The Brewers of Europe

…1 The Brewers of Europe Position April 2023 Proposal for a COUNCIL REGULATION ON PACKAGING AND PACKAGING WASTE, amending Regulation 2019/1020 and Directive (EU) 2019/904, and repealing Directive 94/62/EC Ref. Ares(2023)2893467 - 25/04/2023 2 THE BREWERS OF EUROPE GENERAL POSITION ON THE PROPOSAL AMENDING THE PACKAGING AND PACKAGING WASTE DIRECTIVE Key messages 1. Europe’s brewers have a strong track record in packaging sustainability, taking their responsibility to limit the environmental impact of beer packaging throughout the life- cycle, reducing, reusing and recycling our packaging. 2. The Brewers of Europe therefore supports the overall objective of the EU Commission’s proposal to minimise packaging’s impact on the environment.

…supports the overall objective of the EU Commission’s proposal to minimise packaging’s impact on the environment. 3. Brewers are concerned, though, that overly prescriptive rules or governance provoke the dismantling of well-functioning existing collection systems, be they well- established reuse systems set up by the brewers in many countries or efficient recycling collection systems set up in others. 4. Equally, it is neither legally nor environmentally justified to a priori grant an EU- mandated exemption, from reuse targets or mandatory DRS, for some alcoholic beverages; 5. Furthermore, to ban recycled materials runs counter to the objective of the proposal. 6. Moreover, the practice of selling beer in the on-trade via large reusable packaging containers such as kegs needs to be acknowledged in the measurement of reuse targets. 7.

…via large reusable packaging containers such as kegs needs to be acknowledged in the measurement of reuse targets. 7. Finally, there remain many uncertainties as:- ▪ a number of important decisions will be defined through secondary legislation – it is also key that those transition periods start from the moment of adoption of the secondary legislation, not the primary legislation; ▪ Member States are encouraged to go beyond the EU legislation, jeopardising the good functioning of the Single Market and the harmonisation aimed at in the proposed Regulation. 3 Opening statement The elimination of waste and the creation of a truly circular economy have been on the agenda of European brewers since well before the European Union defined this as one of its flagship initiatives.

…on the agenda of European brewers since well before the European Union defined this as one of its flagship initiatives. With respect to packaging, deployed efforts cover a range of different initiatives that span production, marketing, distribution, utilisation and disposal stages. They include, where feasible and without prejudice to beer safety and quality:- ▪ designing packaging to minimise use of materials, use lighter and recycled materials, and to utilise packaging materials that ensure recyclability; ▪ reusing packaging and rationalising product ranges to reduce packaging; ▪ distributing products in bulk whilst also reducing secondary and tertiary packaging; ▪ supporting and enabling efficient returnable and recycling collection systems. The Brewers of Europe therefore unequivocally shares the overall objectives of the proposal.

…collection systems. The Brewers of Europe therefore unequivocally shares the overall objectives of the proposal. However, brewers are concerned that it violates the principles of law, resulting in policy measures that are not proportionate and fair, whilst jeopardising the good functioning of the Single Market. They believe that these concerns can be addressed, without compromising on sustainability and even supporting further the overall environmental objectives. Discriminatory treatment of the brewing sector needs to be lifted Legal arguments It has first to be emphasised that, according to well-established case-law, alcoholic beverages and in particular, though not exclusively, wine and beer are competing products vis-à-vis the consumer, and are, at least partially, substitutable with each other1.

…and beer are competing products vis-à-vis the consumer, and are, at least partially, substitutable with each other1. Therefore, their respective treatment should not introduce any distortion of competition as regards any measure which may have an impact on consumer perception and/or choice2. They should not be subject to different treatment which impacts either production or distribution costs and, more generally, which puts them at a disadvantage vis à vis the other operators in a similar situation3 . The principle of non-discrimination, which is a general principle of EU Law applicable to all measures taken by the institutions, allows difference of treatment for different situations and, in case of similar products, only if the difference of treatment is justified by objective reasons.

…situations and, in case of similar products, only if the difference of treatment is justified by objective reasons. As to the justification for measures introducing differences of treatment in similar situations, the European Court of Justice has laid down general principles according to which those differences of treatment should be adequate, i.e. justified in the light of the purpose of the measure itself4. In the present case, the objective of the packaging and packaging waste legislation is to move from a linear to a circular economy. This is a general requirement laid down and applicable to all beverages, whether or not the product is subject to vertical legislation. It has also to be noted that the motives of the draft regulation do not explain such a difference of treatment, which is not motivated at all.

…that the motives of the draft regulation do not explain such a difference of treatment, which is not motivated at all. Whereas clause n° 104 merely mentions “given the nature of the products and differences in their production and 1 Case 170/78. Judgements of 27 February 1980 and of 12 July 1983 (Commission v/ UK). Case C-167/05, Judgement of 8 April 2008 (Commission v/ Sweden) - point 43 2 Case C-344/04. Judgment of 10 January 2006 (The Queen v/ Department for Transport) - points 95/96 3 Case C-250/83. Judgment of 15 January 2015 (Finsider v/Commission) - point 8 4 Case C-127/07. Judgement of 16 December 2008 (Arcelor v/ French Government) - point 26 4 distribution systems”.

