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For more than a year now, packaging has been treated as the next big margin story in food and drink. The reasoning is straightforward enough. Producers used to fund only a tenth of the cost of dealing with the packaging they put on the market. Local authorities, and by extension taxpayers, covered the rest. Extended Producer Responsibility has flipped that, and from October 2025 invoices started landing for the full net cost of household packaging waste based on what was placed on the market in2024. Most owner-managed producers absorbed that first hit, grumbled about it, and moved on.
The second hit is what should be on the agenda now, and current industry practice suggests the right thing is not being prepared for. From the Year 2 cycle, the flat base fee gives way to a Red, Amber, Green modulation under the Recyclability Assessment Methodology. Red-rated material attracts a fee set at 1.2 times the amber base, green-rated material attracts a discount funded by the red pot, and the headline shorthand in the trade press has been that producers using the least recyclable packaging will pay more. That much is true. What is being underreported, and what I think is the more important point for a mid-sized food or drink business, is the way producers actually end up with a Red rating in the first place.
What does a Red rating really mean for amid-sized producer?
The intuitive assumption is that Red is reserved for the obvious offenders. Multilayer pouches. Black plastic trays. Foiled cartons with sleeves that nobody can separate. If your packaging is largely a single material and broadly recyclable, the assumption goes, you should sit safely in amber, or even pick up a green discount on the glass and the corrugated. That is what the rating is supposed to incentivise.
What the published guidance makes clear, and what very few producers seem to have absorbed yet, is that where data is missing or cannot be evidenced, producers are highly likely to receive a Red outcome or be forced into worst‑case classification. The methodology requires producers to assess and report there cyclability of each packaging component, and where that information is absent, partial, or cannot be substantiated against the RAM, the system does not pause to ask. It assigns Red. The fee follows automatically.
That is a very different proposition. It means the producer paying the higher rate is not necessarily the one with the worst packaging. It is, in many cases, the one with the weakest data trail. And in food and drink, where SKUs proliferate, suppliers change, components get reformulated quietly between production runs, and packaging specifications live in different systems depending on who happens to manage that line, weak data is the default state of the industry rather than the exception.
Why is this a problem owner-managed producers in particular need to take seriously?
Larger groups have, on the whole, treated EPR as a project. They have set up cross-functional working groups, hired or seconded packaging technologists, built RAM-aligned data registers, and run the work through procurement so that supplier specifications are pulled in at the source rather than reconstructed from PDFs after the fact. They have also had the budget to engage compliance schemes that can run the assessment for them. None of that guarantees a green rating, but it does mean the worst-case Red default is largely off the table for them.
In an owner-managed business turning over between £10 million and £100 million, the picture tends to look very different. Packaging data sits in operations, sometimes in finance, occasionally in marketing if it ended up there because of a rebrand, and only rarely in one consolidated place. Spec sheets are often three or four years out of date. Composite materials are recorded as their headline component rather than their constituent layers. Imported lines come in with documentation that does not map onto the RAM categories at all. None of this was a problem when the fee was flat. From October it becomes the difference between paying the amber base rate and paying twenty per cent more, on what for many producers is already a six-figure annual liability.
The honest reading of what is coming is that the businesses being penalised first will not be the ones whose packaging causes the most harm. They will be the ones whose data infrastructure has not caught up. That is an uncomfortable thing to say out loud, because the policy intent is genuinely about driving better packaging design, but it is what the mechanics of the scheme will produce in practice in the first couple of years.
What about the businesses that have already invested in recyclable packaging?
This is where the conversation gets sharper, and where I think a fair number of producers are about to feel hard done by. Many food and drink businesses have already spent serious money moving away from flexible plastics, redesigning labels to remove problematic inks, switching to mono-material trays, and accepting a higher unit cost on the packaging itself in the expectation that the EPR position would improve as a result. If the RAM data for those redesigned components is not properly captured, submitted, and substantiated by the reporting deadline, the system will rate them Red regardless. The investment was real. The recognition of it inside the fee structure depends entirely on the reporting.
That is a difficult message to deliver to an owner who genuinely believed they had done the right thing. It is also a useful one, because it reframes the next twelve months as a finance and data problem rather than another sustainability project. The redesign work, in most cases, is done. What is missing is the audit trail that proves it.
So what should be on the to-do list before the next reporting deadline?
The most important thing is to stop treating EPR reporting as something the compliance scheme will quietly handle in the background. The scheme can submit what it is given. It cannot manufacture data that does not exist inside the business, and it cannot override or defend a Red outcome where the underlying data is absent or unsupported. In practice that means three things worth getting on with now. The first is a single, owned packaging register that lists every SKU, every component of every pack, the material and weight of each component, the supplier, and the date the specification was last verified. If that document does not currently exist inside the business in a form one person can be held accountable for, it is worth treating that as the immediate priority. The second is a deliberate sweep for the components most likely to default to Red, which in food and drink tends to mean labels, films, closures, and anything described as a laminate or a barrier. Those are the categories where the documentation gap and there cyclability question collide. The third is a forecasting exercise. Modelling what the Year 2 fee will look like under a worst-case Red scenario, and what it would look like with the same packaging properly evidenced as amber, gives the owner a number to act on. In practice, the gap between the two scenarios can be large enough on its own to fund the work needed to close it.
There is one further point worth making, and it is the one I would want to leave a food and drink owner with rather than the technical detail. The producers who come out of the first modulated year well are not necessarily going to be the ones with the most sustainable packaging on the market. They are going to be the ones who treated EPR as a finance issue from the start, gave it ownership inside the business, and made sure the numbers being reported reflected the packaging they were actually using. Everyone else will pay the Red default, at least for a while, and most of them will not realise until the invoice arrives that they were paying it for the wrong reason.
That gap, between what the policy is designed to do and what the mechanics actually produce in the first couple of years, is where the real cost is sitting. It is worth closing it now, while there is still time to do so before the data behind the Year 2 invoice is locked in.
This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.
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