2011 State of the Six Pack - Part 3: The Agenda for 2011

My fellow beer geeks:

It would be nice to think that beer is all about the brewers and their supporters. But government is a partner in this business too, for better or for worse. In 2010, the state allowed Sunday carry out sales from breweries. For some, the impact as been exceptional.

“The Sunday carryout law is huge for us. We have the only Sunday carryout in our county and our Sunday sales are exceptional as a result.” – Tom Uban, Figure Eight Brewing

“The Sunday Carryout Law has been great for Crown Brewing. Sunday sales now rival Friday and Saturday sales. Thanks to the legislators and everyone else who worked so hard to make this happen. Our customers don't have to worry about running out of beer before the game on Sundays. We have even met some new people who needed beer, but didn't feel like driving to Illinois on Sundays. This means more tax dollars staying in the State of Indiana.” – Chris Stanek, Manager/Part Owner, Crown Brewing

“Our guild lobbied the Indiana legislature for many years for Sunday carryout and thanks to Mark Webb for making it happen in 2010. Sunday carryout has brought new customers into the category as sometimes someone comes in and asks for our lightest beer, but hey it is still craft and its a start for them.” – Jeff Eaton, Owner/Brewer, Barley Island Brewing Company

“The Sunday sales have helped our carry out sales tremendously. We have been running a promotion and discounted our Sunday carry out to promote the new law. However, most people still don't realize the law has passed. How about getting all Indiana brewers and take out an ad in local papers and thanking the legislators for passing the Sunday carry out law.” – Kwang Casey, Owner, Oaken Barrel Brewing Co.

Legislation has been proposed to expand on carry out laws. While it is not believed that this will happen this year, it is certainly a topic that we have discussed. Expanded Sunday sales are viewed by many as a hindrance to smaller retailers. With the exception of border towns, sales won’t necessarily go up. Six days of beer sales will instead be spread across seven days, but costs will increase to accommodate the seventh day of being open.

“If Sunday sales become universal the cost of selling beer for liquor stores goes up to accommodate the extra time and personnel involved in operating seven days instead of six. That makes it less lucrative to be in the beer business for the smaller family businesses that often run liquor stores. The unknown here is how much the competition between liquor stores and grocery smoothes over this potential transition. Most opinions in the industry suggest that there is not a lot of overall increase in sales to cover the increased cost of operation one extra day. By and large we’d just end up spreading six days worth of sales over seven days and not picking up much or any additional volume so liquor stores are the clear loser here.” – Anonymous

Smaller retailers may go under; chains may grow stronger. But who supplies more craft beer? And how many small retailers who would be put under by the seventh day of sales would be investing in craft beer inventory anyway? Grocery store chains are the major wild card. They’ve started stocking some craft beer, but not a large variety in most cases. But would that change if they were allowed to do cold beer sales?

“Cold beer sales likely has a much bigger impact because I think it is possible that grocery and convenience stores have held back somewhat on getting into the craft category full throttle due to this issue. After all, Indiana has one of the lowest % of sales from grocery in the country where beer is concerned which is largely due to the cold beer issue. And even though it doesn’t seem that important to me personally, consumers overwhelmingly prefer to buy beer cold. If grocery stores get cold beer, they might be more interested in getting further into the craft category. However, that might not bode well for liquor stores who have been the backbone of craft beer sales for this state for years so there is certainly a downside for them. Again, liquor stores are the clear loser but there could be added potential benefit for the consumer who may have more choices from more retailers on where and which beers to buy.” –Anonymous

In the case of Sunday sales and cold beer sales at grocery stores, it looks like liquor stores lose out. Maybe it wouldn’t be a huge impact on the Kahn’s, Crown Liquors, 21st Amendments, and United Package Liquors, but what about places like Parti-Pak or Stoney’s? wonder if the playing field would be leveled more if parents were able to enter a liquor store with their kids they way they are allowed to go up and down a liquor aisle at a grocery store. That’s a law that I would personally like to see changed.

There are other laws that some would like to see changed.

“Most laws favor the big guy and I hope we are seeing that trend beginning to reverse.” – Mat Gerdenich, President, Cavalier Distributing

“Straight up: On this whole issue of mandatory “carding,” am I the only one wondering why the burden of enforcement always lies with servers and employees? Shouldn’t the 18-year-old consciously violating an admittedly asinine law bear the brunt of punishment? Anyway, as for legislation: There should be more investment incentives and calculated breaks for independent small business, whatever the field of endeavor. Add together the investment, production and employment figures for all Indiana small breweries, and incentivize them collectively. In many instances, breweries and their on-premise operations carry the ball in urban revitalization efforts. This fact needs to be touted and leveraged at every opportunity.” – Roger Baylor, Carnival Barker, New Albanian Brewing Company

“Sunday sales for craft breweries may end up being a momentary blip – billion-$ corporate lobbyists are lined up to kill off independent retailers and nationalize chain buying decisions, which is a bad outcome on so many levels. We’d love to see the prohibition against small brewers operating distilleries to be lifted – we have a 3 yr-old whiskey R&D project in the barrel and would love to turn the team loose on developing some quality spirits for commercial production.” – Doug Dayhoff, Upland Brewing Co.

“As a wholesaler the Sunday Brew Pub carry out sales did not affect us, but we were surprised that more of the craft brewers in Indiana did not take advantage of it. Now this year Sunday carry out sales and cold beer in the grocery stores will change the dynamic of beer sales considerably. This will give the grocery stores more of the beer share which will be affected by less selection. Compare your favorite liquor store to your favorite grocery store or convient store and see who has the best selection. This will mean less access to market for the smaller Indiana crafts. On another legislative front Indiana has a law that allows Indiana craft brewers to self distribute as well as sell carry out which is one of only 18 states to do it. But there is a barrelage limitation of 20,000 which means if you produce 20,000 bbls you cannot have a brew pub or self distribute. We are working with Indiana Brewers to change to 50,000.” – Jim Schembre, Manager, World Class Beverages Indiana

“Changes to add another tier to the excise taxation for micro breweries would certainly be helpful to those of us who produce under 1200 barrels per year.” –Uban, Figure Eight Brewing

“I would like to see a push for more micro-brewery specific tax and reporting forms. I feel that our industry is growing and operates quite differently that a macro brewery producing millions of barrels per year. This could save people on both ends of the forms time and money.” – Stanek, Crown Brewing

“In 2011 (the Brewers of Indiana Guild) has filed legislation that would allow us to sample and sell Indiana craft beer during the Indiana State Fair.” – Eaton, Barley Island Brewing Company

“I think it's imperative that Indiana retain the right for small brewers to self-distribute. I have not heard of any changes being considered - but it would be a huge mistake to change this law.” – Dan Valas, President, Great Crescent Brewery

Given the politics, some of these state and federal legislative desires may seem like pipe dreams. Only time will tell. Here are some other dreams and desires that the craft beer industry is hoping for in their Christmas stocking/Valentine card/Easter basket this year…

“I wish for the craft beer trend to keep continuing onward and upward! Every fizzy yellow beer drinker the learns about and converts to a craft beer drinker is a blessing to the industry!” –Gerdenich, Cavalier Distributing

“For 2011, all I want is stress reduction, and I’ll take my chances with the rest. NABC has high hopes for bomber bottling, which should be underway in January, so let’s roll the dice and have at it.” – Baylor, New Albanian Brewing Company

“Mash tun rakes would be at the top of our list for Santa – shoveling 50 tons of spent grain each month by hand is good work for new pledges but not fun for the experienced staff on a triple brew day.” – Dayhoff, Upland Brewing Company

