Breweries in Indiana strive to adapt as sales go flat

Craft beer, once the dynamic upstart of central Indiana’s food and beverage scene, is no longer a growth industry.

Slumping demand and increasing popularity of other types of drinks have nudged craft beer into “mature market” status 15 years after Sun King Brewing Co. opened as the first full-scale production brewery in Indianapolis in six decades.

Although flavorful India pale ales (IPAs) and sours aren’t in danger of disappearing from the beverage landscape, the styles aren’t spiking in popularity.

Craft beer’s 13% market share in the United States in 2022 was identical to its 13% market share in 2018, according to the Brewers Association, an industry trade group.

Since the beginning of December, McCordsville-based Scarlet Lane Brewing Co. has closed three of its five locations in central Indiana, and three Indianapolis bars specializing in craft beer—including HopCat in Broad Ripple—have also closed.

Still, Patrick Klooz is bullish enough on craft beer that he opened a pop-up at Circle Centre Mall.

Klooz launched a microbrewery, Klooz Brewz Brewery & Public House, three years ago in Lebanon. A 4,000-square-foot brewpub on Lebanon’s town square serves as the company’s home base.

In February, Klooz opened a pop-up version of his pub in the mall food court location previously occupied by Johnny Rockets and Dos Hombres Taco House.

“Every chance you get, you have to try to add to revenue,” Klooz said.

The mall’s Klooz Brewz opened to capitalize on NBA All-Star Weekend traffic. Klooz said the spot will reopen when conventions and sporting events bring significant crowds downtown this year.

He said the pop-up carries minimal business risk, because he’s not renting the space; the mall collects a percentage of Klooz Brewz sales. In December, Wisconsin-based Hendricks Commercial Properties LLC announced plans to transform the mall into an open-air, pedestrian-focused campus with housing, offices and shopping.

Knowing there’s a finite time line for selling beer and burgers at Circle Centre, Klooz said the Lebanon location is his top priority.

“For small brewers, I think the successful route is brewpubs in small communities,” Klooz said.

More than 30 craft breweries operate in Indianapolis and its suburbs, he noted. “That’s a lot of choices,” Klooz said. “Lebanon has one.”

Throughout Indiana, the number of breweries is stagnant. According to the Brewers Association, 197 Indiana companies in 2022 represented a dip of six breweries from 203 breweries in 2021. The number was 192 in 2019 and 195 in 2020.

Blake Mathias, an associate professor of management and entrepreneurship at Indiana University, said it’s noteworthy that the number of U.S. breweries increased from about 7,600 in 2018 to 9,500 in 2022—the era when craft beer’s market share didn’t budge from 13%.

“If you have something that’s not significantly growing in terms of market share and then you add more breweries, it can be problematic,” Mathias said.

On Monday, Sun King unveiled plans for a taproom and food hall in Westfield. Sun King co-founder Dave Colt describes the craft beer industry as being in a “slight decline.”

During Sun King’s 15 years, the company has grown to seven locations and annual beer production of 30,000 barrels.

“It was going to be sunshine and hoppy beers for as far as the eye can see,” Colt said with a laugh. “Clearly, now, some tastes have changed.”

Colt said members of Generation Z drink less beer than older demographics do, and he cited “California sober” lifestyles—in which alcohol takes a back seat to other substances—as cutting into the craft beer market.

Scarlet Lane CEO Eilise Lane said breweries are dealing with rising input costs, such as a 43% hike for yeast during the past year. Increased interest rates, the repayment of loans from the pandemic era and a commitment to pay employees a living wage also contribute to a financial crunch, Lane said.

Meanwhile, it’s difficult to predict how many customers will show up.

“You cannot gauge what is happening with consumers with the consistency you used to be able to,” Lane said. “But we don’t blame them for what’s happening. They’re also experiencing a lot of these effects in their homes.”

Here for hospitality

Paris McFarthing, co-owner of Fort Wayne-based Hop River Brewing Co., said breweries can thrive by offering high-quality beer and food in an engaging setting where people gather.

Hop River, which opened in downtown Fort Wayne in 2018, schedules trivia nights as one way to create atmosphere, McFarthing said.

