Can a distributor offer “end of the month” discounts?

Example: Is it legal to give a retailer $1.00 off per case if the retailer sells 300 cases by the month’s end?

The Liquor Control Commission permits end of the month (EOM) and end of the year (EOY) discounts.  However, The Commission will not allow these discounts on a volume discount.  If the distributor offers an EOM or EOY discount, the distributor may not offer an initial discount on the beer sold.  In the example given to us by the distributor, the Commission would not permit a volume discount for ordering 300 cases of beer and then offer another EOM or EOY discount because the retailer reached the goal of selling 300 cases.  The Commission has stated only one discount is permitted – No “double discounts.”

Can a brewer offer consumer specialty items free of charge?

Example: A major brewer is providing convenience store consumers a free beer huggie (Koozie) when the consumer purchases a bottle of the brewer’s beer.  The huggie is provided by the brewer not the distributor.

The “of value” section applies to giving of things of value to the retailer.  It does not apply to consumer advertising specialties that are clearly documented on an invoice as promotional items intended for consumer use. These items cannot be resold by the retailer nor can they be personally used by the retailer or retailer’s employees. 

As this policy is applied to a recent example, a manufacturer can provide a huggie (Koozie) to a convenience store retailer as part of a consumer promotion as long as the distributor’s invoice clearly documents that the huggies (Koozies) are for a consumer promotion and there is other evidence of the promotion at the store.  In this case, the distributor’s invoice should say “50 Bud Coolies for “Buy 2 25oz Cans, Get a Complimentary Coolie” Promotion- N/C.”  There should also be some other evidence of the promotion in the store like signage displayed that advertises the free consumer item at or near the beer display area.   (i.e. “See Cashier at checkout for free Huggie.”)

At no time may a brewer or distributor advertise free alcoholic liquor (i.e. “Buy 1 12 ounce bottle of Brand X Beer – get the second free.”

Can distributors use social media to advertise retailer’s promotions and beer specials?

ABDI initiated legislation last year, which became law, allowing distributors to advertise its products and repost or share a retailer’s social media post on the distributor’s social media page. The only stipulation is that distributors may not contain the price of the alcoholic liquor.   

“Section 6-5 “…A manufacturer, distributor, or importing distributor may furnish free social media advertising to a retail licensee if the social media advertisement does not contain the retail price of any alcoholic liquor and the social media advertisement complies with any applicable rules or regulations issued by the Alcohol and Tobacco Tax and Trade Bureau of the United States Department of the Treasury. A manufacturer, distributor, or importing distributor may list the names of one or more unaffiliated retailers in the advertisement of alcoholic liquor through social media. Nothing in this Section shall prohibit a retailer from communicating with a manufacturer, distributor, or importing distributor on social media or sharing media on the social media of a manufacturer, distributor, or importing distributor. A retailer may request free social media advertising from a manufacturer, distributor, or importing distributor. Nothing in this Section shall prohibit a manufacturer, distributor, or importing distributor from sharing, reposting, or otherwise forwarding a social media post by a retail licensee, so long as the sharing, reposting, or forwarding of the social media post does not contain the retail price of any alcoholic liquor. No manufacturer, distributor, or importing distributor shall pay or reimburse a retailer, directly or indirectly, for any social media advertising services, except as specifically permitted in this Act. No retailer shall accept any payment or reimbursement, directly or indirectly, for any social media advertising services offered by a manufacturer, distributor, or importing distributor, except as specifically permitted in this Act. For the purposes of this Section, "social media" means a service, platform, or site where users communicate with one another and share media, such as pictures, videos, music, and blogs, with other users free of charge.”

What do I do if a large chain retailer refuses to pay the distributorship’s fuel surcharge? What are the guidelines for fuel surcharges?

A. The Illinois Liquor Control Commission has clarified a few of the guidelines regarding Invoice Service Charges (ISC) (which includes fuel surcharges).  Please familiarize yourself with these guidelines.

• It is required that all ISC’s, if any, applied by a distributor be applied to all retailers without discrimination.  The Commission has clarified that if an ISC is charged by the distributor, the ISC must be applied to all retailers regardless of where the retailer is located or whether the retailer is on-premises or off-premises. 
• Invoices must identify the ISC and the amount of the ISC applied in a line item.  All invoices must explicitly state, in legible print, that a failure to pay an end of the month ISC bill will result in an “of value” violation imposed by the Illinois Liquor Control Commission. 
• The distributor shall have the obligation to report to the ILCC any failure by a retailer to pay an ISC on or before the day of the next delivery after the delinquency has occurred.
• There is no reporting requirement if the distributor collects the full amount of a past due ISC invoice upon the next delivery date.
• If the distributor does not report the failure of a retailer to pay a past due ISC and continues to deliver beer to that retailer, the ILCC will assess “of value” violations against distributor and retailer. 

If you are unable to follow these guidelines, it is highly recommended that you do not charge any retailer an ISC.  Otherwise you and the retailer will face disciplinary action.
 