“I think the number one thing we think about is what influences consumers choice? How can we get more information out to our consumers? Is it social networking? Tastings? What can we use to make your beer buying decision? And then our question is how can we influence it? If we can get into the heads of the beer drinkers and see what where and why they want their beer we would all win. So if you can tell us that we would be very happy.” –Schembre, World Class Beverages

“I hope to see continued growth and public awareness of our locally crafted, full flavored offerings.” –Uban, Figure Eight Brewing

“I would like/need a larger brewing system. I could also use a larger bar.” – Stanek, Crown Brewing

“A production brewery; definitely running out of space!” – Eaton, Barley Island Brewing Company

“I hope for patience personally, growth for our company and maturity & cooperation for our Hoosier craft beer community.” – Blackman, Cavalier Distributing

“I would hope to find in my stocking that all Indiana breweries had a successful year. I've had best year in 16 years and hope to continue the success. I believe Indiana will see a continued growth, since we were so far behind other midwest states. Our time has arrived! For myself, I need to be more active in Indiana Brewery industry. There are improvements I would like to see, and I promised myself to be more involved instead complaining about lack of changes. I would love to see a beer stand at the Indianapolis airport featuring Indiana beers. We could provide brochures listing Indiana breweries along with Indiana beers. Tomlinson's tasting room is good idea, but we need to think big.” –Casey, Oaken Barrel Brewing Co.

“Health for all the brewers and craft beer supporters in Indiana. Healthy, happy beer brewers and beer drinkers would be the best gift we can receive. Cheers to all.” – Valas, Great Crescent Brewery

And with that, I would finish with my wish that Hoosier Beer Geek continue on its path of global domination. And a kegerator. I really want a kegerator at home.

Thank you, my fellow beer geeks, for your attentiveness. Good night, cheers, prost, and hop bless America.

2011 State of the Six Pack - Part 2: The Ready For Prime Time Brewers

My fellow beer geeks:

When historians write about 2010, they may say that it was the year that craft beer started moving from the underground scene into the mainstream. Televisions shows are showing characters drinking craft beer. Sam Caglione has…er, had…his own reality program. There are a number of shows about beer history, beer creating, beer drinking, beer travels… this spring, a documentary about Indiana craft beer will make its debut on Bloomington’s WTIU. Hell, even I made it onto television (I brought Ted Miller along as my sidekick). Seriously, what does that say about craft beer?

“It shows that craft beer is getting the respect it deserves.” –Mat Gerdenich, President, Cavalier Distributing

“We got a ton of calls, emails and tweets asking for us to get more Bitches Brew right after the initial episode (of Sam Caglione’s “Brew Masters”) – so I know people are watching and reacting positively to it.” –Bob Mack, World Class Beverages

“Our beers on “Parks & Recreation” certainly supports the idea that craft beer is being recognized as a marker for local culture/identity – they called us, we didn’t call them (and we think Amy Poehler is awesome).” –Doug Dayhoff, Upland Brewing Company

While “Brew Masters” focused mostly on Mr. Caglione, there were some Indiana connections on the show:

“It's great to see Greg Christmas in some of the episodes. Previously Greg lived in Noblesville and we did a GABF Pro-Am beer with him. The show will boost the whole category.” –Jeff Eaton, Owner/Brewer, Barley Island Brewing Company

But how many new drinkers are these shows bringing in?

“I doubt it has much impact to attract someone away from what they usually watch on TV, but it keeps the people that are already passionate about beer engaged. I say that seeing people drinking beer on television is good all around, but I don't think the average person relates it to any particular market segment. Those of us passionate about beer see it differently. In the same way that people have been told girls in bikini's will come over and play volleyball with them on the beach if they drink BMC, I think we need to be just as careful not to convince people that craft beer is an exclusive drink reserved only for a certain type of beer drinker. Craft beer is unique and varied and should be appreciated by everyone.” –Dan Valas, President, Great Crescent Brewery

There are a lot of characters in the Indiana craft beer market. I suspect that we could build shows around some of them…

“A Roger Baylor / New Albanian show would be most interesting.” –Gerdenich, Cavalier Distributing

I’m betting Roger could get a show on FOX News…

“Blaine Stuckey (Mad Anthony) really should have his own show. Not only is Blaine ruggedly handsome and tastefully telegenic, but he also has the moves, and he is ready for prime time. As an example: Back in 2008, a group of Indiana brewers were being transported to a party somewhere completely unknown in suburban St. Louis, sprawled in the back of a Third World conveyance called the Pickle Wagon. All of us very well lubricated after a day’s work guarding Otto’s fresh hopping machine at a Schlafly Bottleworks function, and as the Pickle Wagon rumbled forward, Blaine shrewdly passed out. When the vehicle shuddered to a halt, Blaine’s eyes popped wide open, he bolted upright, and then ran straight inside. Fortunately, it was the right house, and he was the life of the party. As soon as we got back into the Pickle Wagon – boom, out went his lights -- again. What a gamer! It was a classic performance, and made for basic cable. When the light goes on, he delivers.” –Roger Baylor, Carnival Barker, New Albanian Brewing Company

I’m thinking that Blaine’s reality show would be a good fit for Bravo. Or maybe an MTV show called “Fort Wayne Shore”…

“100 Indiana craft beer personalities deserve a TV show: I can think of several brewers and bar managers who could double for Sponge Bob, The Fonz, Knight Rider, Miami Vice and several characters from pro wrestling (cool classic WWF and dorky new WWE). BIG could field a great WTTV lineup. ” –Dayhoff, Upland Brewing Company

Sounds like a Nick at Nite lineup.

“John from Broad Ripple Brewpub.” –Chris Stanek, Manager/Co-owner, Crown Brewing

BBC America. That was easy.

“A Hoosier show on craft beer couples could produce some interesting segments. Jeff & Linda - Barley Island, Ted & Shannon - Brugge, Greg & Nancy - Lafayette. I know my youngest daughter would get in her dinner table line of "are you guys talking about beer again"!” –Eaton, Barley Island Brewing Company

Sounds kinda prime time…“How I Met Your Beer Drinkin’ Mother”

“Jim Schembre of World Class Beverage would be a great person to contact. He got me interested in micro brews with Sierra Nevada Pale Ale over 20 years ago. He introduced many micro brews and imports to Indiana before going to work with Monarch Beverage. He is a good talker too! Great bull shit artist.” –Kwang Casey, Owner, Oaken Barrel Brewing Company

Perhaps a Discovery Channel show…instead of “Dirty Jobs” it could be “Natt’y Beers”.

It looks like we have enough Indiana shows to cover the entire channel spectrum. Except we don’t have one yet for Oprah Winfrey’s new channel. I nominate Nick Floyd to develop that one. I’m assuming those Chicagoland superstars hang out together…

While on the subject of superstars, let’s look at the superstars in craft brewing…

Big hops.

((applause))

Barrel Aged.

((more applause))

Sours.

((applause with some Arsenio Hall-style woofs))

Collaborations.

((applause; standing ovation; audience members start to throw undergarments onto the stage))

“It seems the IPA are the fastest growing market. The people who dabbled into micro brews have grown up to the big IPAs. It's similar to wine drinkers who tried a Pinot Noir as their first red wine, then graduating to hearty Cabernets or Bordeaux. Once you get people to drink an IPA, it's not hard to convince them to try barrel aged, spiced, or other exotic types of beer.” –Casey, Oaken Barrel Brewing Company

“I still see room for imperial styles. Barley Island will launch some 4-pack bottles of big beers in 2011, many of which have been brewed as test batches for our pubs. ” –Eaton, Barley Island Brewing Company

But these big, wild beers aren’t the only popular kids in class. Sessionable beers are quickly gaining momentum. Opposite ends of the spectrum? Sure. But there is room for both.

