Is It Last Call for Craft Beer? (NYT Op-Ed by Jim Koch)

Discussion in 'Beer Talk' started by 2blackdogs, Apr 8, 2017.

  1. 2blackdogs

    2blackdogs Initiate (122) May 21, 2008 North Carolina

    https://www.nytimes.com/2017/04/07/opinion/is-it-last-call-for-craft-beer.html
     
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  2. bbtkd

    bbtkd Champion (819) Sep 20, 2015 South Dakota

    I agree that big beer is a monopoly, and they are certainly gobbling up craft breweries, but I disagree that this will be "Last Call" for craft. If a craft brewery is bought by the big boys and they let it continue to crank out good beer and innovate, then it seems harmless. Any changes they are making seem to be improving efficiency, distribution, etc vs messing with the beer.

    The BCBS problems we've seen lately haven't been attributed to their ownership by big beer, though conspiracy theorists like trying to make a connection there. I do think that the govt should scrutinize these buyouts a bit better and would prefer to see some craft breweries banding together to save on supplies, improve distribution, and collaborate. Unfortunately, the temptation of millions and billions of dollars is huge for breweries that started in a garage.

    So - I don't like it, buyouts should be scrutinized and avoided, but it's not the end of craft.
     
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  3. Witherby

    Witherby Aspirant (239) Jan 5, 2011 Massachusetts
    Subscriber

    Maybe a last call for large, independent craft breweries with national distribution but definitely not for small, local breweries who sell all of their directly at the brewery and taproom and maybe to some local bars and restaurants. And that is where the creativity and growth is these days.
     
  4. cavedave

    cavedave Poo-Bah (2,090) Mar 12, 2009 New York
    Beer Trader

    Wow nice statistics, but the opinions made from them aren't aren't ones I agree with. I don't see the trend of more Americans enjoying full flavored artisanal beers ending, now, soon, or ever. We will see, of course, and I don't pretend to know more than the writer .

    He lumps all the craft brewers as 5,000+ small breweries, but makes no distinction between small, local ones with no packaging, or with only local distro, and the larger ones in multi regions/nationwide and exporting to Europe. And he doesn't recognize any trends within craft beer but instead makes it a monolith. I think I read, and someone else can chime in with statistics I don't care to track down now, that the small local brewery/local tap room segment of the industry has grown with large double digit increases.
     
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  5. hoppytobehere

    hoppytobehere Crusader (703) Aug 10, 2012 District of Columbia
    Subscriber Beer Trader

    Things are going to get bad for large craft breweries with national distribution like, well I don't know, Sam Adams, but the local guys that are brewing good stuff will do just fine.
     
  6. Squire123

    Squire123 Meyvn (1,040) Jul 16, 2015 Mississippi
    Beer Trader

    Mr. Koch raises some thought provoking points.
     
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  7. Oktoberfiesta

    Oktoberfiesta Aspirant (259) Nov 16, 2013 New Mexico
    Beer Trader

    At least in NM, they recently allowed breweries to operate up to three tap rooms. This has helped so many breweries get their beer into more hands, without playing the big boy distributor game.

    The tap handle fight is all too real though. Same with grocery store shelf space. Atleast in my state, allowing up to three taprooms without extra licenses is the step in the right direction.

    Consumers also need to get informed and let restaurants know they want variety or they won't be a customer for long.

    I also know that at state funded buildings and events, they need to be more open to not just taking the highest bidders beers and having them all be on tap. I know my local racetrack has just one IPA on tap. Can you guess which one? And our AAA baseball team has great relationships with certain distributors. They lack so much local variety, it's sad. Money talks and we need to be the ones using our pockets
     
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  8. SFACRKnight

    SFACRKnight Savant (945) Jan 20, 2012 Colorado
    Beer Trader

    @Oktoberfiesta my guess is goose island ipa.

    As for the topic at hand, I agree that larger breweries like Boston beer new belgium etc are going to feel a crunch. They are fighting big beer on one hand, but are losing countless customers to the small local option. The reason why these craft brewers were able to get so big was because they filled a niche. At one point there was either macro or imports. These breweries saw that need and filled it, but with so many new breweries coming up, how does an older brewery stay in the game? I have felt that these brewers were going hit some hard times, especially when it's cool to hate on them in the craft community.
     
