This story starts out like so many others in the beer industry.
Guy goes to college in Vermont. Guy falls in love with craft beer. Guy starts a brewery.
Except, unlike other brewery owners launching their businesses during the last decade of craft’s explosive growth, Bill Shufelt faced an uphill battle in persuading anyone to believe in Athletic Brewing Company in Stratford, Connecticut—all because the beer he’s brewing is non-alcoholic.
The skeptics might have had a point. In 2019, non-alcoholic beer sales (as tracked by market research company IRI) tallied $151 million—miniscule when compared to the $40.5 billion of total beer sales. And the market has long been dominated by non-alcoholic offshoots of macro brands. Last year, O'Douls (owned by Anheuser-Busch InBev) accounted for 24% of the category; Busch NA for 20%; and last year’s new entrant, Heineken 0.0, for 18%.
But now, there is growing interest in non-alcoholic beer and beverages, particularly as Dry January and “sober-curious” movements enter the mainstream. Similarly, low-calorie, alcoholic beverages such as Michelob Ultra and Saint Archer Gold have found success with health-minded drinkers.
Despite early challenges in gaining support, Athletic has been able to capitalize on this momentum in the non-alcoholic space. As craft beer bars add non-alcoholic options to their tap lists, non-alcoholic spirits such as Seedlip gain traction, and mocktail bars serving exclusively non-alcoholic options open, Athletic has placed itself at the center of a cultural shift to normalize sober drinking.
Shufelt first encountered craft beer as a student at Middlebury College in Vermont. It was the early 2000s, and he was lucky to be within striking distance of many breweries that were paving the way for the industry, among them Otter Creek Brewing, Long Trail Brewing Company, and Magic Hat Brewing Company.
After college, Shufelt moved to New York City, landed a stressful job with long hours, and fell into the city’s typical work hard, play hard routine. Over time, he tired of the toll alcohol was taking on his health and well-being.
“I was turning 30. The hedge fund I worked at was one of the biggest in the world—like huge velocity, super intense—like picture ‘Billions.’ From 6 a.m. to 6 p.m. you had to be on at work, every day. I would wake up at 4:30 a.m, work out. Work hard for 12 hours, then crawl in the door at the end of the day.” Although Shufelt had the endurance for that lifestyle in his 20s, as he approached 30 he was cutting down on partying, about to get married, and training for his first ultramarathon. To prepare, he stopped drinking in the month leading up to the race, and never looked back.
“I was a very social drinker, no over-the-top issues or instances,” Shufelt explains. “Two-to-three drinks, four-to-five times a week—it adds up. If you also blow yourself up one-to-two times a month, it’s just super annoying. I still loved craft beer and wine, but it just didn't fit well in many occasions. Alcohol was an unproductive element, affecting sleep, exercise, mobility, diet, and health. So I just stopped drinking.”
Now eight years sober, Shufelt says his choice to abstain from alcohol still came at a cost: after all, he not only enjoyed the ritual of drinking, but, as a self-described “foodie,” appreciated the complementary role that alcohol played in his meals. “Going to a sports bar for six hours and having Diet Coke is unbearable. Or going to a wedding and having six cranberry and sodas—it was just so odd to me. I would be offered the same drink menu as a five-year-old. It drove me crazy that there weren't any good, non-alcoholic craft beers for so many people to be able to socialize normally. The penalty box for making healthy choices was frustrating.”
As of 2018 (the most recent year of data available), 14.4 million adults in the United States reported struggling with alcohol use disorder. Meanwhile, 50% don’t drink—and among those 50% who do, 60% have fewer than one drink per week. “The potential to positively impact tens of millions of lives was abundantly clear. And so, I started reading brewing textbooks on nights and weekends,” Shufelt says.
In order to make the business work, Shufelt would need to convince a brewer to leave their job making alcoholic beer and transition to the non-alcoholic space. He spoke with over 200 brewers about Athletic. All but one rejected the opportunity.
At the time, John Walker was brewing at Second Street Brewery in Santa Fe, New Mexico, where he had won two Great American Beer Festival medals and one World Beer Cup medal. “When Bill and I spoke on the phone for the first time and he dropped the 'non-alcoholic' bomb on me, I was a bit surprised, but I got it. It made total sense! Why had no one done this? Craft had been booming for so long and gone in so many directions … how did we all miss this?”
