A shortage of bottles and complaints of unfair treatment have seen beer maker Red Stripe Jamaica introducing a rule that forces retailers to return empty bottles to the brewery.
The rule initially affected sections of the trade, mainly bars and other on-spot drinking establishments and events, but was recently extended to all retailers around the time the Fair Trade Commission, FTC, was preparing to launch an investigation. The probe began in September for which the findings were published in November.
By that time, Red Stripe had long changed its policy. However, the brewery said it chose to do so because of bottle shortages, a problem that has persisted throughout the pandemic.
Dianne Ashton-Smith, Red Stripe Jamaica’s head of corporate affairs, said the change actually took place in August 2022.
“The policy was put in place in response to supply-chain disruptions in the aftermath of COVID-19. The decision to extend the policy to channels and customers, which were not initially part of the policy due to operational reasons, was due to the continued challenges of supply-chain disruptions that we faced, the low levels of bottle returns, and their consequent impact on our production and inventory levels,” said Ashton-Smith in response to Financial Gleaner queries.
Red Stripe introduced a ‘full-for-empties’ policy more than a year ago on September 3, 2021, for discrete elements of the retail trade. At the time, it excluded supermarket chains.
“Since the implementation, we have seen bottle-return rates from the trade increasing,” Ashton-Smith said.
The brewery wants consumers to return empties of Red Stripe, Heineken, Guinness, Dragon Stout, Smirnoff Ice, and Malta bottles for recycling. Red Stripe Jamaica has previously said that it can recycle bottles up to six times before the glass loses its purity.
“The policy was implemented to increase the rate of bottle returns for recycling and to facilitate supply to the market. Consumers are encouraged to return bottles to the re-seller – supermarket, wholesale, grocery, bar, etc – of their choice,” Ashton-Smith said.
Red Stripe increased the price for empties to $20 in 2019 and then to $30 in September of this year. The company, a decade ago, recycled some 95 per cent of its bottles but that dipped to about 80 per cent during the pandemic, according to the FTC report.
“We ask for your support in encouraging all Jamaicans to support our ‘Red-cycling’ efforts to create a sustainable, environmentally responsible packaging solution while ensuring that their favourite brewed products are available for the enjoyment,” added Ashton-Smith about the Red Stripe-branded recycling programme.
The rise in the payment has, however, led to the “resurgence of bottle police” as it has made retrieving empty bottles more lucrative, according to FTC economist Dr Kevin Harriott in a telephone call. The term ‘bottle police’ refers to persons who collect bottles for income from events, bars, and stores.
The FTC investigation of bottle returns flowed from complaints from at least one bar owner that the practice was discriminatory since it wasn’t applied evenly throughout the trade.
According to the FTC, around the time it began looking into the bottle-return complaint, Red Stripe expanded its collection drive to retailers after its investigation to incorporate the entire market, thereby removing the anti-competitive areas of concern.
“After we started the investigation, they subsequently changed the policy,” said FTC Executive Director David Miller in an interview with the Financial Gleaner. The FTC report makes reference to discussions with Red Stripe Jamaica dating back to November 2021.
The distribution channels subjected to the initial policy were community bars, quick-service restaurants, independent supermarkets, grocery shops, mini-marts, wholesalers, and distributors. Red Stripe selected the initial channels based on the rate of bottle return as well as the volume of sales through the respective channels, according to the FTC.
“An important point is that distribution channels such as supermarket chains, educational institutions, hotels, gas stations, and convenience stores were exempted from the policy. The policy, therefore, creates a market in which one group of retailers would find it more difficult to expand its sales relative to the other group of retailers,” said the report.
“There was a danger, therefore, that D&G would have to shut down its brewery if the production level fell below the minimum level that would allow D&G to produce bottled beverages at a competitive price. The policy allowed D&G to increase its stock of empty bottles to three weeks of production and avoid shutting down,” the competition watchdog said.
Red Stripe Jamaica is the trading name for drinks company Desnoes & Geddes Limited, producer of Red Stripe beer.
The policy helped Red Stripe Jamaica avoid the costly measures associated with temporarily shutting down its brewery. Immediately before the policy, the empty bottles in the brewery’s custody supported only five days of production, the report added.
The imposition of the policy led to Red Stripe collecting over 50 per cent more bottles a month after its introduction.
The FTC described Red Stripe as having a dominant position in the market but stopped short of calling their actions an abuse of dominance. After all, it noted, retailers were benefiting from reduced prices.