  9. DrewSnyc667

    DrewSnyc667 Zealot (500) Jul 25, 2011 Massachusetts
    Subscriber

    I agree with a number of posters here, it seems like the larger craft brewers, and sadly, some of the pioneers of our hobbies will be the ones who will experience some tougher times ahead. What's interesting is how constantly evolving this industry is. When I moved to Boston 5 years ago I think there were maybe 3-4 taprooms....now there are at least a dozen. That is where the future really is...fresh from the source with little to no packaging (or distribution) required.
     
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  10. Squire123

    Squire123 Meyvn (1,040) Jul 16, 2015 Mississippi
    Beer Trader

    I agree that we consumers hold the key through our purchasing power. Unfortunately around here craft beer sales only represent about 3-5% of the market so we don't speak very loudly.
     
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  11. Crim122

    Crim122 Aspirant (248) Aug 4, 2014 North Carolina
    Beer Trader

    I've thought for awhile now that the future will be hyper local breweries that hardly even distribute within their own community. And if thats what it takes, so be it.
     
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  12. Yipyap

    Yipyap Initiate (100) Apr 8, 2017 Pennsylvania

    I know alot of people that are just burnt out on the whole craft trend in general.150 dollar+ a case beer,too many snooty,arrogant brewers,garbage hop bombs,absurd ingredients etc.i think the big brewers will continue to dominate as long as even the most local craft joints act so out of touch with reality
     
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  13. herrburgess

    herrburgess Savant (994) Nov 4, 2009 South Carolina
    Industry Beer Trader

    As much as hyper-local brewers are growing, I fear their future growth (and survival) will be heavily dependent on retail (i.e. tap-room) sales. Fact is, most big distributors (with a few exceptions) are flexing their muscles when it comes to distributing any beers that don't best serve the big brewers (and their "craft" acquisitions). They still have a big stronghold (stranglehold?) in most markets and are looking to squeeze the competition at every turn.
     
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  14. eldoctorador

    eldoctorador Zealot (558) Dec 12, 2014 California
    Subscriber

    Interesting article, and thread to bump in a couple of years.
     
  15. JackHorzempa

    JackHorzempa Poo-Bah (2,631) Dec 15, 2005 Pennsylvania

    I have been discussing the fact that for the larger distributing craft breweries times are tough (hyper competitive) for quite some time (in numerous BA threads). There has been much consolidation in the recent past and more will be coming in 2017 (and beyond).

    I saw zero acknowledgement from Jim Koch about the competition that small local breweries/brewpubs are bringing to the craft beer market segment. The drink local movement is real, vibrant and growing. Maybe Jim Koch simply chose to ignore this aspect when he wrote his op-ed?

    Yes the mergers of the mega-breweries are a competitive factor but the competition from the numerous (and ever growing) small, local craft breweries/brewpubs is a factor as well.

    If Jim Koch (Boston Beer Company) wants to be a successful business in 2017 (and beyond) he would be wise to strategize on things like:
    • How can he get his products to the customers faster so they will buy fresh Sam Adams beers vs. the fresh beers from their locally produced breweries/brewpubs?
    • How can Boston Beer Company be better positioned to be viewed as a community brewery? Maybe Boston Beer Company should open some brewpubs in strategic markets?
    • Consider the export market for their beers since the US market is getting so competitive. Maybe export to South America (e.g., Brazil)?
    • etc.
    Yes, there will indeed be greater competition for craft beer dollars. The existing craft breweries who learn how to effectively compete in this changing beer scene will still be successful.

    Cheers!

    @RobH @StoneBrewingCo @sierranevadabill @Sixpoint @KOP_Beer_OUtlet
     
  16. JackHorzempa

    JackHorzempa Poo-Bah (2,631) Dec 15, 2005 Pennsylvania

    One more thought:

    There may be decreasing amounts of craft beer purchased from larger distributing craft breweries (e.g., Boston Beer Company) but with the large (and growing) number of local, small breweries/brewpubs there will be no lack of craft beer choices today and in the future.