Shortly after their first phone conversation, Shufelt flew to Santa Fe to meet with Walker and discuss his vision and business plan. For Walker, who still drinks alcohol, the mission resonated on a personal level based on where he was in his life as a husband and father—and as a brewer ready for a new challenge.
“In one of our first conversations, Bill was like, ‘Here’s the thing. We’re not going to do it like anyone else has done it before,’ Walker explains. “In theory, that’s super cool—bucking the trends, it’s awesome. But, in practice—man, it’s challenging. You can base your whole career in brewing on the teachings of your peers and going into this realm, there was none of that. There was a lot of navigating on our own, and trying to figure it out.”
Throughout 2016 and 2017, Shufelt faced the dual challenges of funding Athletic and building belief that there was a market for non-alcoholic craft beer at all. Despite the fact that such a large percentage of American adults don’t drink, Shufelt feels that alcohol marketing has been extremely effective in convincing consumers that the average person is drinking far more than they actually do, contributing to a disbelief among craft brewers that there is a market for non-alcoholic beer.
“Going to a sports bar for six hours and having Diet Coke is unbearable. Or going to a wedding and having six cranberry and sodas—it was just so odd to me. I would be offered the same drink menu as a five-year-old. It drove me crazy that there weren’t any good, non-alcoholic craft beers for so many people to be able to socialize normally.”
“That first CBC [Craft Brewers Conference] I went to, I talked to 500 people that week and we might have had two positive conversations. It was the most disheartening thing in the world. Like really nice people saying, ‘There’s no market there.’” Shufelt also struggled to find breweries interested in teaming up—despite reaching out to numerous contract breweries, he failed to set up a single appointment.
“There’s a huge disconnect between the beer world and the outside world,” Shufelt says. “When we introduce it [non-alcoholic beer] to people at races and 5Ks, everyone drinks it. They love it. But when you talk to brewers about non-alcoholic beer, they just laugh in your face. Or when we go to a beer festival, people are like, ‘What’s the point?’”
Shufelt continued pitching the concept to potential investors and breweries, mostly fruitlessly. But one day, an email popped up in his inbox from TOMS Shoes founder Blake Mycoskie. Shufelt responded, invented a reason he was already traveling to California, and promptly booked flights out the next day to meet him.
Ultimately, Mycoskie would end up investing in Athletic, alongside investor Timothy Barakett and sports business reporter Darren Rovell. But the brewery’s first round of funding still took 120 meetings to secure.
One of the biggest challenges for non-alcoholic beer has been the stigma that it doesn’t provide the same full-bodied and flavorful drinking experience as its alcoholic counterpart.
To make non-alcoholic beer, beer businesses have generally brewed alcoholic beer using traditional methods and then stripped out the alcohol at the end of the process. As Shufelt describes, there are two industrialized processes that accomplish this. The most common since the 1970s has been vacuum distillation, in which the alcohol is removed via heat in a pressurized and heated vessel. The second method is reverse osmosis or dialysis, which involves passing full-strength or low-ABV beers over a fine membrane at high pressure.
“These methods involve arrested fermentation, non-traditional yeasts otherwise used outside of brewing, or cold-shock fermentation,” Shufelt says. “Many argue that these methods fall short of creating actual fully fermented beer, and create large food safety issues with the high degree of unfermentables left behind.”
In addition to these shortfalls, Shufelt and Walker also felt that previously developed methods didn’t produce the flavor profiles they were seeking, nor did they offer the same level of flexibility in brewing styles beyond Pilsners and other Lagers. “We started with the baseline that if these existing industrial methods produced great [non-alcoholic] beer, the innovative and scientific spirit of the brewing community would have refined them by now,” Shufelt explains. “So, we set out to brew fully fermented beer below 0.5%—essentially a super sessionable craft beer.”
“When Bill and I spoke on the phone for the first time and he dropped the ‘non-alcoholic’ bomb on me, I was a bit surprised, but I got it. It made total sense! Why had no one done this? Craft had been booming for so long and gone in so many directions … how did we all miss this?”
