Inside Athletic Brewing’s Plan To Make Boozeless Beer A Billion-Dollar Business

Bill Shufelt and John Walker are making nonalcoholic beers tasty enough to please the biggest suds snobs. And with a nearly $500 million valuation, investors are intoxicated.

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Ona dreary Wed­nesday in January, Bill Shufelt, the cofounder and CEO of Athletic Brewing, grabs a yellow can of golden ale off the humming conveyor belt in his new 150,000-square-foot Milford, Connecti­cut, brewery and cracks it open. It’s 10 a.m.—but there’s no need for an intervention.

Over the last few years, Shufelt, 39, and his cofounder, John Walker, 42, have created the buzziest beer brand in America by creating craft brews without the buzz. Alcohol-free beer, often bland and thin, has long been seen as the brewer’s equivalent to decaf coffee or tofu turkey. Athletic Brewing is out to eliminate the stigma, making hoppy IPAs, crisp ales and toasty porters with the flavor and feel of a craft beer—but with less alcohol than a slice of rye bread. A six-pack costs about $10. “Humans have been drinking beer for more than 5,000 years,” says Shufelt, a former hedge fund trader who, a decade ago, gave up booze to improve his market focus. “I’m a beer lover and food lover—it blew my mind that there wasn’t a beer for people living modern, healthy lifestyles.”

Investors are betting big that millions of drinkers feel the same. Since Shufelt and Walker started tinkering with home-brew equipment in 2017, they have raised a dizzying $173.5 million from Alliance Consumer Growth, TRB Advisors and Tastemaker Capital. In the fall of 2022, Keurig Dr Pepper, the $12.7 billion (sales) beverage giant, took a $50 million minority stake at a valuation just under $500 million, according to sources close to the deal. Celebrity investors including Naomi Osaka, J.J. Watt, Karlie Kloss and Toms Shoes founder Blake Mycoskie have also bellied up to the bar. “I’d never been a fan of nonalcoholic beer—not because it didn’t have alcohol, because it didn’t taste good,” says chef and Momo­fuku founder David Chang, who has invested in Athletic and carries its beers in his restaurants. “Athletic is breaking the stereotype—one of food’s taboos—and it’s gaining momentum.”

While traditional U.S. beer sales have been relatively flat for years, the market for boozeless brews is booming, with total revenue up 20% to $330 million between the summers of 2021 and 2022, according to NielsenIQ. Athletic has outpaced the pack. It says 2022 sales grew almost 70%, topping $60 million, compared to $37 million in 2021. (Heineken 0.0 is the market leader with more than 25% of U.S. sales.) “Growth is being driven by people who enjoy alcohol and are interested in health, wellness and great taste,” says Keurig Dr Pepper’s head of strategy, Justin Whitmore.

Still, that’s a heady valuation of about eight times revenue in an industry where low single digits are the norm. Although the sober sector is small beer, accounting for just 0.33% of the $100 billion U.S. suds market, industry bigwigs think that share could grow fast. Anheuser-Busch InBev, the $57.3 billion (sales) brewing behemoth, has stated it aims for nonalcoholic and low-alcohol beer to be at least 20% of its global beer sales by 2025. “Apply that to the craft beer market—that’s tens of billions of dollars in the United States,” says Andrew Dickow, the head of the food-and-beverage investment banking team at Greenwich Capital Group. “I can’t see how it doesn’t get there, and it can be even bigger.”

The pandemic and the rise of social media have only increased America’s obsession with health and fitness. McKinsey estimates that wellness products and services have become a $450 billion industry as customers clamor for clean products, nutritious food, improved sleep and better physical and mental health. Growing up with legal marijuana, Gen-Z is drinking less than older generations. In 2022, more than a third of U.S. drinkers attempted the Dry January trend, according to beverage research firm CGA. Companies are rushing to offer alternatives like mocktails, alcohol-free wine and CBD seltzers. Still, nonalcoholic beer accounts for 85% of the growing market of “untoxicating” beverages. “I don’t have to compromise on taste, get to enjoy the social scene and hit that craving,” says Karlie Kloss, the supermodel and entrepreneur, who first tried Athletic beer while pregnant and later invested in the company. “There’s so much room for growth, especially with women—not just those pregnant or nursing, but those looking for healthy alternatives.”