    Cheers!
     
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  17. herrburgess

    herrburgess Savant (994) Nov 4, 2009 South Carolina
    Industry Beer Trader

    Well, we might not have the shelves full of 1000s of different SKUs (mostly collecting dust) in every bottle shop. And that, if you ask me, is a good thing. 1000s of choices that are all (or mostly) ultra fresh and that you travel to experience in their original and unique settings...sounds ideal! Will have to see if it is truly sustainable, though....
     
    #17 herrburgess, Apr 8, 2017
    Last edited: Apr 8, 2017
  18. herrburgess

    herrburgess Savant (994) Nov 4, 2009 South Carolina
    Industry Beer Trader

    Not at all. Just saying that the big distributors -- and the fact that there are many more products than drinkers available to consume them fresh -- are working against such a situation. Still, the range of "styles" (well, at least the most popular US styles) may itself be limited enough for reasonable facsimiles to be made in every local region. If not, well...guess you can't always have it all....
     
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  19. MostlyNorwegian

    MostlyNorwegian Devotee (470) Feb 5, 2013 Illinois

    I can see it being last call for a kind of craft brewery which anticipates it can replicate the national distribution model that has sort of been the expansion for the sake of expansion model we may finally be growing out of as a whole. That model has problems from both ends of the market. The breweries who have defined their lot, and space and choose to stay regional or local are going to be able to respond to what the customer wants a lot faster, and the zombie brewers have deep pockets, and can afford to undercut them price wise.
     
  20. Boomer4ES

    Boomer4ES Disciple (351) Jan 31, 2012 North Carolina
    Beer Trader

    The inaccuracies and pure conjecture in this piece are absurd. I get that it's an opinion piece, but if you're stating things as though they are facts, I feel they should probably be based at least mostly in reality. I had a decent amount of respect for Koch before this.
     
  21. drtth

    drtth Poo-Bah (2,822) Nov 25, 2007 Pennsylvania

    Could you clarify a bit as to what you think the inaccuracies are? Thanks.
     
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  22. peaches7

    peaches7 Initiate (0) Jan 26, 2009 Massachusetts

    My concern is the buying power discrepancy. Let's face it. Dominos buys flour and cheese for way less than the small local pizzeria. Similar scenario with barley and hops. Goose IPA draught is SIGNIFICANTLY less in PTR than your local brewer's IPA. It's scary to think at some point the cost of goods for the small independent brewers will become too much.
     
  23. JackHorzempa

    JackHorzempa Poo-Bah (2,631) Dec 15, 2005 Pennsylvania

    I would not use the word “inaccurate” to describe this write-up by Jim Koch but I would characterize it as being incomplete.

    Let’s take one paragraph for example:

    “Get some craft brewers really talking, and they’ll tell you we are headed for a time when independent breweries can’t afford to compete, can’t afford the best ingredients, can’t get wholesalers to support them, and can’t get shelf space and draft lines. The result: Beer lovers won’t have the broad range of choices they have today.”

    For small local breweries which have business plans of selling directly to their customers (e.g., tasting rooms) the above paragraph does not have direct meaning. The same is true for brewpubs.

    For a significant number of the 5,000+ breweries in America this paragraph is not directly impacting to how they sell beer.

    Let’s consider the title: “Is It Last Call for Craft Beer?”

    Well, that question may have real significance for larger distributing breweries like Boston Beer Company, Stone, Green Flash, Sierra Nevada,…

    I would be willing to bet that the owners of my local brewpubs and small breweries that sell directly to their customers there is not the same level of concern as being expressed by Jim Koch. I would not at all be surprised if some of them would express thoughts like: Well, if Jim Koch is unable to deliver fresh beer to beer customers I would be happy to do it instead.

    In the past I worked for GE and the CEO (Jack Welch) would frequently say to us: the only job security is a satisfied customer. If Boston Beer Company can continue to keep their existing and new customers satisfied then as a business they will flourish. If not, those customers will purchase from other craft beer companies (e.g., small, local breweries/brewpubs).