Prior to moving to Connecticut, Walker and Shufelt exchanged volumes of emails on brewing procedures and ingredients. Once together, the pair spent four months homebrewing hundreds of test batches in their empty facility. Ultimately, they came up with a unique method that Shufelt says involves upwards of 10 changes to the traditional brewing process. Due to the proprietary nature of their method, Shufelt and Walker are protective of the details, but they say their approach to brewing includes adjustments to everything from ingredient selection and conditioning to packaging and controlling natural variables like time, temperature, and pH.
“A lot of what people experience in beer is mouthfeel and proteins and hop oils,” Walker says. “And I can’t downplay any older technology because it definitely works and makes quality beer. But we just prefer ours because we don’t have to remove any of those things that are very true and key to the organic experience. We have found a way to manipulate brewing techniques a little bit at every single stage in the brewing process to come out at under 0.5%. And with a product that tastes just like beer—it is beer.”
Tony Natle, sales manager for Star Distributors, Inc. in West Haven, Connecticut, says he’s had a lot of fun sharing Athletic’s beers with new customers. “When we first introduced the brand, we went to the craftiest beer accounts first,” Natle explains. “Many were very skeptical, but blind tasting them against some very well-known craft beers with alcohol quickly made believers out of the staunchest of critics.”
Athletic’s beers have trace amounts of alcohol, though never in excess of 0.5% ABV. Most beers range from 50 to 85 calories per can. The team brews a range of both traditional and modern styles, including Amber Lagers, Pilsners, IPAs, DIPAs, Goses, Stouts, and Berliner Weisses.
Athletic’s releases provide much the same experience as drinking alcoholic beer. The sound of the carbonation escaping as the can opens causes a small amount of foam to bubble up at the top. You can smell the hops as you lift the can to your nose. The lack of alcohol is evident in a slightly thinner body—but the combination of the carbonation, malt character, and hop oils creates a familiar mouthfeel that is both refreshing and fulfilling.
Although Athletic typically has three or four beers available online on any given day, nearly 10 beers are available for curbside pick-up. And as Walker says, the team is champing at the bit to get funky with its offerings in the future.
“Craft beer exploded, and all of a sudden there were all these flavors and styles and so many things—and it was awesome,” Walker says. “That’s part of what we love about craft: the variety. And I think for so long, non-alcoholic was just pigeon-holed into a ‘style,’ and I truly feel like the team has unlocked Pandora’s box for non-alcoholic. I think people have come to realize that you can do whatever you want in this realm, too. We have just begun.”
“There’s a huge disconnect between the beer world and the outside world. When we introduce it [non-alcoholic beer] to people at races and 5Ks, everyone drinks it. They love it. But when you talk to brewers about non-alcoholic beer, they just laugh in your face. Or when we go to a beer festival, people are like, ‘What’s the point?’”
Despite having a similar brewing process to alcoholic beer, non-alcoholic beer is classed as a food product—a huge challenge according to Shufelt and Walker. Because alcohol acts as a natural preservative, brewing non-alcoholic beer requires additional investment and equipment to ensure consistent quality, shelf stability, and food safety.
“The biggest challenge that nobody ever talks about in non-alcoholic beer is food-safety regulations,” Shufelt explains. “Almost everyone we talk to thinks that launching a single NA variety is easily done. It's a totally different set of food safety standards—which really go far beyond regulatory requirements—to make sure your products are stable on the shelves.”
Both Shufelt and Walker got food-safety certifications, and the team has a food-safety plan that Shufelt says fits in a huge, three-inch binder. In addition, Athletic has requirements for record-keeping and standard operating procedures that go well beyond those for producers of alcoholic beer. It also has regulatory oversight from the FDA and state food and health departments—all in addition to the Alcohol and Tobacco Tax and Trade Bureau, which regulates beer.
“We know we’re serving beer drinkers, or sugary soda drinkers trying beer for the first time—and we want it to be super high-quality for them so they have a good experience,” Shufelt says. “But, we also have these super sensitive populations, like recovering alcoholics and pregnant women drinking our beer. Drinking it for medical reasons, or religious reasons. It has to be non-alcoholic and perfect every time for those populations.”
