Indiana State Fair Barrels Forward with Beer

By Michael Rubino, Senior Editor at Indianapolis Monthly

Last winter, Clay Robinson, co-owner of Sun King Brewing, stepped to a lectern inside the Indianapolis Artsgarden to give a speech at a reception for the Brewers of Indiana Guild during the close of another successful lobbying effort at the General Assembly. “It’s my canned speech,” says the brewer of canned beer. But as Robinson, president of his guild, began to address the crowd—“Craft beer can save America …”—someone in the otherwise-quiet audience laughed at the notion.

“I was furious,” he recalls. “I had a collared shirt on. I had a tie on. And this woman laughed. Out loud. It was really quiet for what seemed like a long time. I was taken aback, but I was like, Nope. High road. Go into your pitch.”

The rest of his talk went off without a hitch, which shouldn’t come as a surprise. Robinson and his fellow Indiana brewers seem to be getting the last laugh a lot these days. They’ve strung together several legislative victories that have boosted their market share and accelerated the proliferation of Hoosier-made craft beer—a feat even more impressive given it’s all come in a state that continues to have some of the most sober liquor laws in the country.

In 2010, the Brewers of Indiana Guild got its first big win: approval for Sunday carry-out sales at microbreweries. Those shops raised another glass in 2012, when the Guild successfully lobbied to increase the annual limit on small brewers from 20,000 barrels (one barrel equals two kegs) to 30,000. Sun King and Munster, Indiana–based 3 Floyds picked up the tab for that effort, to the tune of about $40,000. Robinson says the Guild supported those lobbying efforts but didn’t contribute financially because “at the time, I don’t think the other members saw what the growth curve could be. They weren’t short-sighted, just stuck in the box. I’m a manifest-destiny individual. I believe we have to be in charge of our own future.”

Craft beer’s latest victory came earlier this year, when the General Assembly repealed a 67-year-old ban on selling alcohol at the Indiana State Fair. (North Carolina now stands as the only state with such an embargo.) The return of adult beverages to the Fair for the first time since 1947 was made possible by a joint lobbying effort from Indiana wineries, the Brewers of Indiana Guild, and representatives from the Indiana State Fair Commission. And it didn’t hurt that Fair organizers noted a demand. “In the past, the No. 1 question I got from visitors was, ‘Where can I buy beer?’” says Cynthia Hoye, executive director of the Indiana State Fairgrounds. “The second? ‘Where are the restrooms?’”

This month, Fairgoers of age will have the opportunity to sample beer (and wine) produced across the state. The plan is to feature four Indiana wines and beers each day of the 17-day run and offer sales by the glass. The concept was shot down during a previous legislative session but prevailed this time around because, says Hoye, the lobbying group calmed fears that selling alcohol would turn the Fairgrounds into a bacchanal, detailed specific safeguard measures, and shared a vision. “We are the largest showcase for Indiana agriculture,” she says. “If you look at the wine and craft-beer industries here, this fits—it’s the exact thing we’re trying to showcase.”

From the midway to the mainstream, craft beer has never been more accessible to Hoosiers. Last year at this time, there were about 50 licensed breweries in Indiana. Today, there are 90 (and counting). From 2012 to 2013, craft-beer sales in the U.S. went up nearly 20 percent. In Indiana, they rose from 7 percent to 8.5 percent in the same time period. The numbers are promising enough that Sun King recently beefed up its production capacity and can now brew more than 40,000 barrels per year. It won’t, though—at least not yet.

Federal regulators designate “small brewers,” in part, as those operations that produce less than 60,000 barrels per year, but that definition varies from state to state. In Indiana, violators of the 30,000-barrel cap would forfeit benefits afforded to craft brewers, such as self-distribution (selling directly to bars, restaurants, and liquor stores without using a wholesaler) and the means to operate tasting rooms and onsite restaurants. There is, however, a legal workaround: Beer sold outside the state doesn’t count against the 30,000 limit.

Sun King, which only distributes beer within the state’s borders (a strategic choice), sells more beer in Indiana than any other Hoosier craft brewer. 3 Floyds produces the most but moves nearly 60 percent of its product outside the state. “Our goal has always been to sell as much beer in Indiana as humanly possible,” says Robinson. “So we’re looking forward to showcasing what we produce at the State Fair, along with all the other great stuff Indiana has to offer.”

The last time Fairgoers enjoyed a cold beer, though, things didn’t go so well. During the ill-fated 1947 Fair, beer was in such demand that vendors ran out of paper cups and began serving bottles. Drinkers littered the Fairgrounds with them, causing an eyesore and a hazard—and outrage that led to the ban. That type of frenzy over alcohol may help explain why Hoosiers have historically felt the need to limit themselves, a tendency that stretches back to before the Union admitted Indiana as a state.

