- Confirmation of the Producer Fee will give drinks suppliers greater clarity over DRS costs.
- For retailers and wholesalers, it heralds critical conversations with suppliers about price, terms, deposits, product changes and stock
The UK Deposit Return Scheme (DRS) Producer Fee will matter most directly to drinks producers and importers. But its confirmation should also matter to their retail and wholesale customers.
Many suppliers will already have been modelling possible DRS costs. A confirmed fee gives them greater certainty over one of the significant costs they will face when the scheme goes live in October 2027.
For retailers and wholesalers, the question is what happens next:
* How will suppliers reflect DRS costs in their pricing?
* What could this mean for customer terms and promotions?
* Are products, packs or barcodes changing?
* When will DRS-ready stock start arriving?
* Are both sides ready for the deposit to move through ordering, invoicing and payment?
These are not questions to leave until 2027. Confirmation of the Producer Fee will allow suppliers to model their DRS costs with greater certainty. What is not determined is how individual businesses will manage those costs.
How suppliers manage or recover those costs may differ by product, customer and channel. Retailers and wholesalers need to understand what their suppliers are proposing early enough to assess the implications for pricing, customer terms, promotions, price-marked packs and other commercial arrangements.
Cost is only part of the supplier conversation. Retailers and wholesalers also need early visibility of changes suppliers are planning ahead of DRS, including pack materials, sizes or formats, barcodes, artwork and product data.
Changes to pack format, size, barcodes or artwork can affect ranging, shelf space, warehousing and stock planning. Retailers and wholesalers need to know what is changing, when revised products will enter the supply chain and how existing stock will be managed around go-live.
The 20p deposit is separate from the Producer Fee, but creates its own commercial, accounting and systems questions.
Retailers and wholesalers will pay deposits when purchasing in-scope drinks and charge them when those products are sold on. That creates potential cash-flow implications and raises questions about whether existing credit terms remain appropriate.
There is also an important VAT distinction. Under HMRC’s proposed approach, businesses in the supply chain will not account for VAT on the deposit itself. VAT on deposits that are not refunded would instead be accounted for by the scheme administrator.
Retailers, wholesalers and suppliers therefore need to make sure the different treatment of the product and deposit is understood and reflected correctly through invoicing, payments and the systems supporting them.
Confirmation of the Producer Fee is a useful point for retailers and wholesalers to get specific information about key suppliers: what is changing, when it is changing and what that means for price, terms, deposits, products and stock.
Identifying those issues now gives both sides more time to resolve them before UK DRS goes live in October 2027.
Bill Power is Chairman of DRS International.
For further information, contact George Kyle at DRS International via george.kyle@depositinternational.com.
DRS International, 134-138 West Regent Street, Glasgow, United Kingdom. G2 2RQ
E: info@depositinternational.com
W: https://depositreturnscheme.org/
LinkedIn: https://www.linkedin.com/company/drs-international/
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