A little less than a year ago I published this piece. It featured one of the most exciting cider tastings I experienced in 2022. Eleven ciders and a perry, ranging from very good to outstanding, almost all from producers new to me. Two of them featured in my year-end Essential Case and the tasting itself opened my eyes to a cider region — indeed nation — I had given only the scantest consideration beforehand: Scotland.

In truth I was late to the party. Scotland’s cider revolution had been brewing for a couple of years previously and had truly announced itself last year at Pressed — an event celebrating the Scottish cider scene which unfortunately coincided with Bristol’s Cider Salon. 

Beyond the several exceptional producers who have emerged across Scotland in the last few years, the country has cultivated a cauldron of cider enthusiasm via brilliant importers and retailers like Hard Pressed Cider, Re:stalk and Æble. Edinburgh and Glasgow have become hubs for bars and shops offering better ranges of cider than can be found almost anywhere outside the Three Counties, West Country or Manchester. It has been a very exciting time to be a Scottish cider fan.

But in the last few months, all that has been put under terminal threat. As someone whose interests and social media tendrils permeate not only the world of cider, but that of whisky, my timeline has been abroil over something called a Deposit Return Scheme, about to be rolled out by the Scottish government.

Deposit Return Schemes are nothing new on a global level. The idea is to encourage the return of containers, and discourage their being wasted — obviously an important and laudable environmental concern. Several countries have DRS schemes, and it’s about time that the UK caught up. So far, so reasonable. But to understate considerably, concerns have been raised. Not on a regular ‘we’re unhappy about this governmental move’ level, but to a genuine ‘this will wipe out business wholesale and overnight’ degree. 

It was something I was starting to feel needed investigating for this site anyway, when George Julian of Hard Pressed Cider got in touch and asked whether we might cover it on Cider Review. Being both a driving force at the coalface of Scotland’s cider renaissance and in the eye of the DRS storm, it was obvious that George was far better equipped than I to share the story of the situation, so I asked if he’d answer a few questions about it, and his answers are shared below.

There’s little I have to add to George’s marvellously comprehensive explanation and account, except to observe that the DRS is clearly catastrophic for Scotland’s cider scene, and carries major repercussions for the UK’s cider scene more broadly. I hope anyone who cares about this fledgling, fragile, underserved and beautiful industry will take the time to read what George has to say.  

CR: Can you explain in the simplest terms what the DRS actually is?

George: The Deposit Return Scheme (DRS) is a system whereby a small deposit is paid by the customer when purchasing a drink. This deposit is attached to the drinks container, and when the container is returned in good condition that deposit is refunded to the consumer. It covers all drinks (alcoholic or not) between 50ml and 3L of all packaging types (with the odd exclusion – most plastic milk bottles, for instance, are not covered by the scheme).

CR: Why is it being brought about?

George: The idea is that the deposit will act as an incentive to recycling and will reduce littering. The principle is sound, there are really good systems in place all around the world that work extremely well.

CR: Why do you see this one as a problem?

George: The problems we’re facing are not specific to a DRS, they are specific to this DRS. It’s difficult to explain this simply, because the system is so complicated. The supplier-end of the system is a mess. It starts with the disconnect between legislation and implementation. The Scottish government’s DRS legislation is incredibly ambitious – every single drinks container entering Scotland falls into the scheme and must be registered on a database. Their ambition is laudable but no other DRS has started this way. Look at any of the European schemes and they start small, with one or two types of packaging, usually with exclusions on types of glass, or with glass excluded altogether as it’s more expensive and more complicated to include. Still, all of this would be fine in principle depending on the organisation of the scheme. Simplicity would be the key factor in making this work, and that’s where we run into major problems. 

Scotgov wanted industry to take responsibility for the scheme, so they created a not-for-profit company called Circularity Scotland (CSL), made up of industry stakeholders to put the scheme together. To qualify to be a member your company had to represent a significant chunk of the market – 10 million units or more sold annually in Scotland. This means that the membership (and therefore the power and voting rights) sits with the giant, multi-national drinks manufacturers and big retailers. You can see the list here: https://circularityscotland.com/about/membership. Understandably, those companies designed the scheme from their perspective, of companies selling a limited range of products to established large retailers at consistently high volumes, and with entire legal and packaging departments. As a result they have put together a scheme which mind-boggles in its complexity. It is completely inaccessible to the small producer, and in practice financially penalises anyone trading in small volumes. It will be useful at this point to give an example:

Let’s imagine you’re a small cider-maker in England. You don’t deal with Scotland very much but you have a couple of interested customers who buy a few cases every so often from your website. You want to continue that business when the DRS comes in, so you try to sign up. First you need to register with CSL, and you are confronted with the ‘Producer Agreement’, a singularly byzantine document. I don’t deal with exports but I understand that it’s far more complicated than any post-Brexit red tape and is written in legalese. CSL have produced a guide to the agreement, which is a doctoral thesis in itself. Again, this is no problem for one of the giants, you hand it to your legal team, who would have been consulted on its creation anyway. Our average small cider maker will need to pay for expensive legal advice, or spend weeks of their time trying to decode it.