…8 4 Case C-127/07. Judgement of 16 December 2008 (Arcelor v/ French Government) - point 26 4 distribution systems”. The impact assessment accompanying the proposal mentions, against the exemption from the DRS, merely the following: “A high percentage of the wines and spirits market is imported and containers rarely have a national barcode. There are lots of small producers and container designs are not always as suitable for the collection infrastructure and reprocessing.” Notwithstanding, clause n° 68 rightly insists on the necessity to assure equal treatment between operators.

Notwithstanding, clause n° 68 rightly insists on the necessity to assure equal treatment between operators. The Brewers of Europe asks ✓ Reuse targets The scale of the on-trade (including kegs) / off-trade split and the packaging mix hugely varies across Europe, from countries with two thirds of consumption to those with barely ten percent of consumption in the hospitality sector, from countries with high percentages of recycled metal cans to countries with high percentages of returnable glass bottles. The targets set for beer in both on- and off-trade would be manageable if applied at EU level. According to GlobalData information, the percentage of reusable beer glass packaging represents already more than the target set for 2030. This does not even take account of the use of reusable beer kegs and beer tanks, which prevents extra packaging from being put on the market.

…of the use of reusable beer kegs and beer tanks, which prevents extra packaging from being put on the market. As such, one may even wonder whether the introduction of a reuse target for beer is proportionate. It is also unjustified to set a lower target for wine and grant a full exemption for spirits, particularly when the 2040 target is still more than fifteen years off and there is no objective reason why a certain percentage of the glass bottles used for these products could not be reusable when already two thirds of glass beer bottles are reusable. Europe’s brewers therefore request that: ▪ all beverages categories be subject to the same target; ▪ economic producers have the option to implement the target across their full product portfolio rather than per category of drink.

…have the option to implement the target across their full product portfolio rather than per category of drink. ✓ DRS The a priori exemption from DRS for wines and spirits is legally not justified and also not warranted as glass is out of scope. There is no objective reason to treat wine and spirits in cans and PET, whether or not imported in the European, differently from beer in cans or PET, equally whether or not imported in the European Union. An a priori exemption of higher strength beverages from deposits, making these products less expensive to consumers than lower alcohol beverages at point of sale also runs counter alcohol policy objectives. The application of a deposit on a low alcoholic drink, beer in this case, but no deposit on higher strength beverages makes wines and spirits the better option for consumers from cost and handling perspectives.

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…1 Explanatory note supporting The Brewers of Europe response to the EU survey June 2022 EXCISE DUTY ON ALCOHOL AND ALCOHOLIC BEVERAGES Evaluation of excise duty rates and tax structures Ref. Ares(2022)4825421 - 01/07/2022 2 Introduction The Brewers of Europe supports a fiscal policy built on four pillars: ▪ An excise duty system for beer which is fair regarding cost structures and profitability and fair between the EU Member States. ▪ A tax policy which reflects the specifics of beer by safeguarding the beer category and the differentials with other alcoholic beverages. ▪ A tax policy which makes beer the beverage of choice by nudging consumers to the lower strength alcoholic beverages, such as beer. ▪ A tax policy which stimulates the economy at large by valuing the contribution made by the brewing sector and supporting the value chain.

…stimulates the economy at large by valuing the contribution made by the brewing sector and supporting the value chain. Fair taxation Amongst alcoholic beverages categories Beer is by far the most costly alcoholic beverage to produce, distribute and sell. Looked at in terms of pure alcohol, beer costs 2.5 times more to produce than spirits and 1.5 times more than wine, while distributing and retailing beer can be up to 3 times more expensive than wine and 8 times more than spirits. The deceptively simple solution of taxing all alcoholic beverages on the percentage of alcohol by volume (ABV) overlooks the varying structures of the different drinks sectors, the integral role played by beer in Europe's economy and the fact that beer is so much more than alcohol. Maintaining a tax differential between beer and higher strength drinks can help avoid distorting competition.

…alcohol. Maintaining a tax differential between beer and higher strength drinks can help avoid distorting competition. Favouring higher strength beverages would reduce demand for beer, hitting local jobs and tax revenues, whilst undermining efforts to nudge consumers towards lower alcohol beverages. It is worthwhile to remember that the levels of the minimum rates on the various product categories as laid down in Directive 92/84/EEC are the outcome of a political compromise and reflect the issue of competition only to a limited extent. Minimum rates on beer were set at a relatively low level, reflecting the fact that beer is in competition with wine, for which the minimum rate was set at zero.

…low level, reflecting the fact that beer is in competition with wine, for which the minimum rate was set at zero. Rates on spirits, and to a more limited extent on intermediate products (which contain distilled alcohol) have been set at a significantly higher level per degree alcohol, which could be interpreted as meaning that there is no, or only limited, competition between those products and beer and wine. Increase of minimum rates without levying a comparable excise on wine is therefore not logical. Amongst countries The own price elasticity for beer varies considerably by country and by trade channel (on-trade and off-trade), as does the rate of pass-through of tax increases into final retail prices. This highlights the importance of considering the impact of excise duty rates as levied at individual country level rather than the impact of minimum rates set at European Union level.