“I believe in the future of session beers. To me, Sun King has really hit that nail on the head. Their main beers hit in the 5% abv range and come in cans, making them convenient in a variety of settings. I also believe that while Indiana has a small market % of craft versus the rest of the country that we can bring more people into the craft category with “session” beers rather than 80 IBU ales that might scare some folks. So I feel that the session beer is a trend that can help lead the category. But the growth in the IPA category is not going away and while sours are popular among many veteran beer geeks, I’m not sure they can forge a true trend outside of that niche. But please don’t take the 70 IBU and sour beers away from me! ” –Mack, World Class Beverages

“Extreme on the high end is great, but I believe the attractive price points in months to come are going to be in session beer territory. Session beers can have big flavors at lower consumer prices, and with fewer ramifications at the highway sobriety checkpoint. Key to me is educating consumers about the pros and cons of extreme vs. session. At NABC, we feel that our product line is anchored on both these ends.” –Baylor, New Albanian Brewing Company

“I think as our consumers get more educated that they realize that they cannot drink high ABV and high IBU beers all the time and they are the consumers that are now looking for more sessionable beers. Our approach to market is to get and give what consumers want and we are still seeing the growing trend of the high abv and ibu beers but we are even seeing growth in the sessionable beers as well. We think there is also going to be a lot of growth in the Sours. As consumers taste get even more educated. So watch Sours, Sessions, as well as the Big Beers.” –Jim Schembre, Manager, World Class Beverages Indiana

“We first produced a well received 4% session IPA (Where Lizareds Dare) this last summer which continues to be in demand. While the majority of our brews are bigger, 7-10 ABV, we are also continuing to explore full flavored lower ABV offerings.” –Tom Uban, Figure Eight Brewing

“We always do our best to keep a variety of beers on tap. We want to make sure we include the big beers, the medium beers and the sessionable beers. As more macro drinkers make the switch to micro drinkers there has been an increased in requests for a variety of sessionable beers. We always keep our Crown Light(Blonde Ale) on tap to welcome the converts. The Crown Light is a comfortable and welcoming transition for the Miller Light drinkers in the area. Although that is usually the first beer they try, they quickly start expanding their idea of beer. It seems that many people are used to drinking a larger quantity of macro beer, so the idea of a high alcohol ten ounce beer is something they are not yet ready for. We will be releasing more beers that are readily suited to drinking in quantity this year. We want to convert the local macro drinkers and make it an easy transition. We want to welcome and educate as many macro drinkers in the our local area this year as possible. Although, we will continue to brew big beers for the seasoned craft beer drinkers and offer many more varieties of barrel aged beers.” –Stanek, Crown Brewing

“Blending of two beers at the tap is continuing to grow, not only with our beers but customers are starting to blend some of the guest beers on tap at our Broad Ripple location. ” –Eaton, Barley Island Brewing Company

“These trends are all reflected in the beers that people are brewing and are releasing today. While big beers are still huge, there is definitely a momentum toward session beers. We have several breweries that have just released or are planning on releasing year around session beers to their core selection. Another trend we've seen and will continue most likely is the popularity of domestic craft Pilsners. Because the style is so close to the macro-domestic beers that craft beer distances itself from, there hasn't been a ton of interest in craft Pilsners in the past. However, we've seen a big increase in sales and production of craft Pilsners over the last couple of years and this style in particular, along with session ales, will be a trend to stay moving forward.” –Greg Blackman, Sales Manager, Cavalier Distributing, Inc.

“Our Blonde Ale is tied in sales with our IPA and Dark Mild sells strong whenever it's available. I think all beers can be popular if they are well made. Personally, I like drinking beer and I want to be able to have more than one when I go out (or entertain at home). I really like getting a sampler at a brew pub or packaged beer and trying them all. Our next packaging step is getting into some sort of variety pack, I think it's been proven that beer drinkers of all types want some variety and not just hoppy, strong, high ABV beers.” –Valas, Great Crescent Brewery

To be concluded…

Coming up …legislative impacts on the industry and its consumers…and a look at 2011 and beyond…

2011 State of the Six Pack - Part 1: The Growing, Changing Craft Beer Market

My fellow beer geeks:

The year 2010 has gone down in the history books as a landmark year for craft beer in Indiana. Between growth in craft beer sales, the opening of new breweries, and changes in legislation, Hoosiers have reasons to be optimistic. More restaurants and bars have craft beers on tap. More liquor stores are stocking craft beer. More people are looking at Indiana breweries and beers as a source of pride.

When you look at the numbers, despite falling overall beer sales, craft beer sales continue to rise…

“Our [growth] numbers are above the national average. That tells me that Hoosiers are catching up with the west and east coasts as far as learning about, appreciating, and consuming craft beer.” –Mat Gerdenich, President, Cavalier Distributing

“Indiana craft, as defined by the BA, is headed towards a 1.9% share with a .3% growth rate for the state. It looks like consumers are drinking less, but better; and the word “local” has added value at retail, especially as it relates to on premise consumption.” –Jim Schembre, Manager, World Class Beverages Indiana

“Craft beer’s Hoosier market penetration is considerably less than 5% overall [national average]. We have ample room for growth, and those 10% increases [in craft beer growth] soon will come to accumulate into genuine social change.” –Roger Baylor, Carnival Barker, New Albanian Brewing Company

So what do these numbers tell us?

“I believe the numbers are showing that people want more value for the dollar they spend.” –Dan Valas, President, Great Crescent Brewery

“People are starting to realize that there is a whole world of flavors, brands and styles out there…we think that the attention being paid to existing and new brewers in Indiana will be to the benefit of all of us who are interested in craft beer.” –Bob Mack, World Class Beverages

“There is more momentum in the craft beer segment in Indiana than ever before. More people, locally and nationally, are being exposed to and, subsequently, switching over to craft beer. Craft beer is still in its infancy in Indiana, so the growth potential here is huge compared to many other states.” –Greg Blackman, Sales Manager, Cavalier Distributing

The change in consumers preferences has a direct impact on local businesses.

“[Growth in craft beer] helps us focus on how to brew more beer tomorrow than worry about selling the beer we brewed yesterday.” –Doug Dayhoff, Upland Brewing Company

“Although our business is young, I can see a change in the customer base from two and a half years ago compared to today. When we first opened, our customers consisted of home brewers and the already established local craft beer community. Today, we still have many of those same customers, but many people are recently converted macro drinkers. People now read about local breweries from mainstream sources like local newspapers and travel magazines. Beer drinkers are no longer limited to industry literature for information on the local craft beer happenings.” –Chris Stanek, Manager/Co-owner, Crown Brewing

“We have a very broad range of customers and a lot of them are eager to try new and different beers. Some come in every week to get their usual beer and don’t stray too far from what they know they like; they stay loyal to their old favorite. We [also] get beer drinkers from all over the tri-state area (IN, OH, KY) and they are usually attracted by a new beer we have or want to try another one they haven’t purchased before.” –Valas, Great Crescent Brewery

Along with growing craft beer sales in Indiana, the number of breweries are growing. And it is viewed as a good thing for craft beer in general.

“[More brewers] adds a feeling with the general public that the breweries already in business are part of a legitimate segment (i.e. not a fad or the latest new thing). Some of the state with huge craft beer markets didn’t get that way by having one or two breweries.” –Valas, Great Crescent Brewery

“I think that home-grown beers are the best possible thing for the Indiana beer culture.” –Mack, World Class Beverages

“I believe that people want to support their local businesses…craft breweries in Indiana should continue to flourish.” –Tom Uban, Owner, Figure Eight Brewing Company

But it should be noted that not every brewery will be successful. Success is not guaranteed, but there are ways to avoid the pitfalls and continue Indiana’s craft beer growth.

