operations, Canadian brewers have firmly and loyally upheld their tradition of refilling. Provincial governments have helped maintain this tradition by enacting policies such as Quebec's quota on non-refillable beer containers. This quota is not a regulation but a provision of an agreement that brewers and distributors sign with the provincial government.
Policy development. Concern about beverage container litter led to a provision in the 1984 agreement which required that brewers package no more than 37.5 percent of the volume of their beer in cans [YVON]. Because some brewers were packaging beer in one-way bottles [CRI, p. 31], the provincial government instituted a new quota in its 1995 agreement. The 1995 quota, which is part of the 2001 agreement, requires that no more than 37.5 percent of the total number of containers in a brewer's sales be non-refillable. The fines for exceeding this quota are 15 cents per container for the first 10 percent of excess and 30 cents per container for any excess above 10 percent [YVON]. If 42.5 percent of the containers in a brewer's sales are non-refillable, for example, then the fine is 15 cents per container. If 52.5 percent are non-refillable, then the brewer pays 15 cents per container for the first 10 percent of its excess and 30 cents for the remaining 5 percent.
A law titled An Act Respecting the Sale and Distribution of Beer and Soft Drinks in Non-returnable Containers requires that anyone who sells or distributes beer in Quebec in non-refillable containers must obtain a permit to do so from the Minister of the Environment [YVON][NRCA][RNRQ]. To obtain a permit, the applicant must either enter into an agreement with the Société Québécoise de Récupération et de Recyclage (Recyc-Quebec) and the Minister of the Environment or comply with beverage container regulations that have been established under the authority of Section 70 of the Environment Quality Act [NRCA]. Section 70 addresses hazardous materials and authorizes the Minister of the Environment to regulate their handling [EQAQ]. In summary, a brewer or distributor who wants to sell beer in Quebec has three options: sell beer only in refillable containers, sign an agreement with the provincial government, or have their containers regulated as hazardous materials. Results. The prevalence of refillable beer bottles, which make up about 80 percent of the volume of all beer in the Quebec market [YVON], and return rates of nearly 98 percent [RNRQ] help brewers reduce packaging costs and help the province reduce its waste. Although U.S. brewers generally prefer to package their products in aluminum cans [SAPH, pp. 182-184], they work with major Canadian brewers to sell American beer in Quebec in the industry's standard refillable bottle. Labatt packages Budweiser and Bud Lite beers, and Molson does likewise with Miller and with Coors. Another U.S. brewer took a more direct approach to refilling for the Quebec market. Before Sleeman acquired Stroh Breweries, Stroh sold about 70-75 percent of its beer in Quebec in refillable bottles. Stroh's empty bottles were washed in Quebec and returned to Pennsylvania for refilling [YVON]. Outlook. Yvon Millette, President of the Quebec Brewers Association, says that Quebec brewers will continue refilling for the following reasons: refilling is still the most economical way to package beer; beer drinkers have loyally maintained the tradition of buying their beer in refillables and returning the empties; and Quebec brewers have joined other Canadian brewers in a formal agreement to continue the use of the refillable bottle [YVON].
While Quebec uses agreements with brewers to maintain a prevalence of refillable beer bottles, Ontario uses a tax instrument to alter its beer market to favor refillables. This tax instrument is a $0.0893 tax for each non-refillable container. The 10-cent levy is the sum of this container tax, a 7-percent federal goods and services tax on the final sale price of the container, and a 12-percent provincial sales tax on the final sale price of the container. All brewers who sell or distribute beer in Ontario pay the levy to the provincial government [UVB][LLA]. Although the levy is known as the "environmental levy," some Canadian observers [GUZZ][IANJ] and U.S. brewers have construed it to be a policy to protect Ontario's beer industry.
The levy, however, helps protect the refillable bottle, which is an essential component of Ontario's beer industry. Ontario brewers prefer refillables because they minimize the costs and the environmental impacts of beer packaging. Moreover, weak markets for recovered brown glass make one-way bottles an environmentally inferior option [UVA]. The advantages of using the refillable bottle give Ontario brewers compelling reasons to campaign for policies that protect its use. Policy development. The government of Ontario began actively promoting refillable beer bottles in 1989 with a five-cent levy on wines, liquors, and imported beers. At that time, U.S. and other foreign beers were not subject to a deposit, and foreign brewers could choose not to join Canadian brewers in recovering all packaging waste from the distribution and sale of beer [UVB]. Although the rationale behind the levy was the need to compensate the province for the disposal of non-refillable alcoholic beverage containers, its waste management and other environmental programs did not directly receive the revenues [GUZZ].