    For completeness I will provide my personal answer to the question that Jim Koch asked: No, it is not last call for craft beer. Every month I hear of new small, local breweries/brewpubs opening (two just opened a few days ago: April 1st). There is lots and lots of craft beer in my area; more than I can drink.

    Cheers!
     
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  24. JackHorzempa

    JackHorzempa Poo-Bah (2,631) Dec 15, 2005 Pennsylvania

    In my area beer customers are extremely willing to pay 14, 16, 18 and more for four packs of 16 ounce canned beers directly from the local breweries/brewpubs. That is tremendous profit there!!

    I personally have little concern about cost of ingredients to these breweries.

    Cheers!

    P.S. Have you ever bought beer from Trillium or Tree House?
     
  25. Boomer4ES

    Boomer4ES Disciple (351) Jan 31, 2012 North Carolina
    Beer Trader

    The first problem I have is with the claim that the mergers in 2008 resulted in an immediate 6% price increase, and an immediate shift toward cost-cutting. BMC raise their prices every single year around September. This does not always translate to a consumer increase, but this has been common practice since before these mergers. Many of the larger craft breweries also plan their own yearly increases in conjunction with the big guys. I would imagine, but I don't know for sure, that BBC also does this. I don't know much about the claims of cost-cutting, but I have a hard time believing that there was an intentional effort made to cut costs after these mergers. I think the reality is more likely to be that costs were naturally cut due to securing larger contracts with suppliers. The more you buy, the more you save.

    I feel like perhaps he doesn't have a very firm grasp on the distribution network, but this is not uncommon in the craft beer world. In general, the distributor is always looked at as the bad guy, and almost without fail will take the blame for anything that goes wrong in the entire three-tier system. He claims that distributors are "free to favor their primary suppliers." In fact, we are required to favor our primary suppliers, but that is not exclusive to the beer world. If 90% of your sales come from one supplier, you are going to put most of your money behind them. That's just smart business. What is becoming more and more common however is that distributors are separating the craft segment and putting a specialized team together to focus all of their attention on those brands. In a BMC wholesaler, there will never be an equal share of mind, but it is also absurd to expect there to be. Additionally, craft brewers continue to gain more leverage with wholesalers as state laws change. There are places where craft suppliers can simply leave a distributor at their leisure, with no consequences, if they are unhappy with the level of service they are receiving. This put some major pressure on the wholesaler to make sure they are fully supporting those brands. A craft supplier never has to join a BMC wholesaler, or sign a contract that is unfavorable to them. The exception would be if there is only one distributor option, but I have a feeling that this is rarely the case. Koch is acting like all the cards are stacked against them all the time.

    Lastly, he talks about how the AB InBev/SABMiller merger had "largely meaningless conduct restrictions" in the US. He also explains how foreign governments required many more concessions before this merger was approved. Koch fails to mention that this merger had little to no effect on the American beer market, so the fact that there were any conduct restrictions required in the US is actually kind of a big deal. It makes perfect sense that the foreign markets, which were the only real targets of this merger, would have the bigger restrictions. I would also like to mention that AB InBev being asked never to own a portion of the distribution segment which accounts for more than 10% of their annual sales, is hardly a meaningless restriction. They are/were forced to sell several wholesalers to private owners, which certainly account for a substantial portion of annual profits.

    All-in-all, I am not necessarily agreeing nor disagreeing with his message here. I just think someone of his stature in the beer world would be wise to present things in a more truthful, and honestly, less whiny manner. He has been targeted by lawsuits and accusations for years over his company's shady ways of doing business (ie. buying taps), but I have not heard of a similar situation with BMC. I'm not saying it hasn't happened, just that I am not aware of it. BMC certainly has their ways of controlling sales, but any corporation of their size is going to play similar games. At the end of the day, the goal of any company is to make money. The bigger the company, the more profits required to keep shareholders happy. Perhaps Jim would be better off spending less time attacking those more successful than him, and more time trying to stop the bleeding of his own brand.
     