“If [brewers] sacrifice quality for quantity, then we are in for a bumpy ride. But as long as they maintain that quality, I think they will all do in their own respect.” –Schembre, World Class Beverages

“I fear that small brewers rely too much on packing their excess capacity and shipping it so far way that the local story ceases to matter. I think a local brewery should dominate craft beer sales in its own home market. We need to educate incessantly within 10 miles of ground zero, move drinkers into a craft beer comfort zone, and then export from this enhanced local field position.” –Baylor, New Albanian Brewing Company

“The industry had a shake out in the mid-90’s as more and more breweries opened and product became suspect. However, today’s reality is that quality and process information is widely available online and in print. All the brewers talk about issues and help each other out, especially here in Indiana.” –Jeff Eaton, Owner/Brewer, Barley Island Brewing Company

“Cooperation and collaboration are key in craft beer and one thing to always be leery of is aggressive, potentially negative competition between local breweries. Over saturation of breweries could potentially lead to this.” –Blackman, Cavalier Distributing

“[Indiana breweries] need to focus on Indiana customers. Another concern with many breweries opening is that they are inexperienced and need help of established breweries. Remember that when someone gets a bad beer from a local brewery, they might blame all the microbreweries.” –Kwang Casey, Owner, Oaken Barrel Brewing Company

To be continued…

Coming up…craft beer in popular culture…trends in craft beer…legislative impacts on the industry and its consumers…and a look at 2011 and beyond…

2010 State of the Six Pack

My fellow Hoosier Beer Geeks, we have seen a lot of changes over the past year and there are a lot of exciting things to come. But you don’t have to take our word for it. I mean, we are just a bunch of know-nothing hacks. That’s why we sent a Six Pack of Questions to Indiana’s brewers, distributors, and others in the craft beer industry. And we have collected these answers and packaged them together into our second annual State of the Six Pack address.

The Craft Beer Scene In Indiana
Unfortunately, Indiana lost a brewery with the closing of Warbird in Ft. Wayne. But we’ve gained six breweries: Brickworks in Hobart; People’s in Lafayette; Sun King in Indianapolis; Wilbur in Martinsville; Big Woods in Nashville; and Lil’ Charlies in Batesville. Not to mention that breweries have expanded (i.e. New Albanian, Barley Island) and there are more places than before selling craft beer in Indiana. We find it encouraging that not only is the industry growing, but is spreading out as small towns are getting breweries again.

“We estimate the [craft beer] market share has grown in Indiana by .3 percent this year to a 1.3% share…the national average is 4.2%, so we have a long way to go. Most of that Indiana growth has come from the introduction of New Belgium. . . . [T]hat’s a lot of exposure for the [craft beer industry] and it is still a good segment to be in. I think that the reflection of craft brewers opening up in smaller communities is both because of passion as well as the economy. When the economy is tough and unemployment is high, people start to think of ways to create work in case they are unemployed.”
–Jim Schembre, World Class Beverages, Indianapolis

“These drinkers are 'enlightened' as to what the core values of craft beer offer: more variety, better and more flavorful beers, and solid traditional and experimental brewing techniques. The percentage of craft beer drinkers in Indiana is simply increasing, but still has a long way to go. As for the newest hometown/next door breweries, these are revealing the sense of pride and feasibility in having a local beer produced less than 50 miles away. Local, more flavor, exciting varieties: these are all appealing attributes of Hoosier beers for the steadfast and newest generation of Hoosier craft beer drinkers.”
-Caleb Staton, Head Brewer, Upland Brewing Co., Bloomington

“Once [consumers] are exposed to craft beer they realize that beer can taste so much better. I think it's just a matter of more exposure for these breweries to get more and more Hoosiers hooked. As far as the little towns, I think that if you already have a restaurant that works then it's not too difficult to brew fresh beer to serve to the public. The brewery in Nashville uses a very simple and small set up to produce good beer.”
-Skip DuVall, Assistant Brewer, Alcatraz Brewing Company, Indianapolis

“Consumers are recognizing and seeking out locally brewed, quality products. The question is: Can these breweries remain viable in these small markets?”
-Greg Emig, President/Brewer, Lafayette Brewing Co., Lafayette

“The beer drinking mentality of Hoosiers changes slowly, but there’s some traction. . . . Increasingly, folks like the idea of local products and services. Sustainability starts at home, as with NABC partnering with fledgling hops growers in the Knobs, and serving locally-made wines at the Bank Street Brewhouse. Anything is possible at this level.”
-Roger A. Baylor, Carnival Barker and Sometimes Owner, New Albanian Brewing Co., New Albany.

“[L]oving craft beer and believing one can make a living brewing it are two very different matters. The fact that both are growing is very positive.”
-Charles Stanley, Marketing Operations Manager, Upland Brewing Co.

The Craft Beer Scene In America
Beer sales in the United States are down. But the craft beer segment continued to grow (5% by volume and 9% by dollars according to the Brewers Association). The craft beer industry continues to grow despite a poor economy. Imagine how much the industry could have grown if the economy had improved.

“The consumer’s tastes are definitely changing and they are either going up to craft or down to economy beers. The import category is especially getting hurt. I think consumers cannot resonate well with the imports and the craft side has taken their drinkers.”
–Jim Schembre, World Class Beverages, Indianapolis

“These numbers definitely show that more Americans are drinking craft beer. The 9% dollars vs. 5% volume was due to beer price increases in 2009 due to brewers' reaction to malt and hops pricing increase.”
-Caleb Staton, Head Brewer, Upland Brewing Co., Bloomington

“This surge in craft beer sales is just proof that people want a better beer and you even see this from the big breweries who are attempting to brew better beers. Liquor stores are carrying more and more selections than they ever have as well.”
-Skip DuVall, Assistant Brewer, Alcatraz Brewing Company, Indianapolis

“If our beer tastes weren’t changing in some way, it’s hard to imagine the trending up during lean times.”
-Roger A. Baylor, Carnival Barker and Sometimes Owner, New Albanian Brewing Co., New Albany.

“America's beer tastes are definitely changing. The growth in micros has been primarily in at-home consumption.”
-Mike DeWeese, Partner, brewery to be named later

“Some people who would otherwise buy imported beer may be making an effort to support their local economies or the US economy in general (this mentality may also be hurting major "domestic" brands, none which are fully American-owned anymore).”
-Charles Stanley, Marketing Operations Manager, Upland Brewing Co.

Sunday Sales
The sale of carryout beverages in Indiana on Sundays is like a boomerang: it just keeps coming back. Many Hoosiers apparently still hold Puritan fears of alcohol. But one aspect looks promising. Senate Bill 75 would allow the carryout of beer from microbreweries on Sundays. This would allow microbreweries to be on the same level as Indiana’s farm wineries, who have been allowed to sell their wine for carryout on Sundays. SB 75 passed the Senate 41 votes to 9. As long as no one tries to apply amendments to the bill, it looks promising that this bill could pass the House too.

