German deposit system reverses packaging trend

The irony facing bottled water in 2003, says the Research and Markets​ report, is that bottled water volume in single use packaging was a major growth driver for the market in 2002.

PET packaging has in recent years edged out glass packaging, due to its convenience for on the move consumption and lower weight, and thus lower transportation cost. Those manufacturers investing in reusable PET have thus benefited in 2003, while manufacturers of non-reusable PET have seen gains made in 2002 reversed.

The report says that Germany's bottled water market has blossomed, with warm weather in 2003 boosting sales. Local players, particularly those with flexible production capacity, have fared well. Still water and lightly sparkling variants have been particularly popular, with Germany embracing a Europe-wide trend for less highly carbonated products.

Water coolers are also well positioned to make a more substantial impact on Germany's overall bottled water industry. The German water cooler industry has changed radically with the entrance of Nestle and Danone, and these two companies are expected to generate a sustained drive for water coolers in the country. Although the bottled water cooler category accounts for a fraction of total bottled water sales in Germany, it is expected to take on a new dimension now that both bottled water giants have built scale.

The Bottled Water and Cooler Landscape in Germany 2003​ report provides the latest provisional figures on bottled water market developments in 2003, a year in which a widespread summer heat wave significantly bolstered Europe's bottled water industries. Full commentary is provided on the latest market developments in 2003. The report then looks specifically at market developments in 2002. Company volumes are also presented as year-end 2002.

The survey is broken down into four main sections. First of all, a full market overview provides provisional figures on the bottled water market in 2003, commentary on the latest developments in 2003, a revised bottled water market forecast to 2008 and a summary of industry trends. There is also a section on consumption, production and trade, segmentation, packaging.

A third section deals with unit numbers, pack size and legislation, while the final section provides market characteristics.

However, controversy continues to surround the mandatory deposit, and European regulators recently forced Germany to rethink the strategy, ruling that it contravened regulations on the free movement of goods between EU member states.

Germany has one of the most sophisticated recycling networks in the European Union, but the decision last year to expand this to include one-way (i.e. non recyclable) packaging has had a devastating effect, in particular on beverage producers who are by far the biggest users of this kind of packaging, be it cans or plastic bottles.

Foreign bottled water importers have particularly suffered at the hands of the new system, being most reliant on non-returnable PET.

The problem stemmed primarily from the fact that the deposit system on one-way packaging was introduced without the necessary infrastructure (the existing system is run through a nationwide network of standalone recycling points), obliging any consumer wishing to reclaim their deposit to return the container to the store where it was bought - placing an enormous burden on the retail sector.

The supermarkets' response was simply to stop selling all one-way containers - a move which saw entire ranges of soft drinks and beer disappear from their shelves almost overnight.

The German government responded by making it easier for consumers to reclaim their deposit by allowing cans or bottles to be returned to any store, provided that outlet stocked cans and bottles of the same size and type. But since retailers can refuse to take back other types of empty packaging, the result has been the development of a mosaic of different return systems that are not compatible with each other - a far cry from the smoothly operating system for recyclable materials.

The Commission said that while it recognised the environmental benefit of charging a deposit and of taking back packaging, the principal problem with the German system was that it "constitutes a disproportionate barrier to the free movement of packaged beverages from other member states".​ This was particularly pertinent for imported drinks, the Commission said, given that, for reasons mainly related to long distance deliveries, some 95 per cent of the drinks imported into Germany were in one-way packaging.

There is as yet no indication as to whether the Germans will comply with the EU ruling, or indeed what the possible alternative might be, although a number of suggestions have been put forward by industry associations.