2011 March

A state law that some say is outdated could effectively cap the growth of Indiana’s emerging microbrewery industry.

With the Indiana General Assembly deadlocked, Hoosier brewery operators fear they might have to close pubs and curtail other operations before a law stymieing growth can be changed.

Indiana has 34 breweries, which last year made nearly 50,000 barrels of craft beers, but the vast majority are produced by three microbreweries, each of which is quickly approaching a state-imposed production cap.

A brewery that makes more than 20,000 barrels of beer a year exceeds limits of a 1993 state law that gives small breweries lower taxes and other benefits. The breweries want to raise the limit to 60,000 barrels.

If the microbreweries exceed the current limit, their state taxes would nearly double.

The result, said Sun King brewery’s Omar Robinson, is Sun King could be forced to close tasting rooms, stop distributing its own beer and close its brew pubs.

In addition to Sun King in Indianapolis, breweries Three Floyds in Munster and Upland in Bloomington are concerned.

A lobbyist for the industry says there’s no bill in the legislature to change the law, but it hopes to propose one.

Three Floyds, which has a brewery and a pub, likely will go over the 20,000 ceiling this year. Sun King will break it in 2012, and Upland is growing and not far behind, according to industry insiders who track brewery production.

The law was written when Indiana had three small brew pubs making 1,000 barrels a year, so the 20,000 ceiling seemed high, according to lobbyists for the industry.

“The craft industry has exploded, so I guess this problem just kind of sneaked up,” Robinson said Monday, as he watched another new stainless steel brewing tank delivered to Sun King’s Downtown building.

In 2010, the first full year of operations for Sun King, the brewery made about 5,200 barrels of beer. This year, Sun King hopes to brew about 12,000 barrels.

Sun King started with 13,000 square feet of space at 135 N. College Ave. and recently expanded into an additional 13,000 square feet plus a 2,000-square-foot cooler to keep its fresh products at a chilly 38 degrees.

“At that rate, we’ll hit 20,000 barrels in another year, and we’ll have a problem unless the law is changed,” Robinson said.

At Upland, marketing operations manager Charles Stanley said, “We grew from about 8,500 barrels last year to around 10,000 barrels this year, so we have a few years to go. We’re growing while we control the quality.”

The breweries’ growing pains mirror those of Indiana’s small wineries, which were limited to 150,000 gallons of production a year in the 1970s.

The small winery act has been amended many times since, so that it has room for Hoosier winemakers bottling hundreds of thousands of gallons a year.

Mark Webb, lobbyist for the Brewers Guild of Indiana, said the Indiana General Assembly is focused on other issues, but still he hopes legislators will be sympathetic to concerns of Indiana’s emerging beer industry. Less than 2 percent of the beer consumed in Indiana is made in the state.

Raising the limits to 60,000 barrels, he said, “should buy us some time, and it matches the definition (of a small brewery) used in federal law.”

If no progress is made this session, Webb said, the industry will keep pushing for changes to the law.

“We will try to work on it this summer and have a bill ready to introduce in the next session later this year.”

Webb said the brewery operators would be working with the state Alcohol and Tobacco Commission to find a solution.

A spokesperson for the state alcohol regulators couldn’t be reached for comment Monday.