“This will be perceived as being more important for some brewers than others. Obviously, those brewers located in towns with major college campuses would likely benefit the most; however, all brewers will benefit from being able to sell their craft beers on Sunday. Being able to attract and sell to the tourist market on Sunday will go a long way in helping expand awareness of Indiana craft beer.”
-Greg Emig, President/Brewer, Lafayette Brewing Co., Lafayette

“Those of us in border territories know instinctively how important it is for craft breweries to have Sunday carryout sales – but not for the reason you might think. Yes, Indiana loses revenue to surrounding states on Sunday. More importantly, craft breweries are exactly like small wineries in the sense that we are tourist attractions, and the closer to neighboring states we are, the more visitors we’re likely to see on days like Sunday. Craft brewing will survive either way, but if the legislature is interested in providing a level playing field for artisanal producers, and serious about encouraging tourism and bringing money from elsewhere into this state, it will take the measure seriously.”
-Roger A. Baylor, Carnival Barker and Sometimes Owner, New Albanian Brewing Co., New Albany.

“Indiana breweries will probably see some increase in profit if they are allowed to sell packaged beer on Sundays, but it is difficult to gauge how much. Much of that will determine how much of the consumer population becomes aware of change in legislation. Breweries should also consider that their relationships with retailers may suffer if they work hard to advertise this opportunity to consumers. If Indiana retailers are allowed to sell alcohol on Sundays, stores near the state borders will stop losing business to our neighboring states on Sundays. This can benefit Indiana breweries whose distributors' territories correspond with the state's borders. If consumers are shopping at stores where Indiana beer is not available, Indiana breweries obviously suffer. If they shop at stores that sell Indiana beer, Indiana breweries clearly benefit.”
-Charles Stanley, Marketing Operations Manager, Upland Brewing Co.

“If you can buy wine on Sundays at the winery then you should be able to buy beer at the brewery. Also, the taps should be open like normal on election day as well!”
-Mat Gerdenich, Cavalier Distributing, Indianapolis

Excise Taxes
A couple of Congressional bills might make a positive impact on the craft beer industries. Thanks to the House Small Brewers Caucus, HR 836 and HR 4278 would reduce the excise tax paid by small breweries. It is questionable if this would have a noticeable impact on consumers and the prices paid for beer at retailers. But it would certainly have an impact on the breweries and anything that will help our favorite breweries with continued success is a good thing.

“More important to us is keeping the excise tax at an non-prohibitive level to doing business. We are, as smaller brewers, nowhere as efficient and a lower margin business than the larger breweries. One positive side effect of reducing the excise tax, with the additional benefit of stabilizing malt and hops pricing, is the potential for small breweries to keep pricing the same (or possibly even lowering!) in the future years. We will never be a $13 a 30-pack type shelf item, but keeping a constant price is good for core line craft beers.”
-Caleb Staton, Head Brewer, Upland Brewing Co., Bloomington

“I think it would be great for craft brewers because they are fighting hard enough to get their beers on shelves at a reasonable price. If they pay less then hopefully we all will pay less.”
-Skip DuVall, Assistant Brewer, Alcatraz Brewing Company, Indianapolis

“It would certainly lend a much-needed boost to a heavily-taxed industry. In addition to federal and state excise taxes, Indiana brewers currently face dramatic increases in property taxes, as well. Unfortunately, I don't think it will have a great impact on bringing down prices at the consumer level as most of the savings would be absorbed between the brewers, distributors and retailers.”
-Greg Emig, President/Brewer, Lafayette Brewing Co., Lafayette

“Money spent at locally-owned businesses stays in the community. Excise tax decreases would help the bottom line of a locally-owned craft brewer, and by extension, keep more money in the community of origin. Sounds like something I can get behind.”
-Roger A. Baylor, Carnival Barker and Sometimes Owner, New Albanian Brewing Co., New Albany.

“Any drop in taxes is good for business. The little guys benefit the most since we pay more in raw materials costs.”
-Mike DeWeese, Partner, brewery to be named later

“It would help to the bottom line of breweries for sure.”
-Mat Gerdenich, Cavalier Distributing, Indianapolis

Brewing Trends
Bigger and bigger hopped beers continue to be popular. We’re seeing more and more beers aged in barrels. And sour styles continue to grow. Extreme beers are always fun and are a great way for breweries to make a name for themselves. But we’re also seeing more sessionable, to-style beers coming out as well. This is good for all craft beer fans, not to mention a good gateway to bring macro-drinkers into the fold.

“As consumers become more educated to the taste profiles of good beer, you will see growth in some of those segments [like sours]. . . . [W]e also think that the consumer will better understand the traditional styles like lagers and session ales.”
–Jim Schembre, World Class Beverages, Indianapolis

“Other than maintaining a consistent, quality sessionable core lineup of beers, there's going to be a bunch of new brews out there. Seasonals are another big growing faction of the craft beer segment, whether they be Octoberfests, Bocks, pumpkin beers, etc. Bourbon barrel beers are a nice Midwestern trend as well, with breweries able to source true Kentucky Bourbon barrels with more ease than East/West coast locations. I see experimentation and style blurring also as a continuing future trend. Black IPAs are a newer trendy blur style that will be popping up more in 2010. Sours are everywhere now as well; this is evident by the growing number of entries into the Wild and Sour categories at the GABF over the past two years. Oh, and of course, Imperial-style everything! Good article in the recent New Brewer concerning spiced beers, maybe a small resurgence of them will be seen as well. Makes me wonder, maybe Upland Bumblebee Saison was too ahead of its time and a potential fad trailblazer that we gave up on? Maybe we'll bring it back like Kangaroos.”
-Caleb Staton, Head Brewer, Upland Brewing Co., Bloomington

“Hops are where it's at in my opinion. One trend that we have talked about at The Alcatraz is making our beers even more clear and smooth. It's almost a friendly competition amongst the downtown brewers to make clear, smooth and fresh beers as possible.”
-Skip DuVall, Assistant Brewer, Alcatraz Brewing Company, Indianapolis

“I also believe we're going to continue to see spice- and herb-infused brews as well as certified organic beers. [We’ll hopefully see more] estate beers. Sierra Nevada opened the door this year with the release of their Chico Estate Ale. The practice of harvesting, malting and kilning brewery-grown ingredients is sure to catch on. Let's also hope for a bit more recognition for quality session beers.
-Greg Emig, President/Brewer, Lafayette Brewing Co., Lafayette

“The great thing is that it’s not an either-or equation. The exuberant creativity of craft beer can hold its militant core market through crazed experimentation even as we reach for the center of the American beer market as a whole through session beers. It’s something that we’re trying to do at NABC, and we can see the results already.”
-Roger A. Baylor, Carnival Barker and Sometimes Owner, New Albanian Brewing Co., New Albany.

“The sky's the limit when it comes to US brewers. Different spices are the next big thing as well as Belgian styles. Barrel aging will become commonplace within 2 years.”
-Mike DeWeese, Partner, brewery to be named later

“Though big beers aren't going away anytime soon (and with good reason--many are quite delicious) I expect we will start seeing fewer beers brewed with the attitude "just because we can." Now that brewers have spent time experimenting and really pushing the envelope, many will take the lessons they've learned and focus more on creating better beer, rather than just big beer.”
-Charles Stanley, Marketing Operations Manager, Upland Brewing Co.

“Indiana still seems to be big on IBUs and ABVs!”
-Mat Gerdenich, Cavalier Distributing, Indianapolis

Coming in 2010
Hoosier Beer Geek will continue to be the quirky, eccentric site for craft beer nonsense. But you’ll see us organizing more beer events in and around Indianapolis and around the state. You’ll see more drinking guides that will appeal to long time Hoosiers, new residents, and visitors. And we’ll likely drink a ridiculous amount of beer.