    #25 Boomer4ES, Apr 8, 2017
    Last edited: Apr 8, 2017
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  26. drtth

    drtth Poo-Bah (2,822) Nov 25, 2007 Pennsylvania

    Thanks. I can't speak to many of your points but I do disagree with the idea there was no cost cutting after the mergers, at least when InBev took over Budweiser to become ABInBev. There were several thousand people who lost their jobs (mostly at the management level, but...). Carlos Brito made it plain to his management group that if he didn't use a private plane they were not to do so either. Similarly a longstanding practice of only using whole grain rice was eliminated there by reducing the price of raw materials (but not the quality of the the beer).

    Edit: As for the price increases I normally don't spend my money on AALs, but Koch wouldn't be the first person to think that there was a causal connection two events happening at about the same time.
     
    #26 drtth, Apr 8, 2017
    Last edited: Apr 8, 2017
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  27. peaches7

    peaches7 Initiate (0) Jan 26, 2009 Massachusetts

    I have purchased from both of those breweries. Both amazing. I agree they appear profitable. I'm speaking more about retailers making decisions about draught lines, and the long term ability of craft beer drinkers to pay such prices.
     
  28. Boomer4ES

    Boomer4ES Disciple (351) Jan 31, 2012 North Carolina
    Beer Trader

    Alright, I can agree that there was cost-cutting. What I was referring to, albeit not very clearly, was that it was not at the expense of the beer's quality. I feel like without saying it; that Koch was implying just that. That's my interpretation of course, so I could be off-base there.
     
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  29. SFACRKnight

    SFACRKnight Savant (945) Jan 20, 2012 Colorado
    Beer Trader

    You just described Ballast Point...
     
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  30. drtth

    drtth Poo-Bah (2,822) Nov 25, 2007 Pennsylvania

    Well if Koch was implying that he wasn't the only one. :)

    These forums were filled with lots people claiming that Brito's cost cutting measures were to cut the quality of the beer.

    Quite ironic really when many of the same people were already in the habit of referring to Bud as "cheap swill."
     
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  31. jrnyc

    jrnyc Champion (847) Mar 21, 2010 New York
    Beer Trader

    The large brewers who are making inferior products that are collecting dust at local stores are in trouble, that is their problem. But the local breweries who are making superior beers now are thriving. In NYC area I can go directly to Other Half, Sand City, Interboro, LIC Beer Project, Interboro and get awesome, fresh beer.

    Boston Beer Company is a dinosaur. Unfortunately regional brewers might be also. I could care less if Jim Koch is selling less beer, as long as I can go to my awesome local brewers it is irrelevant to me.
     
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  32. jesskidden

    jesskidden Meyvn (1,183) Aug 10, 2005 New Jersey
    Subscriber

    AB-InBev had stated that owning ~10% of their distribution in the US was their aim around the time they first announced their intention to buy SABMiller and months before they made the agreement with the US DoJ in July 2016.
    So they "agreed" to something that they'd already announced was their corporate policy.
    Not sure which event you're talking about but the 2 WOD's they sold in Kentucky in 2015 Anheuser trades Ky beer distributors for Col. (they bought others in other states at the same time) was due to a change in KY Three Tier law, nothing to do with the DoJ settlement.

    I haven't heard of them having to sell other WOD's due to that 2016 agreement - which ones were they?
     
    #32 jesskidden, Apr 9, 2017
    Last edited: Apr 9, 2017
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  33. SFACRKnight

    SFACRKnight Savant (945) Jan 20, 2012 Colorado
    Beer Trader

    I will say that this has been happening across the board with almost everything in the United States. Large corporations have been squeezing small to mid sized businesses out of the economy for years. Jim Koch is just mad it's detrimental to his pocket book this time around. Where was he during the telecommunications mergers? Certainly not clashing sabers over that monopoly...
     
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  34. Prince_Casual

    Prince_Casual Disciple (315) Nov 3, 2012 District of Columbia
    Beer Trader

    I don't really care for Jim Koch to be honest. He has done exactly the same thing in the cider industry, knocking out draft placements and shelf space left and right with Angry Orchard, and at one point made progress with Coney Island although I don't see that anywhere anymore.