Shufelt is not out to bring back Prohibition—some 80% of his customers drink alcohol. Instead, he sees an opportunity to insert beer into settings where you’d typically have water, soda or iced tea: the weekday lunch, post-workout drink, your next road trip. Many customers use Athletic to moderate their alcohol consumption, alternating between standard drinks and Athletic brews to have a fun night without binging. And without packing on extra pounds. While a craft brew can top 200 calories per 12-ounce bottle, Athletic’s Run Wild IPA has 65. (Michelob Ultra, Anheuser-Busch’s 4.2% alcohol beer marketed to health nuts, has 95 calories.) “People make fun of me to my face. They say, ‘It’s not for me, I’m not sober,’ ” Shufelt says. “I tell them, ‘You don’t have to be—this is your new weeknight beer. You can make fun of me all you want, if you just try it.’”

Shufelt grew up in the Wall Street stronghold of Darien, Connecticut, and played football at Middlebury College. “I sleepwalked my way into a financial career,” he says. “I never intended to be an entrepreneur.” In 2005, he graduated with an economics degree and traded health care stocks at Knight Capital in Jersey City. He later became a Chartered Financial Analyst and scored a job at billionaire Steve Cohen’s hedge fund, Point72. It was both stressful and social. Shufelt attended work dinners four nights a week, plus barbecues, bachelor parties and weddings on weekends. “I stopped drinking for lifestyle reasons. I loved fitness and wanted to perform better at work,” he says. “But the second I stopped, I felt like a total outsider because I had nothing in my hands—having a drink in your hand is part of the social fabric of society.” In 2015, while out to dinner with his wife, Jackie, he lamented the lack of nonalcoholic craft beer. “She grabbed my shoulder and said, ‘You should do it.’”

For the next two years, Shufelt spent his nights researching brewing, writing business plans and searching for a brewmaster to join him. “People said I was absolutely crazy to build a brewery for nonalcoholic beer.” He met future cofounder John Walker on an online brewing forum. “Bill put a not totally transparent help-wanted ad on the site for ‘the most innovative sector in craft beer,’” says Walker, who also grew up in Connecticut, where he had worked for his family’s restaurant business in Madison before becoming the head brewer at Second Street Brewery in Santa Fe, New Mexico. “When I called, he said, ‘Don’t hang up. Just hear me out. It’s nonalcoholic beer.’”

Intrigued by the challenge, and the chance to return to Connecticut, Walker packed up his young family and drove east. With Shufelt’s Wall Street connections, they raised $3 million from friends and angels, built a small 10,000-square-foot brewery in Stratford, Connecticut, and began experimenting.

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HOW TO PLAY IT

By Taesik Yoon

Investors looking to profit from the healthy-living movement should consider supplement seller Thorne HealthTecha fast-growing microcap that uses its proprietary health database and artificial intelligence to personalize supplement regimens for an increasingly health-obsessed populace. Many of its supplements contain nicotina­mide riboside, a form of vitamin B3 that Thorne believes supports healthy aging. Sound like junk science? Maybe, but it’s a great business. More than 5 million customers, thousands of professional athletes and over 100 professional sports and U.S. National Teams have used its supplements.

The stock sells for a bargain seven times 2023 earnings estimate and has far more cash on hand than debt.