“The big concern for the year 2010 for the wholesaler is the continued development of more and more brewers; there are now over 1,500 craft beers in America and the craft brewers are wondering if the category has so many brands that the brewers will lose their identity. Something like the wine industry: you know that you like Zinfandels but name one? So some of the major craft brewers are pressing the ideal to slow down the development of other brands. Brewers like Magic Hat even suggest that as wholesalers we do not need to even carry anything but the top four, as they currently represent over 70% of the grand total. So the big thing for 2010 for wholesalers will be access to market and who gets it. Remember there is only a small shelf at retail and how many brands and packages can you even put on it. So the list of brewers that want to come in the state and the number that can actually get to market are two different things. We as wholesalers and you as consumers, because of this aggressive growth of new brewers, must be concerned about quality and we are seeing people get in the craft side and have no beer skills at all. That is a problem.”
–Jim Schembre, World Class Beverages, Indianapolis

“2010 for Upland means 22 oz. bottles of Ard Ri Imperial Red, Double Dragonfly IIPA, Badder Elmer's Baltic Porter, Teddy Bear Kisses Imperial Stout, and Winter Warmer, more bourbon-barrel-aged beers, a bigger launch of lambics, a dark wild launch, two releases of Komodo Dragonfly Black IPA, Banshee Scotch Ale, possibly a collaboration brew, possibly bottled Preservation Pilsner in returnable cartons and the continued supply of our excellent core line up. Those are things we are pretty sure will happen, but some mystery brews will surely pop up somewhere in the meantime (I have a real hankering to brew a beer called Pirate vs. Ninja involving darkness and rum barrels; that is probably something to be brutally wary of). We also look forward to Shoreline picking up our old bottling line and buying some six packs of their tasty brews next year. We look forward to more Indiana breweries and the continued success of our Hoosier brew community. As to the larger craft brewing industry, we look forward to another year of growth as a beer segment, and the beers that have yet to be brewed.”
-Caleb Staton, Head Brewer, Upland Brewing Co., Bloomington

“I think that we need to continue doing what we are doing to expose people to better beer. Tappings, brewfests and great groups like the Geeks are helping tremendously. As a matter of fact I am starting a blog that the three Indy downtown breweries (The Ram, The Rock and The Alcatraz) have come up with to keep people more informed as to what we are doing.”
-Skip DuVall, Assistant Brewer, Alcatraz Brewing Company, Indianapolis

“Our focus for the new year is to expand our bottle sales both locally and in the Indianapolis market and to increase the number of in-house beer-centered events, i.e. brewers dinners; hop variety experiences; and offering more cask-conditioned selections. Things to be wary of in the craft beer industry: Too much focus on extreme beers and the resulting extreme beer prices.”
-Greg Emig, President/Brewer, Lafayette Brewing Co., Lafayette

“Individually, NABC hopes to have a greater draft presence statewide, and to make up our minds about whether to can or bottle. Increased numbers of draft handles will lead to a faster resolution of the packaging issue for us. As for the craft business in general, I see further growth, because I see most of us working hard at the grassroots, local level, which is where sustainability begins.”
-Roger A. Baylor, Carnival Barker and Sometimes Owner, New Albanian Brewing Co., New Albany.

“A rise in gas prices could be an issue again. I think we will see more craft beer in cans as well!”
-Mat Gerdenich, Cavalier Distributing, Indianapolis

2009 State of the Six Pack - Part 3

When the New Year begins, it is not uncommon to reflect on the year that had past and ponder what lies ahead in the coming year. Organizations give annual reports. Newspapers and television shows do special review pieces. Politicians give their annual address (the President’s State of the Union, the Governor’s State of the State, the Janitor’s State of the Mop Bucket, etc.).

It is in this spirit that Hoosier Beer Geek sent a Six Pack of questions to everyone we knew in the Indiana craft beer industry. Breweries, bars, restaurants, distributors, and stores across the state were included in this Six Pack. We packaged their comments, along with our thoughts, into the first annual State of the Six Pack address.

We have broken this up into three parts. Today, we conclude with thoughts on Indiana’s laws relating to beer and alcohol. Tuesday, we looked at the economic factors that have played into the Indiana craft beer market. And yesterday, we discussed the craft beer market slice of the larger beer market pie. We hope that you found this to be as interesting and illuminating as we did.

Question: The legislature may look at Indiana's blue laws. But instead of this being a battle between 18th amendment loving puritan Hoosiers and 21st amendment loving party Hoosiers, it looks to be grocery/convenience stores versus liquor stores. What are your views on the Sunday sales issue? What impact (positive/negative/any?) do you see this debate having on your business and the craft beer market in Indiana?

In discussing Indiana alcohol laws, Elizabeth Morse at Corner Wine Bar and Old Town Ale House sums up well what most beer drinkers think: “Indiana alcohol laws are archaic and difficult to change. An enormous change to the current system would come as a big surprise.”

So it came as a bit of a surprise when a lot of noise was being made about Sunday carry-out laws and that there was a push for a change. Of course, it shouldn’t be a surprise to anyone that right out of the gate, the legislative powers-that-be declared the issue dead and call for a moratorium to legislation related to liquor laws.

Because Indiana’s liquor laws are changing at break neck speeds.

Insert eye roll here.

But there are many that think a change is coming. And the driving force is the 2012 Super Bowl that Indianapolis will be hosting. Football and beer: life partners.

Jim Schembre at World Class Beverages sums up the number one reason to support allowing Sunday sales: “It will be more convenient to our consumers and that has value.”

But he is also quick to point out, “As a wholesaler we do not think it will have much impact on total beer sales. We do not believe consumption will go up…And as it relates to craft, the impact will not have much effect. At least, no more than it would on the mega beers.”

Cavalier Distributing’s Mat Gerdenich points out that the proposal to limit Sunday sales to grocery and convenience stores would likely have no impact on most craft beer sales. “Do you ever expect to see Thomas Hardy's Ale, JW Lees, Struise, or Mikkeller in a mainstream mega grocery store?”

Simply put: “[The Sunday sales] law is ridiculous and needs to be done away with,” says Courtney Hall at The Hop Shop. “There is no argument that I have ever heard to forbid the sale of alcohol on Sunday that does not lead back to religion…In addition to that, the law has been changed to allow restaurants and sporting events to serve alcohol on Sundays. So apparently, it is okay to buy alcohol from certain businesses, just not others.”

Question: There is an ongoing movement away from away from the traditional brick-and-mortar retail sales to online retail sales. Would you welcome changes to Indiana's laws to allow shipping and receiving of beers across state lines? Do you see great opportunities in selling Indiana beers online? Do you have concerns about out-of-state shipments into Indiana impacting your business? And what are the realistic chances of this ever happening in Indiana?

Jim Schembre answers our question with another question, “[W]hy does a consumer want to buy on line? Is it price, variety, or convenience?” And that’s a very good question. With traditional retail, I suspect price and convenience are the main answers. But in an industry that is as heavily regulated as alcohol production and sales, the answer for most craft beer enthusiasts is variety. Gaining access to beverages not available in Indiana is the biggest reason why Hoosier beer and wine drinkers are asking for changes to the law.

But it isn’t just Hoosier consumers that stand to gain. “I would be all for updating Indiana’s antiquated liquor laws to allow shipping,” says Courtney Hall. “There are many beers that we get here in Indiana that other states cannot get, which would allow us to offer them a product that they cannot purchase at traditional retail in their own state.”

Mike Sprinkle agrees. “I think it is only fair to open up the market. Lots of people want Indiana beers that cannot get it and I would love to have access to a lot of the brews we can’t get. It’s totally realistic. We have some pretty stupid shipping laws in Indiana.”