Then we get to the charges and reporting. The minister in charge of the scheme, Lorna Slater, is at pains to say that all businesses are covering the costs equally, but this isn’t strictly true. What she means is that all businesses are paying the same. Firstly every producer must pay an annual registration fee of £365, regardless of how many bottles you put on the market. For the giants this works out as a fraction of a penny per bottle, but if you only send 100 bottles into Scotland every year, that’s £3.65 per bottle. Then you are charged a per-unit fee for each bottle you send to Scotland, roughly 4p for glass (it’s slightly less for cans and plastic).

Next, the agreement states that you need to register the barcode of every different type of bottle entering the Scottish market, but you don’t use barcodes. You are told by CSL that a stickering-system (manually printing off barcode labels) is being developed, but it’s currently 14 days before the cut-off to sign up to the scheme and no one knows whether this will, or won’t, be an acceptable method, or how it will work. Ok, you think, this is annoying but you’ll make the leap to putting barcodes on your labels, but accessing those barcodes will cost you £130 a year to use the specific type of barcode CSL require, and then you have to reprint and relabel those bottles.

Only a few bottles from the whole batch are going to Scotland, and you can’t print different labels for just a few bottles, so the barcode on the label will have to work for the whole of the UK, and not be specific to Scotland. Uh oh, says CSL, that’s a fraud risk, so now you will be expected to pay a surcharge per bottle to cover that risk which is an extra 25% on top of the per-bottle fee for glass. This feels unfair and is becoming troublesome, but you persevere. Then you have to report to CSL exactly how many of what bottles have entered Scotland, charge a 20p deposit to your customer, and CSL will then invoice you for those 20p deposits.

And that’s it, right? Done? Phew. Nope, CSL will then ask you to guess exactly how many bottles will be on the Scottish market in August, so they can calculate a ‘Month 1 fee’ to charge you when the scheme starts. They also want you to be constantly updating what you’re sending to Scotland. You sent one kind of cider in August? They’ll assume you’re sending it again in September unless you actively delist it, and you’ll be expected to report those numbers every single month.

The agreement you signed has locked you in for three years, with complicated and time-limited ways to withdraw, so if you don’t have a good handle on your exact responsibilities then you’re going to run into further costs and further trouble. You’re not sure if this is worth it, but you want a bit of time to think about it? Tough luck, you need to sign up by the 28th of Feb (or 17th, according to a recently-deleted entry on CSL’s website) or you’re locked out of the Scottish market until that registration portal reopens (date to be confirmed, it could be August, it could be 2024).

Then there’s the issue of VAT. Does VAT apply to the deposit amount? No, but also sometimes yes. The deposit is not VAT-rated, unless the bottle isn’t returned, and then it is. How on earth does that work, you ask? No idea say CSL, ask HMRC. Unsurprisingly, they don’t know either. That sounds impossible to comprehend and account for, but get it wrong and you could run foul of HMRC, CSL or Scottish Environment Protection Agency (SEPA).  Did you understand all that? Multinational companies will have entire job roles dedicated to making it all work, but most small cider makers will be doing this themselves, an incredible amount of brain-meltingly complex work. 

Then there’s the financial side. Even if you were making a profit on those small Scottish customers (and by this point you probably aren’t) then it still wouldn’t be enough to cover an expensive repackaging process or, more importantly, the time and trouble involved. I certainly wouldn’t bother, and I suspect many others won’t – and just like that we have a de-facto trade border between England and Scotland. I would stress that this system is to be applied to all drinks containers entering Scotland.

Now let’s say you’re a bit bigger, and have established distribution channels in Scotland, so you’re sending several thousand bottles a year. All of the above still applies to you, but it’s a predictable expense you can pass on to your wholesaler, and once you’ve got into the swing of it, it should be reasonably easy, right? Wrong again. CSL’s operational funding comes from those per-bottle fees, the sale of the recyclate they collect, and unclaimed deposits. They’re not-for-profit, so they have to set that per-bottle fee at a rate which will cover their operational expenses. Loosely speaking they’re forecasting how much it costs them to run each year, and dividing the sum by the number of containers they expect to see on the market. So what if they’re wrong and encounter a funding gap? Well, that agreement you signed allows them to change that per-bottle fee at their discretion with no caps in place and CSL have been vocal about how they expect to change the producer fees on an annual basis.