_{Taesik Yoon is editor of Forbes Special Situations Survey and Forbes Investor.}

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Brewers traditionally make nonalcoholic beer by cooking or filtering standard brews, a process that removes the alcohol—and most of the flavor. Shufelt and Walker had a different idea: Tweak the grains, sugars, temperature and pH levels to brew a beer with big flavor and little alcohol from the start. After six months and more than 60 batches, Walker made what would become Athletic’s Upside Dawn golden ale. By 2018, they were pitching local retailers and scored an early deal with several Whole Foods locations in Connecticut. On weekends, Shufelt would wake up as early as 3 a.m. and trek to triathlons and half-marathons to hand out samples. “Our go-to marketing strategy was bringing coolers to race finish lines, anything from a local 5K to an Ironman, and handing out hundreds of samples,” he says. “We probably sampled almost 10,000 people that first summer and built a huge community of direct fans.”

The startup hasn’t been without its share of hangovers. In late 2018, Shufelt and Walker, having scored their first national order with retailer TotalWine, filled a truck with $50,000 worth of beer and then panicked that some cans might have been skunked. Because Athletic’s brew is low in alcohol, a natural preservative, it takes only a single rogue microbe to taint the taste. “We were going out to a national chain. If we messed it up, it could destroy us forever. It could destroy the category,” Walker says. Ultimately, they tossed the beer, hit up investors for more cash and spent more than $1 million on a tunnel pasteurizing machine for quality control.

Traditional craft brands including Samuel Adams, Lagunitas and Brooklyn Brewery have since jumped on the alcohol-free wagon. But Athletic has held firm, accounting for roughly 20% of all U.S. nonalcoholic beer sales in 2022. Previously unable to make enough beer to meet demand, Shufelt has poured his venture cash into two breweries (one in San Diego and the new facility in Connecticut) that will soon be able to make 650,000 barrels (about 215 million cans of beer) a year. Most revenue comes from grocery and liquor stores, including megachains Whole Foods and TotalWine. Athletic’s beer is also sold in more than 10,000 restaurants and bars.

Digital retail is big, too. Because the beers have less than 0.5% alcohol by volume, Athletic doesn’t need to stress about complicated liquor and tax laws and can sell directly to consumers online. “The e-commerce business has taken on a life of its own,” Shufelt says. “We’ve built a real community with hundreds of thousands of consumers and a huge data set.” With that information trove, Athletic can email customers about new beers, special sales and exclusive flavors, and share company initiatives. (Athletic, a certified B Corp, donates 2% of sales to maintaining hiking trails.)

Data also informs strategy: In 2020 Athletic bought a San Diego brewery from Ballast Point, in part because of statistics showing a high concentration of customers on the West Coast. E-commerce also gives Athletic a cheap and easy way to try out new beers (such as its blueberry IPA and an extra-special bitter) to identify winning flavors before undertaking a larger production run. Says Shufelt, “We get feedback straight from our customers and can test and improve new products before sending them to retailers.”

With its two new breweries now fully operational, Athletic is rushing to get shelf space in more national grocers, big-box stores and liquor chains. There’s room to grow. Shufelt says Athletic is now in just 15% of U.S. retailers licensed to sell beer. “His competitive advantage is his war chest of capital,” says Greenwich Capital’s Andrew Dickow. “There’s no one else in the craft industry doing nonalcoholic beers that can match his marketing and advertising.” Athletic is also looking to spots that historically haven’t slung suds: convenience stores, coffee shops, delis, pharmacies—even vending ma chines. Says Shufelt: “There’s a huge opportunity to go where beer has never gone before.”

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VICE BREAKERS

There has long been demand for guilt-free guilty pleasures. Here’s a brief history of goods without the good stuff.

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Cereal magnate John Kellogg creates America’s first commercial meat alternative, Nuttose, out of peanuts.

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German Ludwig Roselius treats coffee beans with benzene to create the first instant decaf, Sanka. By 1993, Sanka ranked fifth among instant coffees in the U.S., with $45 million in supermarket sales.

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No-Cal, America’s first sugar-free, zero-calorie soda, hits shelves. Marketed to diabetics and housewives, the brand is a hit but eventually goes flat amid competition from Diet Pepsi and Coke’s Tab.

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Philip Morris debuts Next (“nicotine extracted”) ciga­rettes. The smokes, which had some nicotine, were discontinued soon after.

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