Why brands must make reusable packaging a commercial priority

The reusable packaging industry spends most of its time discussing the environmental benefits of reuse and the absurdity of the wasteful, down-cycling-dominated, linear economy.

While the environmental and climate benefits of reuse are important and exciting, most stakeholders understand these benefits but are yet to achieve mainstream scale. Why is this? It’s because the elephant in the room is not addressed - economics.

To truly scale reusable packaging, it must compete with single-use on cost. Whilst working inside some of the world’s largest FMCG brands, I’ve seen first-hand how brands can make radical changes to packaging and supply chains, investing hundreds of millions of pounds to make incremental gains to their profit and loss accounts.

But what if reusable packaging was lower in cost of goods than single-use? What if any economist could look at the profit and loss of reuse and advocate for change?

This is not a pipedream. The macroeconomics of the packaging industry is changing wildly, it could be cheaper than single-use by 2024. Here’s why:

Over the last 50 years, single-use packaging has been so cheap that reuse models could not possibly compete financially, but this is changing quickly.

The cost of all materials has been steadily increasing since 2004 (averaging at about 7% year-on-year for glass), however, over the last two years we've seen a 23% spike in the cost of materials alone, as shown by the chart below. When added to the rising cost of energy, labour shortages and material scarcity, some of our customers have seen 80% increases in the price of packaging.

I often get asked, "Do you think prices will continue to rise?" Whilst a fair amount of crystal ball gazing is required, it seems clear that the supply of energy, raw materials and labour will only continue to become more scarce. Demand for packaging will only increase as a result of the growing population and accelerating consumption. So yes, in my view, it will continue to rise at the same rate or above.

Producers who turnover more than £2 million and place more than 50 tonnes of packaging on the UK market need to buy Packaging Recovery Notes (PRNs). PRNs are proof of the material being successfully recovered from the market and the fees generated subsidise the collection activity. The price-per-tonne paid by producers varies across material types and on a monthly basis.

PRNs have changed dramatically in cost over the last three years. In January 2020, a PRN cost £16 per tonne for glass remelt. Fast forward to January 2023 and the same PRN costs £100 per tonne. This change has been driven by the increasing cost of waste collection and demand from brands for PRNs.

Extended Producer Responsibility (EPR) is a regulatory tool or 'eco-tax' to be introduced in 2024. It requires producers to be significantly more responsible for their post-consumer products by paying an additional fee as an incentive for sustainable product design. It is hoped this will encourage the adoption of refill and reuse models and boost the collection of their waste.

Ecosurety provides compliance advice to the industry and is predicting the new legislation will cost the UK glass industry £205 million in 2024, equating to an additional £106 per tonne of packaging placed on the market.

Yes, you read that correctly. Reusable packaging will have a lower cost per unit than single-use in 2024. How is this possible?

1. Reused packaging is exempt from PRNs and EPR. Producers only pay for new containers placed on the market. Every subsequent reuse is exempt, so the more times a container is reused, the bigger the saving.

2. Reusable packaging doesn't need to be more expensive to manufacture. Using our supply chain data and testing laboratory, we've been able to show that many containers can be safely reused with only minor design tweaks.

Let's have a look at an example, considering a 1L glass bottle sold in the UK in 2024. Note, for reuse, manufacturing cost, PRN and EPR are charged on the first use only.

Single-use packaging is not as cheap as it used to be. With rising commodity prices and increasing legislation, brands should be accelerating their transition to reusable packaging. The adoption of reusable packaging is no longer just an environmental imperative, it's a necessity to maintain a profitable business for brands. The question is becoming: can you afford not to?