“There are lots of issues about who is buying it,” says Jim Schembre. “Who is collecting the taxes? And who is ultimately drinking it? If we had no rules or laws that say anybody can drink alcohol at any age then I think direct shipping to consumers should be legal. But people sometimes forget that we are not selling chocolate. Alcohol is a controlled product. So until we change that law, we must protect its availability to the market.”

In discussing the Sunday laws, we found that there were differing viewpoints on who should be allowed to sell cold carry out beer.

Mike Sprinkle: “I would welcome Sunday sales. On the other hand, I don't think Groceries should be able to sell cold beer and they should be more regulated. I know no one under 21 can come into my store, yet kids run free through the liquor and beer isles.”

Courtney Hall: “[Sunday sales] is also somewhat intertwined with the idea of being able to sell cold beer in grocery and convenience stores. This is another ridiculous law that unfairly favors businesses that have a 3 way package liquor license. We are now the only state that still limits cold beer sales to only one type of license.”

Outside of the Sunday and shipping laws discussion, there were plenty of additional comments about Indiana’s liquor laws.

Roger A. Baylor: “The most sadistic and hypocritical aspect of this topic is the fact that I can go to a small winery and buy wine to go on Sunday, but can’t sell beer to go from my small brewery. Almost as bad, it encourages people to drive drunk by forcing them to consume on-premise rather than drink at home. Beyond this, the Sunday sales dispute primarily is about who gets to sell cases of swill, so I can’t say it impacts us. I will say that from the perspective of living in New Albany, across the river from Louisville, Indiana hemorrhages tax revenue each and every Sunday. It’s hilarious to me that Their Man Mitch constantly talks the free-market talk, but very little of it ever seeps into the regulatory regime of alcohol in Indiana. Any “realistic” prospect of anything happening that pertains to alcohol sales has to do with one thing, and one thing only: The prompt and efficient collection of tax revenue, so that tax “breaks”can be awarded elsewhere. To me, sensible laws relating to interstate commerce should not except or exempt alcohol sales.”

Mat Gerdenich: “The bigger question…can anybody even have a realistic chance on changing any laws in Indiana? We are still two of 50 states that do not sell alcohol on election days. Let's see if we can avoid being the 50th state on this issue. We got to crawl before we can walk much less run.”

It appears that everybody, in varying degrees, agrees that Indiana could use some changes to our alcohol laws. The biggest challenge, though, appears to be getting everybody on together on the same page to push forward changes we all can agree to. Changes won’t likely come when different segments of the industry disagree. Liquor stores, convenience stores, grocers, breweries, and wineries all need to find common ground and build on it.

2009 State of the Six Pack - Part 2

When the New Year begins, it is not uncommon to reflect on the year that had past and ponder what lies ahead in the coming year. Organizations give annual reports. Newspapers and television shows do special review pieces. Politicians give their annual address (the President’s State of the Union, the Governor’s State of the State, the Janitor’s State of the Mop Bucket, etc.).

It is in this spirit that Hoosier Beer Geek sent a Six Pack of questions to everyone we knew in the Indiana craft beer industry. Breweries, bars, restaurants, distributors, and stores across the state were included in this Six Pack. We packaged their comments, along with our thoughts, into the first annual State of the Six Pack address.

We have broken this up into three parts. Yesterday, we looked at the economic factors that have played into the Indiana craft beer market. And tomorrow, we will conclude with thoughts on Indiana’s laws relating to beer and alcohol. But today, we will discuss the craft beer market slice of the larger beer market pie. We hope that you find this to be as interesting and illuminating as we did.

Question: Mega-breweries still dominate the Indiana beer market. How do you see the impact of craft beer in the Indiana market? What do you see (or hope to see) coming in 2009 and beyond?

It is hard to escape the fact that Indiana is a macro-brewing state. From the repeated television and radio commercials to the print and billboard ads, from Lucas Oil Stadium and Conseco Fieldhouse to your local grocer and corner bar, Indiana is painted in Budweiser red, Miller blue, and Coors silver.

Jim Schembre at beer distributor World Class Beverages points out that only 1% of the beer market in Indiana is dedicated to craft brewing, while the national average is around 4%. We all want to see our favorite beers readily available at our favorite bars, restaurants, and stores, so for fans of craft beer, those market numbers seem pretty daunting.

But most people in the industry seem to be “the pint glass is half full” guys and see the opportunities that come from being the underdog. “In a state as conservative as Indiana, craft brewing is going to be a grassroots insurgency for a very long time,” says Roger A. Baylor of New Albanian Brewing Company. “The upside of that is that if 90% of the marketplace doesn’t know or care about your product, there’s nowhere to go except up.”

Mat Gerdenich of Cavalier Distributing, puts his view in investor speak. “We are in a bear market, all things considered. However, I am BULLISH on craft beer in Indiana! The MACRO SWILL guys do what they do and will continue to do so. I would like to see more people vote with their pallets and not fall for mass marketing gimmicks.”

Based on the number of special “craft” and seasonal beers that the mega-brewers have been producing, it doesn’t look like they will be giving up any of their market share without a fight. But Mike Sprinkle at Crown Liquors is optimistic that beers like Blue Moon and Budweiser’s American Ale can make an eventual positive impact on the local craft beer industry. “Since all these mega-breweries started making all of these intro-craft beer styles, I like to think its just going to make the movement towards craft even faster.” Essentially, getting the consumer to jump away from the American light style into something else, even if it is another BMC product, is the biggest leap.

I don’t think any of us would disagree with those thoughts. But what does the craft beer industry need to do to make their slice of the pie grow? “We think the key to the cumulative success of craft-brew is to offer opportunities for consumers to try and understand the nature of the beast,” says Elizabeth Morse at Corner Wine Bar and Old Town Ale House. “Our plan is to keep offering our mega-brew drinkers alternatives that are a step-up...it's a process.”

“[Craft beer market] growth has still been very localized to certain areas of Indiana, such as Indianapolis, Bloomington, Lafayette, and Muncie,” observes Courtney Hall at The Hop Shop, “but has been fairly slow to make its way into the more rural areas of the state. My hope for 2009 and beyond would be to see continued growth in the larger cities, but also interest and growth in more of the small towns and Bud/Miller/Coors sort of markets.”

Roger Baylor takes an outside-of-the-brewery approach that any of can try. “Craft brewing growth here remains predicated on patience, education and personal contact. I’m a member of the board of two economic development entities in New Albany, and I take beer to every event that I can legally do so. Recently one of my comrades, a wine drinker with no interest in beer, has become enamored with pairing cheese and smoked beer. If each one of us scores a convert every week, critical mass isn’t too far away.”

It is amazing the interest that can be gained by bringing a couple of bombers to a tailgate, family gathering, or party at a friend’s house. I’ve converted many friends and family just by bringing craft beer and a small stack of sample cups or plastic shot glasses.

Question: Consolidation has been a favorite in the mega-brew's playbook. There have been some instances of one craft brewery purchasing another craft brewery. Do you see mergers making further strides in the craft beer market? Do you think that consolidation would help craft beers become more well known to the general public? Or does it go against what craft brewers are trying to accomplish?

Miller merges with SAB. Coors merges with Molson. SAB Miller merges US Operations with MolsonCoors. And InBev merges with Budweiser. Eventually, we’ll see InBudSABMillersonCoors with a US market share of 99%, right?

The big boys in the brewing industry seem to think that merging, cutting costs, and streamlining are the key to continue holding on to their market share. Would there be any benefits to the craft beer industry or craft beer consumers if craft breweries were to take a similar approach?

