CHICAGO — The layout of the Independent Spirits Expo in Chicago Wednesday night (Sept. 25) was a snapshot of the rapid growth in the highly entrepreneurial craft spirits sector.

Two years ago, the Expo was shoehorned into a large bar and lounge. Last year, it fit into the events space in a steakhouse restaurant. This year, the event sprawled across a big ballroom in the Hilton Chicago hotel, with dozens of producers participating and hundreds of different spirits available for tasting.

This scene might have sounded like a fantasy just a few years ago, when several states relaxed their post-Prohibition era laws that had made it virtually impossible to start up a small distillery, and a relative handful of craft producers broke new ground.

“When you think where we were 10 years ago with craft spirits, you could count craft distilleries on one or two hands,” said Aaron Zacharias, who owns two bars that have long featured craft beer and spirits: Fountainhead and Bar on Buena, both located on Chicago’s North Side. He reported he had learned recently that there will be 100 craft distilleries in the state of Washington alone by the end of next year.

Zacharias made the comments as moderator for a panel of 11 craft industry insiders that was presented earlier on Wednesday, as part of the Expo’s day-long program. (Continued after slide show.)

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The panel was in part a celebration of the craft sector’s rise. Jason Griffin, a distributor for Chicago-based Wirtz Beverage Group, responded to an audience question about when the craft phenomenon really took hold by saying: “In 2002, it was already moving. It was really solid by ‘05. By ’08, it was definitely on its way. Now, the category is beginning to balloon some.”

Griffin added that the category had reached the point at which “I can go home and look my wife in the eye and say, ‘I’m a small niche brands distributor, and I’m going to be doing it for the rest of my life.’”

But the panelists also engaged in a dialogue about some of the challenges that come with such fast growth. “Where is everybody going to find their niche?” Zacharias asked. “It’s not a niche market anymore, but you’ve got to create your own.”

With more and more products competing for space at retail outlets, bars, and restaurants, small producers are facing some of the same kinds of marketing issues as the big industrial-sized distillers.

“Ten years ago, you could let the liquid do the talking, it really didn’t matter what kind of bottle it was in, there was so little competition around,” said Pat Brophy, the assistant beer and spirits buyer for the Binny’s Beverage Depot chain, the Chicago area’s biggest alcoholic beverage retailer. “But now it’s become, the sizzle is selling the steaks, and you have to have that package that catches the eye.”

He added, “Something has got to jump out to them. People aren’t going to just take $30 blind date on a gin if there’s nothing there to catch their eye, if it’s just another tall, plain-looking bottle in a sea of gin bottles on a wall in one of our stores.”

The panel exhibited a range of opinions about whether young distilleries should focus on building a big local customer base or aggressively seek distribution in other national or even international markets.

Paul Hletko of Few Spirits in the Chicago suburb of Evanston said he has taken more of an expansionary approach. He noted that Few, whose gins are signature products, are sold in England. He said his customer base there is smaller than in Chicago, “but not by a large margin.”

“We don’t necessarily market ourselves as local,” Hletko said. “We are local in Chicago, but we do offer a world-class product. Our approach is not drink local, it’s drink small, drink hand-crafted, drink different.”

But Ryan Burchett, who founded Mississippi River Distilling in LaClaire, Iowa,  said start-ups need to establish customer loyalty in their home bases before seeking to grow their territory. “If you can’t own home, or at least make enough hay there to pay the bills, it’s not going to make any sense to go down the road to a bunch of other states. That’s where you make your gravy, but you’ve got to own home.” A big part of Burchett’s marketing is emphasizing that his distillery uses only locally produced ingredients.

Yet with the interest in craft spirits growing so quickly among consumers, it does not necessarily take that long to establish a local beachhead and move beyond if a distiller has appealing products. Burchett noted that Mississippi River Distilling, founded just three years ago, will be sold in 16 states by the end of this year.