My competitors’ supplier has an advertisement in the local newspaper which offers instant savings if the consumer buys 3 twelve packs of the brewer’s beer. Is this legal?

Yes. The Commission's current policy on coupons is as follows:

1)    Mail-in coupons or mail-in rebates are permitted.

2)    Offering Instant Rebate Coupons (IRCs) at the licensed premises is prohibited. Distributors and suppliers are permitted to offer IRCs in newspapers, magazines, on the Internet, etc.; however, at no time may an instant rebate coupon be offered on an alcoholic beverage package or within the licensed premises. In the example given in the distributor’s question, the consumer must clip the coupon and physically bring the coupon into the store for the discount. The coupon does not state that the consumer will receive “free” or “complimentary” beer but rather provides the consumer with a quantity discount.

3)    Cross-promotional coupons are coupons which discount a non-alcoholic product in conjunction with the purchase of an alcoholic beverage product (For example, “Purchase a 24-pack of Brand X – Get a free bag of charcoal"). Cross-promotional coupons are permitted provided that the non-alcoholic item discounted is not a retailer specific brand. Unlike Instant Rebate Coupons, cross-promotional coupons may be offered on and off the retailer’s premises.

Can a Distributor Offer Free Labor to Install Glycol Draught Systems? Doesn’t the Rules Allowed Us to Provide Free Labor on the Original Installation if the Retailer Pays for the Equipment?

No. 100.210 states: “Distributor servicing, balancing, or inspecting draft beer or wine systems at regular intervals, and providing labor to replace or install rods, taps faucets, fittings and lines in draft beer or wine dispensing equipment, shall not be considered a subsidy. However, free cleaning of coils by a distributor by a company whose services are paid for by a distributor shall be considered a subsidy or something of value…” If free cleaning can’t be provided by a distributor then anything related to coil cleaning like installation of a Glycol system has to be paid for by the retailer.  The rule allowing for free labor is specific to the mechanics of the maintenance and repair of a tap system - not the regular cleaning and not original installation. 

The Commission has earlier stated that if a distributor is found guilty of giving a retailer a draught system or providing free labor to install a brand new system, the distributor may be fined up to $20,000 and have their license suspended for no less than 7 days. ABDI advises any distributor engaging in this activity to cease immediately.

What is the difference between a brewer, Class 1 & Class 2 Brewer and a Brew Pub?

BREWER (IN-STATE) NON-RESIDENT DEALER (OUT-OF-STATE BREWER)

·         Permitted to manufacture an unlimited amount

·         Must sell to importing distributors (Non-Resident Dealers) or Distributors (Brewers)

·         May not self-distribute

·         Brewers are permitted to sell beer manufactured by the brewer on the premises (tap rooms).    They may not sell wine, spirits or beer not manufactured by the brewer.

Class 1 Brewers

·         May only manufacture 30,000 barrels (930,000 gallons or 413,333 cases) of beer per year and may self-distribute up to 7,500 barrels (232,500 gallons or 103,333 cases) of beer per year in Illinois 

·         May not own a brew pub

·         May sell their beer at the production facility (tap room).  The above guidelines apply.

Class 2 Brewers

·         May manufacturer up to 120,000 barrels (3,720,000 gallons or 1,653,333 cases) of beer per year. 

·         May not self-distribute.

·         A Class 2 Brewer, or Non-Resident Dealer, who brews fewer than 120,000 barrels of beer per year across all commonly owned locations inside and outside of Illinois may sell at retail from no more than 3 locations in Illinois. These may include 3 brew pub locations, 3 tap room locations, 2 tap rooms and a brew pub, or 1 tap room and 2 brew pub locations. All amounts are accumulative, and they may not be a part as a member of or affiliated with, directly or indirectly, a manufacturer that produces more than 120,000 barrels of beer per year or any other alcoholic liquor.

BREW PUBS

·         May manufacture up to 5,000 barrels of beer per year per location.

·         May not self-distribute

·         May sell beer for off premises consumption purposes to consumers (known as non-licensees) and to distributors and importing distributors.

·         Are regarded as a specialty retailer; therefore, they may operate an unlimited number locations provided that each location is licensed separately and that they are not affiliated with a Class 1 or Class 2 Brewer.  If they are affiliated with a Class 2 Brewer the limits apply.

·         May sell other beer, wine and spirits at retail provided it purchases said products from a licensed distributor.

·         May simultaneously hold a Class 2 Brewer’s license provided that the location is separate from the Brew Pub location

As a distributor am I permitted to give glassware to a retailer if my supplier gives me the glassware free of charge?

No. According to Section 6-6 of the Liquor Control Act, no manufacturer or distributor may “directly or indirectly, sell, supply, furnish, give or pay for, or loan or lease, any furnishing, fixture or equipment on the premises of a place of business of another licensee authorized under this Act to sell alcoholic liquor at retail….”  

Section 6-6 (iv) also states: “…however, such items, for example, as coasters, trays, napkins, glassware and cups shall not be deemed to be inside signs or advertising materials and may only be sold to retailers.”