This is all really annoying, but these costs apply to everyone in the market, right? So everybody will be passing on the same costs? Again, wrong. For a big multinational producer, a £365 registration fee will be less than they spend on, well, literally anything in a year. Thanks to volumes of scale big companies will find it much easier to separate and separately package stock bound for England and stock for Scotland, thus avoiding that barcode surcharge. It’s estimated that for small producers the cost of producing a single bottle could almost double. For the multi-nationals, because of economies of scale and privileged access to buying the recyclate cheaply from CSL, they could see their cost-per-bottle stay the same, despite the fees, or even decrease.

Drinks producers have already been battered on all sides. A handful of English small producers have already declared they will no longer supply Scotland, and the reason it’s only a handful right now is because the scheme has been so badly advertised that many English small producers aren’t aware of it. An informal poll on Twitter amongst small brewers suggested that only 15% were committed to still sending their products to Scotland. Several wine importers I know are estimating as many as 75% of their lines will disappear unless there is a change.

CR: Can you talk a bit about the current state of cidermaking in Scotland and what might happen to makers as a result of the scheme?

George: On home turf Scottish cidermaking has experienced something of a renaissance over the last 18 months. Small artisan producers have popped up all over the country. They are beginning to find their feet and their niche, and we are supporting them wherever we can. It is the most exciting period for Scottish cider that I can remember, but it’s important to note that these makers are still small. Almost all of them sit under the 7000L duty threshold, most by quite some distance. Cidermaking done properly is a long, slow development process, working on yearly cycles. You can’t just knock out a batch, see how it’s received and tweak things over a few months in the way brewers can, so it can take years for a cider maker to truly hit their groove. The DRS is posing a hurdle that some will find insurmountable. The costs are huge, and the time commitment required for just understanding the DRS is enormous. This has been my entire working life for the past 3 months and still I only vaguely understand a small chunk of it, and details are changing all the time. There are still hundreds of unanswered questions and very little help. Scottish cidermakers face an impossible choice: sign the agreement and face potentially crippling financial and administrative challenges, with unanswered questions and uncapped costs, or risk not signing it in the hope that something changes, and face being locked out of the home market in August. There is, of course, another option: call it a day and close your doors. One new cidermaker has already told me that this could be an option, and I would be surprised if he were the only one considering it.

Looking forward, how on earth will anybody start up? Many new cider makers will start with tiny volumes, usually sold at local markets. There is a small turnover exemption for the annual registration fee, but the barcoding, extra fees and administrative burden alone will act as a daunting barrier to many, let alone the complexity of the scheme. This is a big kick to a burgeoning cider scene that is really beginning to find itself.

We, as small Scottish businesses, have been catastrophically let down by our representatives. It is hard to express just how angry I am, and others are too. Lorna Slater, the minister in charge of the scheme, constantly states that this is a scheme that you see all over the world, and that it is being led and implemented by industry. This is only a half-truth. This scheme looks nothing like other European schemes, which are usually simple affairs, often involving annual reporting, paying in arrears, usually with exemptions on types of glass, and with an absolute fraction of the cost to producers. Many of them come with exemptions or support for small to medium-sized enterprises (SMEs).

We have been left to the whims of the big businesses which helped design the scheme, and which do not understand (or do not care) about how it might work for the thousands of small, artisan producers in the UK. This is to be expected.  Business is business, and big businesses will always be looking out for their own interests, that is how capitalism works. We rely, in part, on our elected representatives to level the playing field for small, home-grown businesses, who do not have the clout of the multi-nationals, or, at the very least, to prevent those multi-nationals from running rampant. That duty has been well and truly shirked, and we face a scheme which acts more as a system to monopolise markets than an incentive to recycle.

CR: Similarly, you and others have built up an amazing scene for cider more broadly in Edinburgh. What do you fear happening to that?

George: Choice will disappear, and prices will increase. For the products we distribute I am resigned, even in a best-case scenario, to losing about a third of our packaged range for Scotland. Some producers just don’t have the volumes, or the barcodes, or both, and it will end up costing them money to sell their products in Scotland. For those who can make this adjustment worthwhile, I am reasonably confident we can keep them in Scotland, for now, but if costs go up then it is perfectly understandable that they will pull their lines too. But that’s just the products we distribute right now. With one eye on the future, I don’t know how we will ever manage to convince any new English or Welsh producer to send products to Scotland. Fine cider is still a niche product, and to generate the volumes of sales needed to offset the costs and the admin incurred by the DRS, we would need a couple of years of them being on the market to establish consistent sales. If producers go through all of the faff of signing up, the costs passed on to the consumer by the time the product hits the shelves will be substantial. The most likely scenario, however, is that most small non-Scottish producers will decide it is not financially viable and simply exclude themselves from Scotland, and those of us living here will not be able to buy the vast majority of English cider unless we drive down to England and buy it in person.