Despite difficulty in building interest and credibility within the craft beer industry, Athletic experienced growth from the start. Starting retail distribution in June 2018, the brewery sold $53k in non-alcoholic beer through grocery, convenience, and other chain stores in its first year, as tracked by IRI. By 2019, as it gained momentum, the brewery expanded into additional states and retailers, selling $1.1 million. Meanwhile, with 40-60% of its business coming from e-commerce (which it can do because the beer does not contain alcohol)—none of which is included in IRI’s sales figures—Athletic quickly maxed out its Stratford facility’s 10,000-barrel capacity.
Although its online platform gave Athletic a larger market to distribute into versus breweries that sell solely out of their taprooms, launching through e-commerce also pushed it into the national spotlight immediately. “We’re in this weird intersection where we had national expectations from the moment we opened our door,” Shufelt says. “It's very tough, expensive, and painful to try to reach a national audience as a small craft brewer, especially one with a totally different regulatory and capex landscape.”
Athletic’s Connecticut brewery was unable to keep up with its growth. Leveraging its e-commerce data to prove the need for additional capacity, Shufelt and the team were able to go back to the original investor group. In March 2020, the company secured a $17.5 million Series B funding round, which exclusively comprises backing from the same group as its initial investment. The second round solved Athletic’s capacity shortfall by helping fund the purchase of a former Ballast Point brewery in San Diego—an additional 125,000 BBLs of capacity.
“Once we had enough data to show there was strong proof of concept, we used that to raise the money—but, it was really just in response to how painful the expectations were. It’s awesome and our community is so incredible—it was just painful not to be able to get them beer. You hear stories about, ‘I quit drinking six months ago. Your products have made it so much easier, but I haven’t been able to get it in a month.’ And it breaks your heart.”
The e-commerce platform isn’t the only channel that’s continued to grow. In 2020, Athletic sold more beer in the first six months through retail channels than it did in all of 2019, with year-to-date IRI sales tallying $1.35 million. Some of that growth is self-fulfilling, as Athletic has rapidly expanded to various states and added retailers. The impact of COVID-19 has also meant IRI-tracked beer sales across the industry have increased in the first half of 2020 vs. the same period in 2019—beer sales are up 18% and non-alcoholic beer is up 37%. Still, Athletic’s sales in the first half of 2020 were three times higher than in the first six months of 2019.
“John and I looked at about six-to-eight breweries around the country,” Shufelt says. “This one [in San Diego] was just perfect. With our e-commerce platform, we have a lot of data, so we already knew we were selling a lot of beer in California and the Southwest. So it made perfect sense and we could move with confidence.”
Support for Athletic has gone beyond the at-home-drinking realm as well. The beer is now carried in popular craft beer bars, like Top Hops and As Is in New York City. Pre-COVID-19, Top Hops had dedicated a tap handle to Athletic for nearly 18 straight months, and at times would go three-wide on tap handles during the week. Run Wild, the brewery’s flagship IPA, was the bar’s top-selling beer in the last half of 2019 every month, even while competing against alcoholic craft beers. “A lot of New York’s top craft beer bars have been our biggest fans,” Shufelt says. “Ted [Kenny, owner of Top Hops] gets it and talks to customers. He doesn’t position it as non-alcoholic, just as a sessionable option.”
The market for non-alcoholic beer is continuing to grow, with new entrants from both macro and craft breweries. Despite being only 0.37% of total beer, retail sales for non-alcoholic beer grew 23% to $151 million in 2019. While small in absolute dollars ($151 million is approximately the same as annual sales for Leinenkugel’s), nearly all of that progress was due to the launch of Heineken 0.0 in 2019, which was supported by a robust marketing campaign. Any remaining growth was a net of pluses and minuses from various brands.
“I'd say our average customer drinks full-strength beer and wine, but also has other Athletic beer occasions in their life,” Shufelt says. “They tend to be busy, with day jobs, and like to think of themselves as weekend warriors and parents.”
