What Next? The Indianapolis Beer Market In Adolescence

If there's any proof of how far better beer has come in Indianapolis, you only need to look at the tap handles at popular establishments around town. Where there once was a better beer wasteland now lies fertile ground where new breweries add their wares to the mix on what seems like an almost monthly basis.

But as the market grows, so does the competition. Whereas your local brewery may once have owned three taps at the bar, entries from newer breweries mean that the market for tap handle real estate has grown more competitive, even allowing some bars to move from beyond a local/regional tap list to one that focuses on beer from breweries within a few mile radius.

Somewhere, it seems like someone loses out. Be it the long running macro that no longer has an audience, the established craft brand that suddenly has local competition, or the new brewery that can't find tap space in suddenly crowded market, there must be a saturation point.

Are we there yet?

"New breweries haven't had an affect on our sales," said Sun King's Clay Robinson. "We are a proven seller in the market and have a really solid fan base, so our tap count has not just remained steady, it continues to climb as more people discover Sun King and craft beer. I would assume that new breweries are getting tap handles from national brands that are also available in bottles, because it really doesn't matter when it comes to mass produced domestics whether you have it in bottles, cans or on draft."

Then perhaps it's the regional craft brands that have taken a hit? Brands from surrounding states once had almost free reign over tap handles in better beer establishments. Are distributors seeing the hit on sales?

"An increase in local craft sales very much benefits out of state sales," said Bob Mack of the local/national beer distributor World Class Beverages. "Especially in our situation in Indiana where we are still well under the national average in terms of craft as a percentage of overall beer sales."

So what about a brand like Bell's, who had a very strong tap presence and very little local competition until recently?

"Bell's is, in fact, still up," said Mack. "They do have fewer taps in some places as competition is squeezing some of those taps out, but the velocity (rate of sale) on existing taps is getting higher as more and more people ask for craft beer. So we are seeing greater sales on a single tap than we used to see. Also, there are more taps overall in the market than there were a year or two ago, so there are more to go around."

But do World Class' salespeople find it harder to push their bigger brands to bars that are just hopping on the craft wagon?

"Maybe, but there are many more opportunities today versus a year ago or further back, so business for Bell's is still very good - even better than it is for some local brands," said Mack. "Of course for many World Class customers, Bell's is closer to home than many Indiana brewers, so it is still local to many consumers."

"Overall, we're up dramatically on regional, non-Indiana brewery sales. So I don't see the growth of local brands being a problem for them. There are case by case situations where they lose lines to local brands, but overall their number of lines is not reduced. They are picking up lines in other places where there was no craft beer previously and the lines that are out there are selling faster than before. In my opinion, the regional and local brands can complement each other."

So perhaps the real story is the continued and growing success for everyone involved with better beer? Not quite. As is the trend nationally, imports are losing market share.

"I suppose that is going to happen given the large number of American brand selections now versus what it used to be," said Mack. "Additionally, a lot of good American craft brewers are making excellent examples of Dubbels, Tripels, Oktoberfest, and other traditional foreign styles. We are somewhat cushioned in sales of brands like Spaten but retailers are looking first for new placements of craft brands and not so much for imports."

So imports are down, but what's it like for our newest breweries? Fountain Square Brewing recently opened and has secured a fair amount of taps in their short existence, including a very strong presence in their backyard of Fountain Square.

"Getting into bars and restaurants has been fairly easy," said Fountain Square's Skip DuVall. "We have a sales person taking samples out and people have received our beer well. We sometimes need to wait until a tap opens, but our success rate is pretty good."

Sun King's Robinson echos the sentiment. "What I found from the early days of Sun King was that the slowest seller is the beer that loses its spot, which can be frustrating because a new brewery has to wait for it to sell out before changing over," he said.

"It seems that we have replaced some semi-mass produced beers like Stella," said DuVall. "Our porter has taken off and I think that is because of the timing of the seasons changing."

How does a new brewery set itself apart in a market that's not only crowded with local breweries, but also repetitive styles?

"We have been talking a lot about what we want to do with our beer and who we are," said DuVall. "I am leaning on towards doing a series of Imperial beers on a seasonal basis - IPA, Stout or even an Imperial Lager of some sort."

One thing that may be forgotten by those of us in the middle of the craft beer movement is that while these styles seem repetitive to us, to new drinkers, they're a whole new world. "You've got to remember that a lot of folks are coming from a background where beer is only one style," said Sun King Head Brewer Dave Colt.

If you look at it from the other side of the argument - that we've got an overabundance of the same styles - Colt also has a theory.

"For many of the folks behind new brewery efforts, they look at what's available locally and say, 'Well everyone's doing a porter, so we've got to do a porter.' Or 'IPAs seem to be really popular locally, so we should do an IPA,'" he said.

Regardless of where you stand on the style issue, the market for everyone continues to grow.

"We have less brands this year than we did last year (WCB lost both Dogfish Head and Avery recently, while Flat 12 has been added to their lineup) and we are still going to finish the year up at least 20% in sales over last year," said Mack. "I dare say that some very mature markets, like Portland, might be tough for outside brands because so much of the beer sold there is local – as much as 30%," said Mack. "But with Indiana brewed beers still being around 1% or less of overall Indiana beer consumption, I think we have a long ways to go before hitting that sort of ceiling."

So if demand is up, tap numbers are up, variety is up, and the number of breweries is up, what challenges await?

"A challenge that I see for brewers based on the rising tide of demand is their ability to increase capacity," said Mack. "It is most definitely not cheap to build and increase capacity and it often requires brewers to take out loans based on the idea that growth will continue. With more brewers coming into the market, growth may not continue for everyone as they plan it to, making it tough for them to meet financial demands."

From the distribution standpoint, it's brewery inventory and production that provides the biggest challenge.

"Small brewers are much more subject to out of stocks and inventory fluctuations than larger brewers, so we continue to have a somewhat frightening out of stock rate on products that people order a lot of, but that's the nature of the craft industry," said Mack. "Of course, some brewers are solving that problem for us and for themselves by pulling out of states to better manage their inventory levels, but it's unfortunate that it has to come to that."

While we've lost certain well-respected brands in Indiana before, the lack of availability of drinkers' favorite beers doesn't seem to be hurting the overall business. The better beer audience seeks variety. Indianapolis' better beer drinkers can rest assured that if they lose a regional favorite, there's a newer and more local brewery waiting to fill the void.