“The people who come in are diverse, and the people with them are diverse,” he said. “You may have a beer drinker and somebody who doesn’t drink beer—who maybe just wants to eat or wants something non-alcoholic or wine. Having those options keeps the whole group coming in rather than someone nixing it because they can’t find something for themselves.”

Sun King recently tested a theory that its hospitality would translate from Indiana to Florida.

Co-founder Clay Robinson moved to Sarasota, a city of 55,000 south of Tampa, to open a Sun King brewpub in 2022.

The company distributed its beer in Florida before opening the location about 10 blocks from the Gulf Coast and about three blocks from the baseball stadium where the Baltimore Orioles play spring training games.

“We took a good, hard look at the craft drinking market and migration patterns for Hoosiers and people in the Midwest already engaged with our brand,” Colt said. “On the west-coast side [of Florida] is where most folks from the Midwest go.”

At Klooz Brewz in Lebanon, social media photos of the brewpub’s pork tenderloin sandwich recently caught fire and provided a boost to business. The sandwich adheres to Indiana traditions, Klooz said.

“It’s at least double or triple the size of the bun,” he said. “Fresh, hand-breaded. You pick it right up from the butcher every morning.”

Changing tastes

Although IPAs are largely identified with craft beer, experts say lagers—or the style of beer found in bottles of Budweiser, Corona, Miller Lite and Coors—are on the rise among independent breweries.

The craft industry emerged in the 1980s by offering styles such as ales and porters in contrast to mainstream lagers and pilsners.

“IPAs always are going to have a foothold in the market,” McFarthing said. “We tend to do a lot of lagers and pilsners, too. I think some of those more traditional styles with new takes on them are coming back. They’re also beers that you can drink more than one of and still enjoy it.”

Scarlet Lane added non-alcoholic hop water to its roster.

“You need to diversify what your options are on your menu,” CEO Lane said. “People can say, ‘I’ll have an IPA, and then I’ll have a hop water. That means I can hydrate a little bit and hang out.’”

The choice that follows the hop water can be more adventurous, she said. At Scarlet Lane, variations of the company’s Dorian Stout have included accents of sea salt with caramel, rum and raisins and even Szechuan spices.

Sun King’s efforts to diversify are seen in the company’s Delta 8 seltzer, which is non-alcoholic while including 10 milligrams of Delta 8 THC.

In 2018, Indiana legalized the sale of cannabidiol, also known as CBD, a substance derived from the cannabis sativa plant.

Cannabidiols sold and purchased in Indiana must contain less than 0.3% of THC—the psychoactive agent that causes intoxication.

Sun King’s Delta 8 drink is sold in blueberry, peach, lemonade and “naked” flavors.

“People are choosing other ways to make themselves relax,” Colt said.

Local favorites

Klooz said one revenue stream for his company is custom brewing for clients who then place their company name on taps. Klooz Brewz distributed its beer to stores and restaurants but decided the program wasn’t worth the effort.

“It’s a very competitive market,” Klooz said. “Your prices have to compete with everyone. We tried it. We did it for eight months. We were up to about 30 accounts, but you’re driving two hours for 80 bucks.”

Scarlet Lane now operates locations in Beech Grove and McCordsville, where the company originated in 2014.

CEO Lane said the McCordsville facility occupies 10,000 square feet on 4 acres of land, property that’s owned by Scarlet Lane.

“One thing we have been working on since Scarlet Lane started 10 years ago is to own the property in McCordsville and develop it into an adult playland,” Lane said. “In 2019, we started working with the property owner, and we recently finalized that purchase. We’re now working on building out additional restaurants and entertainment areas.”

Since mid-December, three Indianapolis bars specializing in craft beer have closed: Goodwood Brewing & Spirits, 140 S. Illinois St.; World of Beer Bar & Kitchen, 409 Massachusetts Ave.; and HopCat, 6280 N. College Ave.

IU faculty member Mathias noted that Goodwood is a Kentucky company, World of Beer is based in Florida, and HopCat originated in Michigan.

“Some people don’t know where their beer comes from, but many of the real craft beer enthusiasts do,” Mathias said. “And it does matter to some extent. When you have so many good breweries and so many good beers, having something that differentiates you is helpful.

“Sometimes that differentiating factor may only be that you’re next door. ‘I know the person. I know the brewery. It’s local; it’s made here.’”•