E-commerce—or as Shufelt calls it, ABC’s “national taproom”—comprises 40-60% of the brewery’s sales depending on the season. The data Athletic has been able to accumulate through its platform—email, location, age—is invaluable. According to online orders, 79% of its customers are aged 29-44, with more than half of that population sitting in the 21-34 age bracket; sales are almost evenly split between male and female customers. In addition, e-commerce sales to repeat customers have never dropped below 50% in a given month, indicating strong brand loyalty and a potential leading indicator of sustained future growth.
“The other week we launched 200 cases of our Free Way Double Hop IPA,” Shufelt says, “and it sold through in about 30 seconds. It's really fun to have a national online e-commerce community where we can sell and speak directly to customers across the country.”
“When we first introduced the brand, we went to the craftiest beer accounts first. Many were very skeptical, but blind tasting them against some very well-known craft beers with alcohol quickly made believers out of the staunchest of critics.”
According to Natle of Star Distributors, Inc., the market for non-alcoholic and lower-alcoholic products is booming, helped along by new entries into the segment and a growing consciousness among many drinkers about the benefits of reduced alcohol consumption. He supports Shufelt’s point of view that for many, non-alcoholic beer is complementary to alcohol intake. “I donated a case [of Athletic beer] to a friend’s pool party and mixed it in the cooler with many well-known craft brands. No one suspected Athletic was a non-alcoholic product. Many of my acquaintances now drink Athletic on a regular basis—even those that also drink alcoholic beverages,” Natle says.
Shufelt doesn’t necessarily feel Athletic has carved out a new market for craft, non-alcoholic beer. Instead, he feels it has addressed a population that had largely been neglected by the industry over the last 25 years. “The traditional non-alcoholic beer market is a very specific subset of the population. We are marketing not only to those groups, but for all the healthy adults who just want to be able to enjoy a great beer without dealing with any side effects or having to compromise any other part of their life to enjoy one, be it all the extra calories, a workout, job, family, or sleep.”
According to IRI sales data, the lift in non-alcoholic sales is partially attributable to a desire to opt for lower-calorie options. During Dry January of this year, non-alcoholic beer sales maintained their overall position at about 0.4% of total beer sold, while low-calorie brands like Michelob Ultra, White Claw, and Truly saw significant increases when compared to last year.
Whatever the reason underlying consumers’ decisions to abstain, non-alcoholic craft beer is also helping to lift the stigma for those who choose sobriety. “Some customer stories can bring tears to your eyes,” Walker says. “Beers and time drinking brought certain people together, certain families, certain couples, and it’s just a pastime. And then there have been illnesses that have occurred. So we get these emotional emails from people whose get-togethers have been brought back to life. Those get me. I never ever thought that I would have been exposed to something like that. These emails they pour in, and they’re incredible.”
To the ABC team, non-alcoholic beer isn’t just a fad. With such a large population of Americans not drinking, and 66% of Millennials saying that they’re making efforts to reduce their alcohol consumption, Shufelt believes the expansion of the NA market is part of a larger cultural shift. “The beer and wine worlds are amazing, but they only hit a very small subset of occasions very well. Non-alcoholic beverages fit great in the other 90% of occasions.”
Non-alcoholic beer is underrepresented in the United States compared to many other countries—for example, in Germany, Spain, and China, non-alcoholic beer is approximately 15% of total beer sales. “The U.S. IPA market is about 5-6% of the U.S. beer market per the Brewers Association,” Shufelt explains, and it’s roughly 37% of total craft beer sales. “We're definitely biased, but I just don't see how NA beer will be less than 10% of the U.S. beer market in 10 years, and it may even overshoot to, like, 30% with the rapid onset of so many health trends it aligns well with.”
To achieve that growth, however, will take more than just Athletic’s beer—but Shufelt isn’t scared of new entrants to the category. “It’s awesome,” he says. “If you think back to two-to-three years ago, to how big the stigma problem was in the industry, having cool brewers send us notes about our beer—and we have some cool collaborations coming up in the next six months—it’s now literally impossible to say that non-alcoholic beer isn’t a part of the beer community if these brewers and breweries are now a part of it. We were excited when Brooklyn Brewery entered the category; we think it’s a category that can support a lot of offerings. I would be psyched if every bar, restaurant, or taproom you went to had a good NA option. That’s a big part of the impact we wanted to have. We can’t say we’re all about the impact and sad when other people enter the category.”
