When Laws Scramble Business Plans
Writing the cover story in Portland’s Willamette Week, Nigel Jaquiss detailed a remarkable story of a city bureaucrat drafting policy that would effectively put Oregon’s only glass recycler out of business. This is a significant local development—but it has ramifications for beer, wine, and cider makers throughout the Northwest. The plant, owned by Owens-Illinois, recycles 100% of the glass bottles collected as a part of the Bottle Bill—100 million pounds last year. The Portland City Council is due to consider a carbon tax that would hit the plant for a million dollars a year. Already downsizing because of the shift to cans (especially in beer), the plant probably wouldn’t survive the tax. That would mean shipping Oregon bottles to California for recycling—if they don’t end up in a landfill instead.
Go read the article if you want to understand how this proposal came to be. It’s quite a story. I wondered how it would impact the beer industry, which has a handy source of bottles at the O-I plant, and so I called Jules Bailey, chief stewardship officer of the Oregon Beverage Recycling Cooperative. You may remember Jules from a story I did a couple years back about Oregon’s effort to start a bottle return program in the state, which he spearheaded. In short: it won’t be good. The lessons touch on supply chains, pricing and availability of materials, and how laws can act as unforeseen variables that scramble business plans.
Glass Source
Add the Owens-Illinois facility to that list of ancillary businesses that support the beer industry: hop fields and research centers, malthouses, yeast labs, brewing schools, etc. The O-I plant has been a handy source for wine and beer bottles for decades—and it’s the only one in the Northwest focused on those kinds of bottles.
This isn’t just a convenience. Fewer and fewer places now make bottles for these purposes. At one point, a hiccup interrupted Oregon’s refillable program, and Jules had to scramble for a supplier. “What I learned in the course of that mishap,” he told me, “is that most of the traditional places people have been getting glass have dried up. You cannot get that 500 ml bottle out of China anymore.” European sources have been lost as well. “That local supply has become increasingly a really important source as other sources of glass have gone away.”
The sky won’t fall if the glass plant closes, but it will have a real impact on the industry. “There are always ways to get glass, but if you look at any producer that doesn’t enjoy the advantage of being close to a glass plant, their costs are much higher. In Oregon we take it for granted that you can just go down the street and buy as much glass as you want.”
That surprised me. I figured glass was a commodity and prices were more or less fixed. Not so, he told me. “There are a lot of factors. A lot of glass is sold through distributors as opposed to directly, and so there’s the cost of getting it through Saxco, for example. I don’t know how much they would be able to absorb, but it would be significant in a business where pennies per bottle matter.”
Carbon footprint
The ostensible point in slapping companies like O-I with a big tax is driving them to reduce emissions. If Willamette Week’s Jaquiss is right, O-I produces a lot of airborne pollutants, and is located in an industrial tract near the low-income Cully neighborhood. But how much would shutting down the plant help reduce our carbon footprint? It would actually make it larger.
“Glass is just so heavy to transport,” Jules said with a sigh. Last year, Oregon collected 200 million bottles as part of the Bottle Bill—which excludes (weirdly) wine bottles. Shipping all those down to California and importing millions more bottles from elsewhere adds tons and tons of carbon to our glass footprint—and gains us nothing. So long as we use glass, we need factories to manufacture, process, and recycle it. Shutting down a local plant doesn’t end manufacturing, it just relocates it. In many cases (though probably not this one), “green” states and countries that offshore their dirty work end up sending it to places with lax standards, where plants pollute far more.
Why, then, would famously-green Portland consider a tax that would create more pollution? Jules isn’t familiar with all the details and didn’t want to speculate, but did add what seems like a logical conclusion. “I’m not convinced carbon was the primary driver of the policy. I think revenues may have been the primary driver.”
Covid, Wine, and an Expanded Bottle Bill
While I had him on the line, I asked how the refillable program was going. Planning began four years ago, and the project came online more than two years ago—before it was clear just how many breweries were going to switch to cans. Still, it’s “okay,” he said. It’s worth doing and the breweries using it seem satisfied, but unless there’s a switch back to bottles, it won’t expand.
However, he did mention an interesting development. Thanks to Covid, more people have moved to home delivery, and wineries are discovering they like 500 ml bottles—they’re great with a meal. One winery, Coopers Hall, has begun using the program, even though wine isn’t part of the bottle bill. (Legislators originally passed the Bill in the 70s to reduce littering, and people weren’t chucking wine bottles out their car windows.) Wineries have dabbled in cans, but bottles will remain the key package. They’ve shown huge interest in the program, and now Jules and others are looking for solutions, including adding wine to the deposit program. I was fascinated by the detail that Covid might spark a change in bottle volumes, though—another example of the many ways Covid is reshaping culture.
Whether all this will come to pass is now very much an open question. The Willamette Week article is going to provoke a lot of hard questions. Shutting down a plant that provides good jobs while impacting several industries, all to raise a relatively small amount of money may not seem like such a great idea once those impacted start voicing their concerns. It is, nevertheless, a great example of how laws impact business, even if very few people ever realize it.