CR: What do you think would be a better alternative?

George: A DRS that works for everybody. I am not qualified to comment on the issue of whether we need a DRS or not. Some people have strong opinions on whether we do or don’t, and on the net benefits to the environment. All I want is competence. That is, a simple system that works for all sectors of the industry, not just supermarkets and international giants. It is clear to anybody who digs into the detail that this system is unfinished. There are huge numbers of unanswered questions, going way beyond what I’ve outlined here. We haven’t even started on the issue that as a distribution company we also cover parts of England, and how that fits into the system (badly), or how it will work with retail and hospitality (confusingly, and also badly). My best hope is that we get some kind of small-producer exemption or support (as there is in many other countries), or a delay. An exclusion of glass and integration with the English system (coming in 2025) would also help, but this hope is fast dwindling, as it looks as though England will exclude glass and Scotland seems hell bent on keeping it. I don’t want to be accused of hyperbole. As a distribution company we have a good level of draft sales that will support us, and I remain confident of retaining a good range of packaged products for the Scottish market, but this will undoubtedly hamstring us, and will almost certainly lock a large number of non-Scottish cidermakers out of Scotland.

***

After our initial conversation in February, but before this interview was published, the picture moved on. So George kindly furnished me with this addendum.

***

Since that initial interview quite a lot has happened. A package of help has been announced for SMEs. We have been told that the manual barcode-stickering solution is in development (which we had already heard from CSL 6 weeks ago), and that there is a financial package of £22m to help with day one cash flow issues, in the form of a de minimis discount/exemption on Month-1 fees for small producers. It is, of course, a positive move in the right direction, but it equates very roughly to a one month discount, and does nothing about how inaccessibly complicated the whole thing is.

Of the three candidates for the office of First Minister two have said they would stop and rework the scheme, while the third (and according to bookies the likely winner) has said he would implement a small producer exemption for a year. One has said that in its current form the scheme will wreak ‘economic carnage’ (she also happens to be the current Minister for Public Finance). The minister in charge of the scheme then announced two days before the regulatory deadline (after which you would be locked out of the Scottish market come August) on a TV chat show that they were indeed considering a small producer exemption (which was news to everyone who had been told repeatedly this was not something they were considering). However when pushed she could not define either a small producer or an exemption, which was helpful.

The sign up deadline came, went and was quietly dropped (registration is now open until June I think but if there was an official announcement on the matter I completely missed it) when it emerged that only 15% of the drinks producers expected to sign up had done so. This was announced as a great win for the scheme, as those who had signed up represented 90% of the volume of drinks containers on Scotland’s shelves. Incidentally, at a DRS conference in November we were told that 90% of the volume of drinks containers on Scotland’s shelves were, in fact, guaranteed to be signed up, as this actually represents just a handful of companies, most of whom make up CSL’s membership and therefore helped to design the scheme.

In addition, the UK government has insisted that Scotland has not, in fact, applied for an exemption from the UKIMA (UK Internal Market Act,  the act which seeks to avoid creating internal trade barriers), and signalled strongly that one may well not be granted, thereby throwing the legality of the scheme into question. Lorna Slater then accused the Secretary of State for Scotland of lying, and published correspondence referencing their application for an exemption. The UK government maintains they have not received an official application. In the meantime we are consistently told by CSL that everything is fine, and that we should continue preparing for the scheme.

In short, this has gone from a poorly-executed piece of policy implementation, in need of some significant work, to a proper, all-out bin-fire. Positions are becoming entrenched, which helps absolutely nobody (see, for instance, one Green MSP’s pot-shot at SMEs on Twitter, which was about as constructive as a wet paper towel). It would be genuinely comedic if my own livelihood, and that of many of my colleagues, were not on the line. In reality it is absolutely exhausting, somehow occupies all of my time despite my inability to change anything, and at times feels like a bit of a fever dream. It is clear that something will change, but no one has any idea what or when, and money needs to be spent and processes put in place now. In the meantime the livelihoods of small drinks producers are used as a political football between governments. If this were pre-2020 this would be frustrating. Coming as it does during a very shaky recovery for the drinks sector, a looming recession and a cost of living crisis, it is absolutely intolerable. The new FM, whoever it is, will take office at the end of the month, and who knows what will happen then.