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Abstract

The market for beer in Germany is special for many reasons, e.g. the purity law, the large number of breweries, or consumers who are highly loyal to local brands. To what extent brand loyalty affects spatial pricing strategies, is the main question of this article. We employ weekly retail scanner data for Germany from 2000 to 2001. We find that discounts are higher and offered more often the closer the brands are sold to the brewery they originate from. In addition, average prices are also lower on home markets. According to Anderson and Kumar (2007) this strategy is chosen because promotions generate new loyal customers who repay in periods of regular prices. Thus, loyalty of consumers may be endogenous. Alternatively, retailers use local beer brands as loss leaders, which can also explain the observed regional pricing strategies.

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