Solid Waste & Recycling

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Cover Story: Competing for Containers

Canadian deposit-return programs are moving into a new era of competition and cost scrutiny. Gone are the days of makeshift manual return counters in retail stores and no-frills depots. With deposit-r...


Canadian deposit-return programs are moving into a new era of competition and cost scrutiny. Gone are the days of makeshift manual return counters in retail stores and no-frills depots. With deposit-return now established as a permanent container recovery mechanism in most Canadian jurisdictions, what was once viewed as a marginal business has evolved into an attractive and in some cases lucrative business venture.

How lucrative? Excluding Manitoba and Ontario, the business of collecting empty bottles and cans in Canada is worth over an estimated $100-million in economic activity. Revenue is generated through handling fees — the per unit price paid to the collector of containers for the service of providing a collection centre for consumers, returning the deposit, sorting and preparing containers for final processing.

The depot monopoly

In most parts of Canada (Alberta, Saskatchewan, New Brunswick, Nova Scotia, and Newfoundland) only licensed agents can be compensated for container collection. Licenses are granted only if the agent meets the criteria outlined in the operating agreement and is located in a geographical area convenient for consumers. Licensing ensures that the collection agent has access to all the empty containers for a specific area, ensuring a minimum throughput. As the system operates today, if a more efficient collection agent wants to enter the marketplace in the same area, they would have to purchase the license from the existing agent.

In Alberta some liquor stores currently collecting beer containers are jostling for more business. Executive Director of the Alberta Liquor Store Association John Szumlas says, “Member stores can collect beer and liquor containers at a cheaper rate than depots and offer more convenience to consumers. But the container management Board will not issue any new licenses to protect existing depots.”

From a brand-owner’s perspective limited flexibility around collection makes it difficult to reduce costs and fraud. For example, New Brunswick’s Encorp Atlantic, the operating agent on behalf of non-alcoholic beverage distributors, issues about 1,500 letters of notice per year to depot operators over poor counts.

General Manager Brian Howell says, “It’s not uncommon that the miscounts can represent as much as 10 per cent less than what is reported.”

For Encorp’s brand owners this represents a pay out of an additional handling fee and deposit on each container that does not exist. This “slippage” (intentional or unintentional) is an enormous issue. Without free entry to the marketplace Encorp is forced to do business with the same agents as long as they retain the license. While Encorp can withhold payment for poor counts, quality control is costly and, within reason, can only be initiated on a random basis.

Return-to-retail

In other jurisdictions retailers are allowed to have a piece of the action. In British Columbia — where retailers are required by law to accept a certain amount of containers onsite — the Save-on-Foods grocery chain has embraced the business with its Changes Recycling Centres. The stores use a fully automated container collection system; generally, the only labour input is a visual count. In addition, because the store has a much larger business base (the grocery store) the net unit costs are significantly lower than they are for a depot. Save-on-Foods also sees this service as “value added” and therefore realizes a greater flow of customers through its stores. (See Letters, page 5.)

Quebec, meanwhile, has a long established return-to-retail system. Many large grocery chains have invested in automation, citing the profit potential of the collection business by minimizing labour input and maximizing compaction capacity. (See sidebar, page 10.) Return-to-retail is far more common in the United States where popular store chains such as Costco, A&P and Wal-Mart collect deposit-bearing containers onsite.

Driving efficiencies

Whatever the system, depot or return-to-retail, the rising costs of collection and subsequent increased handling fees demand system efficiencies. In the case of bottle depots, increasing throughput will improve their economies of scale. In Alberta, for example, if non-beer containers were returned at a rate of 85 per cent (versus the current rate of 74 per cent), 113,883,502 more units would run through depots. Enhanced recovery can be achieved through increased and/or improved education and awareness, as well as boosting the financial incentive to return (e.g., increasing the deposit value).

Also, the addition of new materials such as milk containers could have a “very dramatic effect on lowering the handling commissions of the containers currently in the system,” reports the Beverage Container Management Board (BCMB) concerning Alberta’s handling fee issue.

New stewardship initiatives may also offer depots an opportunity to expand a depot’s business base, thus rendering lower overall unit collection costs. Non-container materials such as electronics, batteries and other household waste items could be returned through expanded depot businesses, providing a greater ability to be competitive through reduced costs coupled with improved service options for customers.

In addition, rationalized sorting, automated container counting and reverse vending machines are viable initiatives for reducing labour in a cost structure. In some cases depots can save on space requirements by using onsite baling or crushing machines.

Finally, depot associations across Canada can assist their members by encouraging time management, materials management and best practices.

Says Jeff Linton, Executive Director of the Alberta Bottle Depot Association, “We already have two committees working on efficiencies, and we’re prepared to move forward.”

Whether the issue is electricity, air travel or phone service, some level of free-market entry for beverage container collection is inevitable. The big business of container collection means greater cost scrutiny, elevated competition and tremendous opportunities for system efficiencies through automation and rationalization. While Canada leads North America in overall container and waste recovery public policy, we may soon find ourselves leaders in optimum container collection systems as well.

Clarissa Morawski is principal of CM Consulting in Toronto, Ontario.

Container Handling Fees in Canada and the U.S. (May 2002)

Alberta
2.83 cents/unit for domestic beer
3 cents/unit <500ml
5 cents/unit >500ml and for liquor
3.55 cents/unit for imported beer
British Columbia
3 cents/unit for: Al cans, bi-metal <1L, pouches, tetra pak/gable top <500ml
4 cents/unit for plastic <1L
5 cents/unit for bi-metal >1L, tetra pak/gable top >501ml, glass
7 cents/unit for plastic >1L
Saskatchewan
2 cents/unit for refillable beer
3 cents/unit for aseptic & polycoat
5 cents/unit for aluminum cans
6 cents/unit for plastic containers
7 cents/unit for glass containers
Manitoba
1.4 cents/unit for all refillable and non-refillable beer
New Brunswick
2.2 cents/unit for refillable beer
3.2 cents/unit
Newfoundland
1 cent/unit for refillable beer
3 cents/unit
Nova Scotia
2.5 cents/unit for refillable beer
2.75 cents/unit
Prince Edward Island
2 cents/unit
refillable bottles
Quebec
2 cents for non-refillable containers — “incentive fee”
Yukon
2.5 cents/unit for aluminum cans, refillable beer and cider
4 cents/unit for liquor (200ml-499ml), glass, plastic metal, Tetrapak <1 litre
7 cents/unit for liquor (>500ml), glass, plastic, metal, Tetrapak >1 litre
$US
Connecticut
2 cents/unit soft drinks,
1.5 cents/unit for beer
Delaware
1 cent/unit
California
Weighted average of 0.21 cents/unit
Iowa
1 cent /unit
Maine
3 cents/unit
Massachusetts
2.25 cents/unit
Michigan
$0
New York
2 cents/unit
Oregon
$0
Vermont
3 cents/unit
Hawaii
To be determined (likely to be 2 cents/unit)

Source: CM Consulting and www.bottlebill.org

Note: Direct currency conversion for comparison sake is not recommended because handling fees are relative to the cost of goods in both Canada and the U.S.


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