To get that effect, you'd have to create each letter as a separate text frame. InDesign cannot set character-level effects.
(That is, unless the Obi-wan magician can find a way with scripting. )
you can't apply effect on a character
My first suggestion would be to create outlines from text. You'll have separate elements and then be able to apply an effect on each of them. Easy, but you loose editability.
Or you place each letter in a separate text field (you may use the automatic length option).
Then cut/paste the entire field into a blank one.
Not very "clean" way, but it might do the trick.
I figured it might be the slow way. To make matters worse its along a curved path!
Well, it sure is slow and tricky.
However curved path don't make things more difficult, it even prevents moving blocs vertically, what could be a mess up.
Note that using auto block resizing doesn't not automatically properly place following letters when editing a central letter. To "refresh" the document, you must do an action (move/delete...) on the path and then Ctrl+Z.
Hope that helps