Deposit Return Systems

Last modified: March 23, 2019
In the Public Interest
by Steve Apotheker
Resource Recycling's Bottle/Can Recyding Update
Commentary - March 1995

The drastic increase in aluminum prices has caused a howl among packagers that use the popular metal container. The National Soft Drink Association (Washington) has been particularly vocal in charging the aluminum industry with creating a producers cartel responsible for part of that price increase.

Although soft drink consumers may feel a slight goring sensation, the public's ox was slaughtered 15 years ago when soft drink packagers muscled Congress for antitrust immunity for their exclusive franchises.

In 1978, the Federal Trade Commission scared soft drink bottlers by ruling that the use of exclusive territories was illegal. But it gave the bottlers an out, ruling that operations using refillable bottles deserved this legal protection because production and distribution of refillable bottles demanded geographically concentrated operations and also because of the sizable investment made by a bottler in the number of bottles in circulation.

In the wake of the FTC decision, the bottlers turned to Congress for protection. Executives from Coca-Cola and Pepsi-Cola marched to the Hill, arguing that exclusive territories were necessary to protect the environment through the use of refillable bottles, preserve small businesses and maintain bottler investment. However, the bottlers and their Congressional advocates rejected any mandatory legislative requirement to use refillable bottles. In 1980, the Soft Drink Interbrand Competition Act was passed overwhelmingly by both houses.

The Soft Drink Act granted considerable benefits to the bottlers in the form of exclusive franchises in return for reciprocal social welfare gains, such as refillable bottles and small businesses. But the public good has been ill-served in the last 15 years.

For example, the use of refillable glass bottles for soft drink packaging has declined from virtually 100 percent in 1958 to 38 percent in 1980, and is less than 2 percent today. The industry usually attributes the decline in refillables to the demand for "convenience and an active lifestyle."

However, peering behind the myth of the free market shows that refillables have disappeared because they were simply not available and were not promoted Bottlers tiers and retailers refuse to stock the product, or carry refillables only in selected brands or sizes. And in places where refillables were available, stores often chose other soft drink packages on which to offer big discounts to get customers in the stores.

Recently, the Coca-Cola Company was asked if it would introduce plastic refillable bottles in the U.S. Although the company has introduced the package in Europe and other markets, according to Kathryn Norton, a spokesperson for Coca-Cola, "We adapt our packaging to meet the individual needs of each market. In the U.S., there isn't a current need for plastic refillable bottles."

At least one company has voiced that need to Coca-Cola. But although the free market system usually holds that "the customer is always right," Coca-Cola has declined repeated requests by Steward's Corp. (Saratoga Springs, New York), a convenience chain with 190 stores, to market Coca-Cola in plastic refillable bottles. The convenience store company wants to use refillables because packaging costs would be lower. The price of a soft drink package accounts for "about 48 percent of a bottlers' tiers' cost of goods sold," according to Beverage World (Great Neck, New York). This is more than the cost of the product, 35 percent, or the labor to handle the package, 17 percent.

To the credit of the soft drink industry, its packages do have a recovery rate that exceeds 50 percent While laudable, it is far short of the recovery rate for refillable containers, which exceeds 90 percent in those countries that still maintain active systems. But, even taking recycling at face value, the U.S. bottlers have still given the American public the short end of the stick

To deal with the proliferation of one-way beverage containers that have replaced refillables, communities have instituted curbside recycling collection programs. Although this public policy has been strongly supported by the soft drink industry in name, its members have failed to become active participants in funding this alternative. By comparison, the soft drink industry in Canada has joined with other packagers to create a fund that offsets costs incurred by communities operating recycling collection programs.

Turning to the small business argument, the number of bottlers has declined significantly, mirroring the demise of the refillable bottle. In the 1950s, there were about 6,000 bottlers, dropping to 3,000 by 1970 and down to 1,500 by 1980. In 1994, there were only 560 bottlers, declining by 50 each year. And of those that survive, fewer

remain as independent businesses. In fact, Coca-Cola and Pepsi-Cola now have an equity interest in over two-thirds of their markets.

In 1995, it seems clear that the public interest is no longer served by maintaining exclusive franchises and the Soft Drink Act The environment has suffered from the loss of refillable containers, which has resulted in more resources being consumed and more containers landfilled. The consumer is faced with packages that cost more than the product. In addition, citizens bear additional costs for recycling collection programs. And communities have lost jobs as smaller bottlers get swallowed up by bigger ones.

It is not realistic to expect that the soft drink packagers will make any changes on their own. After all, it wasn't the garbage haulers who independently started recycling collection programs, and the newspaper publishers and newsprint mills did not take the initiative to add recycled content to their product These industries did respond decisively once the public good was clearly set forth. And the results have been extremely popular and successful programs.

The Soft Drink Act needs to be gutted, or at the very least refitted with specific requirements to ensure that the entire public benefits. First, Congress should require the industry to provide a designated level of funding for residential recycling collection programs, along with other packages being served by these programs.

Second, Congress should set a minimum level of refillable use by all beverages, except milk A number of European countries and Canadian provinces mandate use of refillable containers for 60 to 80 percent of soft drink and beer sales.

It seems ironic that on the 25th anniversary of Earth Day the biggest beverage company in the world is rolling out its contour plastic bottle with a tremendous promotion campaign, whose message is a nostalgic tie to its original bottle. We need more than a shadow of the past; we need the Real Thing, which includes a refillable bottle at the lowest cost to the consumer and the environment, and more jobs in our communities.

[Acknowledgement is given to an article on the Soft Drink Interbrand Competition Act by Allan W. Vestal, published in Vol. 34, No. 2, Winter 1993 issue of the William and Mary Law Review. j

Resource Recycling's Bottle/Can Recyding Update - March 1995

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