That doesn’t mean that Shufelt and Walker aren’t concerned with other issues in the category. Their worries about quality in particular mirror conversations that are currently being had in the alcoholic beer space. Because of the large investment in food safety protocols, and the challenges of quality control, Shufelt says it’s hard to make good non-alcoholic beer.
“One of our biggest worries is that people won’t invest in those things and just launch it as a SKU because there’s an economic opportunity. One of the biggest risks to the category is people cracking an NA beer, being disappointed, and then telling 25 friends that NA beer still stinks. We do hope that anyone who does it does it thoughtfully, and we’re just not sure that’s economically viable if you’re making just one SKU of beer. Every part of the industry faces these things, but NA beer is just particularly sensitive because of the stigma.”
One thing that has helped counteract the stigma around non-alcoholic beer is the community that Athletic fosters—both internally and externally. With a product focused on helping consumers be their best selves, Shufelt says he and Walker were intentional from the beginning in building ABC’s company culture. “John and I were very lucky to have such a long planning stage for our business, just discussing our values over homebrew. We are very proud of the cultural foundation and mission of Athletic.”
Walker and Shufelt wrote the employee handbook together and in three years almost no words have changed. “We didn’t want to go and back-fill values,” Shufelt says. “Our values were ingrained into the ethos from the start.”
All employees receive full benefits and from the first dollar earned, while Athletic has donated 2% of its sales to trail and park clean-ups. In addition, the company is currently in the planning stages of becoming a Certified B Corporation. In doing so, the brewery would follow in the footsteps of peers such as Allagash Brewing Company and New Belgium Brewing Company—and other activism-oriented companies beyond beer, such as Patagonia, Ben & Jerry’s, and TOMS.
Externally, the team has also partnered with various professional athletes, marathon and ultramarathon runners, and Ironmen and Ironwomen, in an effort to build an ambassador community. “Our ambassadors are great. They are from all walks of life, and it's because of their enthusiasm we had to start the program. We had so many people who wanted to run races, go on adventures, and spread the word, that we created a program. It's all inbound—we don't do any ambassador outreach,” Shufelt says.
For many of its ambassadors, Athletic’s beer reflects a growing interest in wellness, fitness, and health. “Five years ago it was awkward not to drink out in public and you had to have some sort of explaining to do,” says Brian Mazza, founder of High Performance Lifestyle Training and a fitness influencer. “I personally was fed up with working on myself so consistently, but destroying the work at night even if I was only having one-to-three drinks at dinner. People in the industry are always looking for products that will allow them to continue to stay on top of their game, especially while they are socializing.”
In addition, Athletic partners with organizations such as the AVP (Association of Volleyball Professionals) Pro Tour and Spartan Race.
“I feel like one of the biggest trends is either low-alcohol or non-alcoholic beer,” Sara Berry, director of Global Partnerships at Spartan, says in regards to the organization’s choice to partner with Athletic. “It is obviously brought on by athletes focused on fitness who don’t want to undo what they may have accomplished in a workout or be hungover in the morning. For other Spartans, whether at work or driving their kids to and from sports, there are times when it’s better to avoid alcohol. We also found that many, though, don’t want to miss out on the taste or a celebratory situation.”
Despite building such a strong community of non-alcoholic beer drinkers, Walker’s and Shufelt’s goal is not to compete with or replace alcoholic craft beer options. “We’re definitely not the Prohibition parade,” Shufelt says. “We love the craft beer industry and think it’s great. The world is a super stressful place and the craft beer industry does a lot to relieve that stress—we just want to add some mindful options to it, too. And I think people are seeing more and more how that fits in their life.”
To Walker and Shufelt, success isn’t necessarily measured in sales or barrels, but in the role that the brewery plays in normalizing non-alcoholic beers—and in freeing its community from the “penalty box.”
“Someone asked me what success looked like in this company and for me, I think I had a moment of clarity,” Walker says. “When my son turns 18 or 21, if he can go to a bar and order a non-alcoholic beer and not get heckled because it’s a new culture norm, there’s no shame—then that’s success. I would like to think that we’re on that path.”
Words + Photosby Kristen Foster
