Beer is huge and once you start pulling back the covers you begin to realize just how massive it is. Normally, all we see are six packs at Kroger, a pint at a restaurant, or flight at a brewery, and it ends there. Something I’ve always enjoyed doing with this blog is looking into all those things that aren’t sitting right in front of our faces. I’d heard about the minimum markup on beer a few times but never looked into it before. Here’s what I found from poking around.
Why a Minimum Markup on Beer?
…prevent abuses caused by the disorderly and unregulated sale of beer.
The Ohio Administrative Code (OAC) dryly lays out what is and isn’t allowed, no reasons giving. So I was quite surprised when section 4301:1-1-72 said why there was a minimum markup on beer. It begins with the short line above, then launches into a list of reasons.
Not having a set minimum price could result in aggressive sales practices that would “stimulate purchase and consumption,” which you’d think the government would want to do to help businesses grow. Except, this is alcohol and such stimulation of purchase and consumption could lead to intemperance.
The OAC provides further reasons beyond teetotaling and gets into the sometimes loved, sometimes hated, 3-tier system. No set pricing could result in discriminatory sales practices that could threaten the survival of distributors and stores. If one person can charge less for the same product, it could obviously be a boon to that store.
The Minimum Markup
Never to make anything simple the OAC uses three separate rules to say the minimum markup is 25% anytime a customer buys beer. It takes three rules because each rule addresses each of the three tiers. First off manufacturers, the breweries, have to markup 25% when they sell to you. The second rule says a 25% markup for when you buy directly from a distributor. And the third rule? You guessed it; the store has to mark it up 25% when you buy a beer from them. 25% of what, though? 25% of what it costs a store to buy it from the brewery or distributor.
Surprisingly, the bottom of the rules on minimum markup are where we get the rules on “mix and match” packages. Fascinating, and disappointing, to me, is that only the customer can pick out which beers go in the mix pack.
It’s disappointing because I’ve always loved the idea of a store building a mix six for customers, like a MadTree or Rhinegeist mix six-pack. Even better would be a mix of a certain style to help customers explore that style. This also works great with out-of-state travelers. Every time I travel I find a local bottle shop and talk to the folks there to learn what great local beers I need to buy. It’d be nice to walk in and buy a pre-mixed local six. I even have a list of beers for them!
Going Below Minimum Markup
You’ve likely seen some beer below the usual $9.99 that you swear you saw for sale at $9.99 before. You may be thinking, hey! They can’t do that, that’s below minimum markup!! Well, that’s not quite true, because the minimum that gets marked up can change thanks to differential pricing practices, which is a complicated way of saying changing the price.
No manufacturer or supplier of beer to Ohio wholesalers may differentiate in the price of beer sold to Ohio wholesalers except when such price differentials are based on reasonable business grounds.
OAC section 4301:1-1-73 uses lots of big words to say “breweries need a good reason to change their prices and when they do they have to give distributors a 2-week notice.” So when you see a pumpkin ale on the shelf in May for $5.99 either the brewery changed the price or seasonal creep has gone way too far.
Coming Soon: Pricing Laws for Bars
Everything you just read applies to retail sales for off-premise consumption, i.e., bottles/cans you drink at home. There’s a whole separate set of things about beer pricing at bars and restaurants. I’ll have another post on that soon.