    I've given him a bunch of "shots" and frankly his beers are dated, unimaginiative, and just not good. Those Rebel IPAs were terrible. I'd honestly take a Budweiser over a Boston Lager at this point. BBC is as bad for true craft/artisan beers as InBev is.
     
  35. SFACRKnight

    SFACRKnight Savant (945) Jan 20, 2012 Colorado
    Beer Trader

    I thought it was funny when he was denouncing ipa while those rebel ipas were already in their fermenters.
     
  36. fx20736

    fx20736 Savant (994) Mar 7, 2009 New York

    I think the common theme of this thread is: 'Big' Craft brewers (i.e. BBC, SN, etc.) are being squeezed by AB Inbev and Miller Coors buying mid sized brewers (Goose Island, Blue Point) but not to worry because small locals will continue to proliferate and offer lots of new beer. Personally, I don't disagree with Jim or the posters here. but this is after all a 1st world problem compared to the stuff going on in the world and I know I will always find decent beer to drink
     
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  37. Premo88

    Premo88 Meyvn (1,252) Jun 6, 2010 Texas
    Subscriber

    First thing I thought of: the tap room.

    In Texas where our legislature finally has loosened up the archaic rules, the tap room is beginning to flourish. It's still just "beginning" ... not every small brewery has one or keeps one open for regular hours seven days a week, but the ones that do (and I've seen firsthand) appear to be making good money just off their tap rooms.

    Koch is coming from a good place. He's one of our biggest defenders of craft beer for obvious reasons, and I'm glad he wrote the piece. *And* I'm glad he pointed out Karbach, at one time my favorite in-state brewery whose beer I likely won't buy again now that they cashed in with ABIn-Bev.

    But it seems we're a long ways away from the two giants buying up all the beer. They'll get their hands on as much as they can, but that doesn't mean they'll be successful after they've done so -- especially if they force smaller, proven craft breweries to cut costs and produce inferior products.

    Right?
     
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  38. Urk1127

    Urk1127 Savant (962) Jul 2, 2014 New Jersey
    Beer Trader

    I can see breweries still working in the like of how pizzerias work in lieu of domino's running the show. Brewers can make enough to survive and help economy and neighborhoods by staying local. Bottling or not. I'm confident it will not destroy these said brewers. As for the big brewers, it's the amount of high profile brewers. The strong will adapt and survive no matter what. I feel we will not see many huge craft brewers as much as we have now, 50 years from now it will be a lot less. But local neighborhood brewers will survive just like barber shops, pizzerias, bakers etc ...
     
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  39. jesskidden

    jesskidden Meyvn (1,183) Aug 10, 2005 New Jersey
    Subscriber

    So, you guys think that Koch should go after the 1-2% of the beer market served by the small brewpubs & small breweries* ("under 15k bbl/ microbreweries" by the B.A. definition, which make up over ¾ of all brewers) and just ignore the 80% of the market controlled by the 5 brewing companies larger than BBC (AB, MC, Constellation, Heineken USA and Pabst)? ;)

    *
     
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  40. cavedave

    cavedave Poo-Bah (2,090) Mar 12, 2009 New York
    Beer Trader

    I suppose you are right, statistics (if they are complete and correct) don't lie, it is just the most likely explanation to explain the apparent vibrancy of small breweries and tap rooms/pubs while dust gathers on old bottles and cases of some out of region craft beers in the beverage stores, and goes unsold at pubs that kick local craft beers in a day.. Did BMC cause this? Would consumers buy these out of region craft beer place holders if they were a couple dollars cheaper? I don't know but I don't think so. Did BMC cause my friends and I to now get 50- 75% of our beer from local options? No, they didn't, our changing expectations and tastes account for it.

    My point wasn't so much that Sam Adams should go after anybody, but that the local small batch movement is succeeding at its modest but steady pace because Sam Adams and BMC can't compete with what they offer and the consumer increasingly wants fresh, local, and better. Since it is the fastest growing sector in an industry that is contracting as a whole, yes, it deserves some acknowledgement.
     
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