Pricing in the Land of Beers

Belgium prides itself on being “The Land of Beers.”  A Belgian student tells me that this pride leads to some unusual pricing policies among the less well-known breweries.  Apparently, many charge a higher price for their products when they are sold within the local area around the brewery, since people are proud of their local brand.  This is a clear example of demand-based price discrimination.  The average cost of selling locally is probably below that of selling elsewhere (lower transportation costs); but locals’ pride in the native tipple gives the brewers some monopoly power, which they are happy to exploit.  The brewers are made better off (higher profits) by the locals’ behavior; and the local people must be better off, otherwise they would choose different brews.

dabeir trinket

how are the locals better with higher prices? better off than what?

Daniel Dickison

Better off in that they are happier believing they are supporting the local economy, home team pride, and what not.


The willingness to pay for the local beer will be higher than that of other beers for the reasons that you say, but it's a huge leap to say that local people are better off.

Eric M. Jones

"...The average cost of selling locally is probably below that of selling elsewhere (lower transportation costs)"

Buying a pineapple in Hawaii is expensive. A good cup of coffee in Costa Rica will cost you dearly. There must be myriad other examples...due to giant distributors or processors buying up all the local product. So local markets get squeezed. Transportation costs are a trivial part of this because the Giants negotiate for lower prices that easily cover higher transportation costs.

Jerome Solanum

The cost of quinoa in the Andes is another good example.


This happens in the US too, though the motivation is nominally different. Buying brewery-direct is often more expensive than buying from a retailer, with the brewery pocketing the markups that would normally be paid to the wholesaler and retailer. Brewers defend this practice by saying it would be suicide to undercut their retailers. I'm not so sure--are many beer shoppers so price-sensitive that they'll drive many miles to a brewery with limited hours and a single brand to save a buck a sixpack? My sense is that it's simply a good story and everyone is happy to play along since it allows higher prices and brewery visitors still get warm-fuzzies.

Btw, Maredsous (pictured) is brewed by Duvel Moortgat, which produced over 7 million barrels across a number of brands in 2010. That's still small from a global standpoint, but for comparison, Boston Beer Co/Sam Adams and Yuengling each have an annual production of closer to 2M barrels.



This is similar for many small wineries in the US (I'm thinking particularly of NYS). They sell their wine at full list price in their tasting rooms, while any wine they sell elsewhere through distributors is essentially sold at cost. Those off-site sales are basically marketing, not revenue.


Some wineries here in California charge more at the winery because they would rather have you purchase the wine in the store - the distributors and stores wouldn't continue to carry the wine if people just drive to the winery and buy it for cheap.

Chris Benten

Samsung (and probably other Chaebols) practice this discriminatory pricing also. However, one way of looking at this issue, learned in Managerial Accounting, is to cover all fixed costs with local pricing and only variable costs go into external pricing with excess production capacity. This was the Asian argument when accusations were flying about "under cost" pricing a few years ago.


The same thing happens with oil refineries. Gas prices are more expensive in towns with oil refineries. Partly it has to do with local taxes, but gasoline stations controlled by the refineries have priority and set the base price for the town's average cost of gas.

Seminymous Coward

This claim is false. Cancer Alley's gas prices are lower than the national average. makes it abundantly clear.

Also, I'm curious as to what you mean by "priority."

jobu babin

'otherwise the would choose different brews." Not the minds of locals, there are no other brews.

Essentially, local breweries in Belgium, and many parts of Germany are local monopolies...reminds me of some work by Jared Diamond. The municipalities are better of because of the lack of competition ensures a quality product, and mass produced beer as it exists in the competitive US market is simply a different good altogether (because of differing price elasticities and demands for product freshness and identity).

Kyung Rae Kim

Great point. Completely makes sense. In pricing, it is about willingness to pay and what the market will bear. In this case, there is higher willingness to pay.

Perhaps a great example why "cost+margin" is such a basic and poor way to think about pricing. Thank you again.


You have me confused.

The only brewery in the local town charges enough more to the local taverns for its beer than it charges for beer sold to wholesalers and tavern oweners in distant towns, because the locals want only the local beer and thus will pay more for it.

So......What prevents the local tavern owner or shopkeeper from going 5o kilometers down the road to another town in Belgium or Holland, and buying from wholesalers there at the lower prices, and importing the beer back home?


simple, they don't want to engage in a price war and have everyone undercut their prices and have the local brewrey no longer benefit from having a slightly higher price at the hometown.