…duty rates as levied at individual country level rather than the impact of minimum rates set at European Union level. 3 As any Member State may set an excise rate above the agreed minimum rate at any time, failure to raise the existing minimum rates – as suggested throughout the survey - is not crucial. The increased minimum rates would not do away with price differentials, which are in part determined by tax differences, and thus not be an adequate response to perceived problems with cross-border shopping, fraud and smuggling of alcoholic beverages. These problems are caused by the excessive high rates in some Member States. Increase of the minimum rates will significantly reduce purchasing power of consumers in some countries. These Member States should be free in setting the excise rates in line with local circumstances.

…in some countries. These Member States should be free in setting the excise rates in line with local circumstances. Differentiation is justified Beer is enjoyed for a range of attributes (aroma, taste, colour, foam etc), including its relatively low alcohol content. It is fundamentally important to the sector that beer continues to be taxed as a category and not on the basis of alcohol content alone. Since beverage categories are different, it is not logical to introduce a common tax base. Alcoholic drink categories are distinct, being produced by different methods (fermentation v distillation) using different materials (grapes versus hops and grain) and have different traditions and patterns of consumption. The Plato system uses the Plato degrees measured in the wort during the brewing process as the taxable basis to calculate the excise duties due.

Plato degrees measured in the wort during the brewing process as the taxable basis to calculate the excise duties due. This measurement is inherent to the brewing process, as the wort strength is the basis of every beer recipe and determines the specifications (e.g. taste, aroma, colour and foam stability) of the final beer product. Consequently, all brewers carry out this fundamental analysis, irrespective of whether they operate at micro- or macro scale. The alcohol content of the final product on the other hand is only one of the many sensory parameters that characterise beer as beer is more than simply an alcohol-containing beverage. Moreover, it is not inherent to the brewing process as it is not required to measure the alcohol content to produce a beer.

…it is not inherent to the brewing process as it is not required to measure the alcohol content to produce a beer. Up until now, it is not possible from a technical point of view to brew a beer based on the alcohol content of the final product and at the same time sticking to the recipe which provides the particularities to the beer product. As the wort strength is the basis of the recipe, it is the same in every batch, which provides more flexibility to the breweries than the ABV system as alcohol content of the final product may vary from batch to batch as beer is brewed with yeast, a living organism subject to biological variations. The dual system does not affect EU market integration and competition as long as the systems are equitable.

…variations. The dual system does not affect EU market integration and competition as long as the systems are equitable. By defining the Plato measurement on the basis of both alcohol and sugar instead of only on alcohol, this equitability does not exist for brewery products where sugar is added after fermentation. Hence, the 4 distortions are not the result of the application of two measurement systems (ABV and Plato) but of the incorrect and non-scientific way of Plato identification by the EU Commission in the latest revision of the Structures Directive, not respecting EU Court ruling. The mandatory implementation of the alcohol content as sole taxable basis for beer would have a devastating effect on the brewers and the consumers. A move away from the option to use the Plato system would require all breweries to invest in expensive additional measurement equipment.

…the option to use the Plato system would require all breweries to invest in expensive additional measurement equipment. This would particularly hit SMEs during already challenging economic times. Consumers’ choice of beer would be curtailed with breweries halting the production of certain beers because of the excessive costs linked to a switch to and implementation of another tax system. A tax policy making beer the beverage of choice Despite meaningful decreases over the past 10 years, the harmful use of alcohol remains a major issue for public health. All alcoholic beverages, including beer, can be consumed in ways that are harmful, but nudging consumers toward lower alcohol alternatives like beer can accelerate the positive trends.

…that are harmful, but nudging consumers toward lower alcohol alternatives like beer can accelerate the positive trends. Lower alcohol beverages, like beer, are less associated with the riskiest drinking patterns, while the most dangerous drinking patterns involve binge drinking of large amounts of concentrated alcohol1. Hence, when regulations encourage consumers to favour lower alcohol beverages like beer, it has the potential to reduce alcohol-attributable harm210. This time-tested approach is embedded into the regulations of many countries. Almost every OECD Member taxes spirits higher than beer, in terms of excise per litre of pure alcohol3. Also, the WHO 1 - Rehm, Jürgen, and Omer SM Hasan. "Is burden of disease differentially linked to spirits? A systematic scoping review and implications for alcohol policy." Alcohol 82 (2020): 1-10.

…linked to spirits? A systematic scoping review and implications for alcohol policy." Alcohol 82 (2020): 1-10. - “More potent forms of alcohol, such as spirits, were associated with more acute harm caused by injury, either unintentional (e.g., traffic injury) or intentional (e.g., suicide or violence).” Rehm, Jürgen, et al. Rehm, Jürgen, et al. "Regulatory policies for alcohol, other psychoactive substances and addictive behaviours: the role of level of use and potency. A systematic review. "International journal of environmental research and public health 16.19 (2019): 3749. - “There are a few types of problems where spirits, when consumed in concentrated form, seem to have a special association with harm.

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