After a 1991 GATT ruling required Ontario to improve market access for U.S. beer [GATT], the province's beer industry urged its government to impose regulations that would mitigate the threat of U.S. beer and preserve the successful deposit-return system for beer bottles. After considering both a regulatory and a tax policy, in 1992 the provincial government increased the levy from five to ten cents and applied it to all beer in cans. Doug Macdonald, Ph.D., a lecturer in environmental studies at the University of Toronto, has suggested that Ontario preferred the levy increase for three reasons: the risk of complicating negotiations with the soft-drink industry over funding for curbside recycling, the difficulty of enforcing regulations such as quotas, and the revenues that the levy could generate [GUZZ].
The levy rendered a competitive disadvantage to American beer, most of which was canned, by effectively increasing the price of a can of beer by 10 percent [GTEP]. However, an analysis of Brewers Association of Canada data suggests that the levy only temporarily affected the competition between American and Canadian brewers. The Ontario market share for Canadian beer, which had been slowly declining, increased from 96 percent in 1992 to 97 percent in 1993. After this jump occurred, the market share continued its decline to 92 percent in 1999 [BACX]. Results. Although the 10-cent levy had almost no impact on U.S.-Canada competition for the Ontario beer market [UVA], it apparently changed the packaging mix shortly after it became effective. Sales of canned beer fell by almost 50 percent in 1992 [GTEP], while the market share of beer in refillable bottles jumped from 80 percent in 1990 to 92 percent in 1995 [CNWM, p. C-6]. In 2000, 81 percent of beer sales came in refillable bottles [BRI], while only 9 percent came in cans [BACX]. Macdonald believes that the levy has had a significant impact on sales of beer in refillables through its impact on consumer behavior [DOUG].
The preservation of Ontario's market for beer in refillable bottles has helped to preserve the deposit-return system and other operations that specifically support refilling. The retailers' deposit-return system not only recovers almost 98 percent of refillable bottles [BRI], but also facilitates the reuse or recycling of secondary and transport packaging and the recovery of aluminum cans [UVA]. Brewers Retail, Inc. (BRI) claims that it recovers almost 98 percent of its packaging and diverts about 500,000 metric tons of material from the waste stream each year [BRI]. BRI's recovery operations reduced its waste disposal costs from a peak of $1,500,000 in 1992 to only $129,000 in 1994 [HMM]. In fact, all foreign brewers now participate in these recovery operations [UVB]. In addition, recovering, washing, and processing of refillable bottles employs over 2,000 persons in Ontario [BRI]. Finally, another economic benefit of the 10-cent levy has been the revenue that it has generated for Ontario--more than $40 million in 1998 [KICK].
Ontario beer drinkers can still buy their favorite brews--Canadian or American--in cans or in bottles. In fact, under agreements with these American companies, Ontario breweries package Anheuser-Busch and Coors beers in the industry's standard refillable bottle. Other American brands, including Stroh and Old Milwaukee, are sold in cans [UVA]. Outlook. Ontario's 10-cent levy on non-refillable beer containers has survived the 1993 resolution of a U.S.-Canada trade dispute [SAPH, p. 245] and the aluminum industry's 1999 ad campaign against it [KICK]. The levy has also survived a conservative provincial government, which abrogated many other environmental protection laws during the late 1990s. There is no guarantee that the levy will remain, Macdonald says, but its ability to generate revenue may ensure its survival [DOUG]. Regarding its ability to boost sales of beer in refillable bottles, the levy might lose some of its effectiveness if new technology reduces the cost of canning beer and brewers pass this cost savings to Ontario consumers.
[GATT] Canada--Import, Distribution, and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies. Report by the GATT Panel, 18 February 1992 (DS17/R - 39S/279). Washington: Organization of American States, 1999. (B)
[GIDE] Prince Edward Island Department of Fisheries, Aquaculture, and Environment. "Refillable Beverage Containers: A Retailer's Guide to the Regulations."
[IANJ] Irvine, Ian J. and William A. Sims. "Interprovincial Barriers in the Beer Trade." Provincial Trade Wars: Why the Blockade Must End. Ed. Filip Palda. Vancouver: The Fraser Institute, 1994. 1-46.