In the days of the Northwest Territory, of which Indiana was a part, it was illegal to sell liquor to soldiers and Native Americans from 1790 to 1795, and the latter continued to face restrictions throughout the territorial period. The year Indiana became a state (1816), lawmakers wasted no time prohibiting liquor sales on Sundays. Though there have been modifications to the law since then, Indiana remains the only state with such a ban and is also the only one that regulates alcohol sales based on temperature (for example, grocery and convenience stores can’t sell cold beer).

Hoosiers went on the wagon for three years beginning in 1855, but even after statewide prohibition was repealed in 1858, Indiana endured years of strict pro-temperance laws. The state went dry again in 1918, two years before national implementation of the 18th Amendment. Evangelist Billy Sunday—one of the catalysts of the Prohibition movement—settled in Winona Lake in 1911; even after the passage of the 21st Amendment repealed Prohibition, the area continued to be a pro-temperance stronghold. The Prohibition Party, which made its headquarters in Winona Lake for four decades after the repeal in 1933, held its national convention in Indiana nine times.

From Prohibition’s failure came the three-tier system, a state-controlled regulatory practice that separates manufacturers (brewers) from retailers (stores, restaurants, and bars) with the creation of distributors or wholesalers (middlemen). In principle, the idea is that the distributors deliver the product to market in a fair and legal manner and ensure that both large and small manufacturers get equal treatment in the marketplace. “Prior to Prohibition, breweries owned taverns and, basically, tried to see how much beer they could sell—just like any other manufacturer would do with any other product,” says Marc Carmichael, president of the Indiana Beverage Alliance, the state’s top lobbyist for Budweiser wholesalers. “The problem is, when that product is alcohol, society ends up paying a terrible price. The country was awash in cheap alcohol, life was hard, and people, especially immigrants, turned to taverns. We were able to set up a system to prevent similar problems.”

The system, though, isn’t entirely pristine. First of all, wholesalers aren’t necessarily independent, representing the likes of Anheuser-Busch InBev and MillerCoors. Through sheer market domination, the multinational brewers can dictate terms as well as shelf and tap space. And in Indiana (and some other states), small brewers are allowed to circumvent the system and act in all three roles—manufacturer, distributor, and retailer—as long as they stay under the 30,000-barrel threshold. These realities can sometimes put the two groups at odds, although Carmichael claims that issue has been overblown.

“We’re really big fans of the craft brewers,” he says. “We’ve worked with them since the 1990s to find a way to work outside the system. The state allows them to operate in all three tiers to get started, but at some point, we’re going to expect them to operate within the system. And once they’re there, we can deliver their product and help them build a brand.”

Robinson predicts that soon either Sun King or 3 Floyds will lobby to increase the state’s production limit again. That ever-upward-creeping barrel cap has Carmichael and his clients concerned. “The wholesale tier tends to be the tier that defends the system,” he says. “We’re the ones who raise our hand and say, ‘Wait a minute. Do you really want to do this? Have you thought about the long-term impact?’”

“There are Indiana businesses that sell Anheuser-Busch,” says one wholesaler lobbyist. “They’d like to show at the Fair.”

According to Robinson, the long-term impact is economic growth. “It’s not just Sun King that is benefiting,” he says. “Others are profiting, too. In five years, we’ll have four or five breweries that will produce more than 20,000 barrels per year.” Craft brewers, Robinson points out, are tourism-generators, job-creators, and tax-revenue producers. A 2012 study conducted by the Brewers Association found that Indiana’s craft brewers have a $600 million impact on the state. In contrast, Robinson says, when you go to the ballgame and buy a Budweiser, “that $4 just left the country,” referring to the fact that the brand is owned by a company based in Belgium. “The ‘great American beer’ isn’t even American.”

In the next five years, Sun King estimates it will sell 20,000 barrels annually in Marion County and 10,000 more in the surrounding counties. Given the growth of the last few years, it’s not an outrageous expectation. In 2013, it sold 14,000 in Indianapolis and another 3,000 in the doughnut counties. But Carmichael cautions that the craft-beer landscape is changing.

“All of these small brewers have expectations of tremendous growth,” he says. “But every time you open a newspaper, you read about a new one opening. Sun King’s projections may or may not pan out. It faces a lot of competition that didn’t exist four or five years ago, and there’s only so much beer that can be consumed. It’s growing its base, but not quickly. The craft-beer customer likes to try new beers all of the time, so it’s hard to develop any loyalty. Your dad probably drank Bud all the time, but these consumers like to experiment; they move around. And there’s less volume. It’s a matter of someone picking up a six-pack instead of a case of beer.”

The ultimate taste test may come soon at the State Fair. Though only Indiana breweries and wineries have been invited to participate this year, Carmichael would like to add the much-larger brands. “There are Indiana businesses that sell Anheuser-Busch products and Miller—and they pay state taxes, too,” he says. “They’d like to show at the Fair. It’s not going to hurt anyone if they’re there. Craft beer is great, but there’s an awful lot of people who might like to have a Bud or a Bud Light, the No. 1–selling beer in the country.”