“The leitmotif of craft brewing is stylistic diversity and free choice,” says Roger Baylor, “and this is the polar opposite of megabrewing. Therefore, insofar as craft beer consolidation doesn’t mimic the megabrewing strategy of stylistic monoculture and the absence of free choice, it probably helps to some extent. It’s a slippery slope, indeed.”

Courtney Hall replies, “I feel as though this is a double edged sword for breweries. The idea of increasing production and distribution is enticing, I’m sure, but it does seem to come at a price. Too many of the beer purists, this is seen as “selling out”, so there is some backlash from that group; and because the breweries are often combined and more recipes cranked out, there is a little less TLC in each batch which does seem to lead to a slight loss of flavor profiles. This may gain them some customers by having a less edgy flavor that is acceptable to more palates, but it causes the people looking for that edgy flavor to look elsewhere.”

But Jim Schembre observes that “this is the business cycle that is emerging. Some of it good; some of it bad. Craft specialty beers were originally developed because somebody loved to try to drink a different style of beer and wanted to try something new. This new consolidation of micros (Red Hook, Widmer, and Goose Island; Pyramid, Portland and Magic Hat) are happening because of the financial concerns companies have. And with this comes the ideal of brewing items that make money, not what they love to brew. You are either developed because of love of the beer or love of the money. Love of the beer started the category, but now love of the money is taking over. I think it goes against the original ideal of why and how the category got started.”

So given the economic condition of our country, will we continue to see such mergers? Mat Gerdenich thinks we will. “This really depends on each situation. In these difficult economic times consolidation is going to increase as a matter of survival. The big question is do these merged breweries want to be the next macro swill brewery or are they going to stay true to the craft beer roots? If the craft part goes away and it is more about big business and less about the beer, than that can be problematic.”

Courtney Hall, though, thinks that this discussion might be moot. “[T]here are not likely to be many breweries looking to make the investment to purchase another brewery right now, and even if they wanted to, it is will likely be difficult for them to acquire the financing to do so.”

2009 State of the Six Pack - Part 1

When the New Year begins, it is not uncommon to reflect on the year that had past and ponder what lies ahead in the coming year. Organizations give annual reports. Newspapers and television shows do special review pieces. Politicians give their annual address (the President’s State of the Union, the Governor’s State of the State, the Janitor’s State of the Mop Bucket, etc.).

It is in this spirit that Hoosier Beer Geek sent a Six Pack of questions to everyone we knew in the Indiana craft beer industry. Breweries, bars, restaurants, distributors, and stores across the state were included in this Six Pack. We packaged their comments, along with our thoughts, into the first annual State of the Six Pack address.

We have broken this up into three parts. Today, we will look at the economic factors that have played into the Indiana craft beer market. Tomorrow, we will discuss the craft beer market slice of the larger beer market pie. And Thursday, we will conclude with thoughts on Indiana’s laws relating to beer and alcohol. We hope that you find this to be as interesting and illuminating as we did.

Question 1: How has the economy affected your corner of the craft beer market so far and how do you see it affecting your 2009? Address both the impact on consumers and on your business operations, if possible.

Everyone is well aware of the economic issues that this country is facing. And most everybody has been making adjustments or concessions in order to balance their own budget. After losing their employment, one of our own Knights had to cancel a beer road trip. Of course, others of us seem to continue plowing cash into the craft beer machine. Just doing our part for an economic recovery!

For a good feel on how the economy is affecting the craft beer industry, we begin with those who are closest to the consumers, the retailers. Courtney Hall, owner of The Hop Shop, tells us, “We have seen a slight drop in sales, but more of a “trading down” than anything. That is, many people are buying 1 six pack instead of 2, or picking up an $8 six pack instead of a $10 six pack, for example. However, as this has been happening, we have seen an increase in the number of people either entertaining at home or simply staying at home to drink instead of going out to a bar or restaurant. The net effect of all of this is that we have essentially been flat in beer sales as compared to last year at this time.”

So how have the restaurants been fairing? “Business continues to move forward,” says Elizabeth Morse, owner of Corner Wine Bar and Old Town Ale House. “[The Corner Wine Bar] has been around for a long time and is pretty predictable/profitable. [The Old Town Ale House] continues to increase revenue each week, albeit slower than we'd anticipated. In general, sales are lower than projected at both restaurants. However, while customers spend less, we find that they are more likely to drink with those dollars than they are to buy food at our establishments.”

Roger A. Baylor at New Albanian Brewing Company is in the unique position of being a brewer and a retailer. “So far this year, we’re doing fine [selling] our own [beer], and also doing well with the top shelf of guest beers…[T]he house brewed price tier and the most expensive imports and micros are both thriving, while the items in the middle are static.”

As the economy tumbles, retailers feel it first. Then moving up the chain, distributors start to feel the effect. Mat Gerdenich, Owner of Cavalier Distributing, said “I started seeing some effects late September and we are speculating how things are going play out next year.”

Jim Schembre, manager of World Class Beverages, remains optimistic that, despite the economy, craft beer will still see growth in Indiana. “[W]e anticipate that the growth rate of the craft specialty business in Indiana will grow but at a much slower pace. probably closer to 9% not like the past increases of over 25%. We base those numbers on several things. One is we have a substantially lower market share than the rest of the country which gives us room to grow. Two is we are seeing new distribution as it relates to the on premise channel which is not growing with the traditional beer categories so those retailers are looking for something different to appease there consumers. And craft specialty fills there need. And lastly a bigger focus on Local beers which we think can improve the sales for the category.”

It appears that while consumer spending in down, people still like to drink. “[I]n the face of a bad economy, craft beer is still an affordable luxury,” Mat Gerdenich adds. Probably one of the cheapest vices available.

Question: At this time last year, everyone was worried about the effect that the global hops shortage would have on the beer world in 2008. Did the price/unavailability of certain hops change the recipe of any of your standard beers or force you operate your business than you normally would have? How do you see this affecting your business in 2009?

At the start of 2008, everyone in the beer industry was nervous about shortages of hops. Hopheads, like myself, feared the loss of some of our favorite beers. Would hops be reduced in recipes? Would some hoppy beers be dropped all together? We held our breath as the answer revealed itself.

“We had to tweak some of the beers,” said Roger Baylor, “but the brewers were resourceful, and we spent what we had to spend to get what we wanted when we could get it. There was never a thought of dumbing down.”

“Fresh hopped and generally hoppy beers were still brewed,” observed Mike Sprinkle, “Beer Doktor” and Chain Fine Wine Buyer for Crown Liquors, “and I don't think that breweries skimped on the hops, so that was good.”

So brewers were still supplying products for those demand hops. But what about prices? “[W]e saw the price increases!” reports beer distributor Mat Gerdenich. But hops weren’t the only culprit. “The price of grain also had a lot to do with pricing as well. Hops caused us some supply issues in 2008 but not nearly as was predicted. I only know of a few of our suppliers that reformulated some recipes. I am currently hearing mixed reviews as to 2009.”

Courtney Hall concurs with Mat. “There were some price increases throughout the year, but it is hard to pin all of those on the rise in hop prices. Malt prices also went up this year, and for the majority of the year, gasoline was out-of-control expensive, so I think there were several factors in any price increases that happened. Along the same lines, I do not think that this will have a huge impact in 2009 either. Some brewers may cut back on some of the extravagant and extreme sort of beers in an effort to conserve their hop allotment, but I don’t envision shortages of their higher volume beers.”

Basically, everybody agrees that the impact of a hops shortage were not as bad as everyone feared. But there were some price increases. What we can anticipate for 2009 is anybody’s guess. We suspect that this year, consumer spending and demand will have a bigger effect on the breweries, retailers, and all those involved in the craft beer business than hops, barley, and fuel costs.