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The Beer Circle » Opinion » Pennsylvania Laws vs. Mug Clubs

Pennsylvania Laws vs. Mug Clubs

The Iron Hill Mug Club Card

One step forward, one step backwards. Just when it was reported that Pennsylvania moved to fifth in the nation in beer consumption, I received an email from Iron Hill Brewery & Restaurant that they were temporarily suspending their Mug Club. Being a member, I was really interested in why. To quote the important parts of the email:

Due to factors beyond our control, including decisions by state agencies that regulate the sale of alcohol, the Mug Club as we know it must end.

Whether we agree with these decisions or not, or why after 10 years the Mug Club has become an issue, is not up to us to decide. What is important is finding a solution quickly and doing what’s best for our most loyal customers. We want to comply with all the laws and regulations in the states we operate but our primary focus is providing guests handcrafted beer, creative food and attentive service.

  • Members will no longer receive points for the purchase of alcohol. This was a major issue for the state. Members will continue to receive points for all other purchases, excluding tax, tip and gift cards.
  • Members can continue to drink from the Mug Club mug, but must pay the same price as non-club members, an additional 50 cents over the current price of a pint. The free eight ounces of beer that Mug Club members received was another major issue for the state.

First of all, the Iron Hill Mug club program has existed for 10 years and there is an issue with it now?! Of the issues cited in this email, the only one I can understand is the State’s argument is the giving away of free beer. However, beer is still being purchased and Mug Club members are simply receiving extra. Lest we not forget, Mug Club members pay to be part of this club, so the money spent on the front end can be seen as future purchase of beer to be drank. I reached out to Kevin Finn, President of Iron Hill Brewery & Restaurant, and confirmed that the issue lies within their Pennsylvania restaurants. In his response to me, he noted that Iron Hill was only verbally warned and not cited at this point.

I was also pointed to the PLCB findings on this issue by Michael (@saisoninthesun). From the ruling, I believe that Iron Hill attempted to modify the Mug Club to get a determination from the PLCB as to what exactly was not permissible in their program. Iron Hill struck out the additional beer a member receives in his or her mug and the section about earning points on the purchase of beer. It is apparent that the PLCB views the additional 8 ounces of beer as a promotional material and also as discount pricing. If members pay incrementally for that extra beer, no violation occurs:

With regard to the unlawful inducement, the Liquor Code prohibits providing anything of value as an inducement to purchase alcohol. [47 P.S. § 4-493(24)(i)]. However, an exception allows manufacturers and licensees to provide advertising novelties of nominal value, which bear advertising matter, to other licensees and consumers with or without a purchase. [47 P.S. § 4-493(24)(i); see also 40 Pa. Code § 13.52]. “Nominal value” currently is interpreted as fifteen dollars ($15.00) each, wholesale cost, or less. [Board Advisory Notice No. 10 (6th Revision)]. Such advertising novelty giveaways may or may not be conditioned on the purchase of an alcoholic beverage.

Your Mug Club promotion, as revised, would be permissible as described, since it would not be considered an unlawful inducement to purchase beer. Since the Mug Club members have to pay the same price for their beer as non-members, there is no inducement for patrons to pay the membership fee in order to take advantage of receiving an increased amount of beer that is not afforded to non-members.

The Iron Hill Mug: 8-ounces Too Big Without Charging Extra to Fill It

Obviously the PLCB has some issues with rewarding members for their purchases.

Further, the offering of points for purchases is problematic when points are accumulated based on the purchase of beer/alcohol, regardless of whether the points are ultimately redeemed for food and non-alcoholic products only.  However, your revised Mug Club promotion specifically excludes the accrual of points on purchases of alcohol; therefore, your promotion would be permissible with regard to the offering of points.

This information has to affect other Mug Clubs as well. I know for a fact that Appalachian Brewing Company has a very similar set up with rewards and free beer based on the mug size. I sincerely worry that mug clubs across the state are about to shut down as we know them. The statement near the end of the ruling says the following:

Please note that although discount pricing restrictions do not apply to manufacturers, such as breweries, they do apply to brew pubs and restaurants operated in connection with breweries, which appears to be the case here.

It is interesting that if they had a mug club I could go to Tröegs (a brewery) and have extra beer provided to me for free but I can’t go to Iron Hill because they have a brewpub license. As with most items in Pennsylvania’s liquor code, the actual practice is not illegal but it is only illegal because of the license that a business has. The PLCB does not have issue with giving an extra 8 ounces of beer to a member, they only have an issue if it occurs at a brewpub. In my correspondence with Kevin from Iron Hill, he reiterated that the PLCB is focusing heavily on the fact that they cannot give out additional beer without increasing the price.

After digesting all of this information, I can conclude that the PLCB views a mug club as an avenue to provide someone with free beer. However, I have to disagree with that opinion, as the persons receiving said benefits are paying to be part of this club. Paying members are shoveling out money for a privilege. It is not like Iron Hill is walking around giving away free beer to anyone on the street or as an enticement to visit their place of business; they are rewarding their most frequent customers who choose to buy a larger glass with a full mug. In closing, I have to say that Iron Hill may be one of the classiest organizations I know. They gave all members a 500 point bonus just for having to put up with this crap until they resolve the issue and reinstate a new Mug Club program. They seem to be just as aggravated as the customers are, and they are doing a damn fine job of keeping everyone happy. I look forward to their new point program and I will continue to patronize their brewpubs.

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Written by Jeff Kupko

Jeff is a traffic engineer that loves his beer, and especially loves trying new beer. As a student at the University of Pittsburgh, Yuengling was a staple and the beginnings of liking something better than fizzy yellow water. This has evolved into an entire hobby, with Jeff keeping a blog of all of the beers he tries. Vacations most certainly involve at least one brewery or bottle shop visit to gather a region’s coveted fruits. Now, Jeff has ventured into homebrewing, and there is probably no saving him from being engulfed entirely by beer. While Imperial Stouts and IPAs rank highest in Jeff’s eyes, sours are sneaking up on those styles, and Jeff loves to try all different styles. Find Jeff Kupko on Google Plus

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