The Journal. - Who Wants Non-Alcoholic Beer? Everyone, Apparently.

Episode Date: March 5, 2024

In 2017 Bill Shufelt was desperate. He’d quit his job at a hedge fund to start a business that sounded absolutely nuts: a non-alcoholic beer that people would actually want to drink. WSJ’s Ben Cohen uncovers how Shufelt’s idea has led to one of the fastest-growing movements in the beer industry.   Further Listening: -Canned or Homemade? America’s Biggest Cranberry Company Wins Either Way  Further Reading:  -The Hottest Beer in America Doesn’t Have Alcohol  -Bud Light Missed Out on the Super Bowl Party  Learn more about your ad choices. Visit megaphone.fm/adchoices

There are signs that Americans are falling out of love with beer. A national agency reporting beer sales are down. The two leading brewers in the space experienced a combined 17% drop in U.S. market share. Experts predict beer sales this year will drop to their lowest level in more than two decades. But there's one kind of beer that's flying off the shelves. Non-alcoholic beer. Let's try non-alcoholic Guinness together. I kid you not, this tastes like a real Corona. Cerveza Athletica Light Copper. Yum yum Yum, yum! I'll give this an eight. Non-alcoholic beer is the fastest-growing category of all beers.

All right, the people have spoken. Athletic Brewing Company was the number one recommended to me non-alcoholic beer. Our colleague Ben Cohen says there's one company that's been fueling this craze, Athletic Brewing. You know, the most interesting number to me is that Athletic is now the number one beer of any kind at Whole Foods, including the beers with, like, full alcohol content. And to me, that is, like, you know, not only like completely unthinkable,

it's like almost inconceivable. Like how is it that the number one beer at Whole Foods Market is a non-alcoholic beer? The answer to that question involves one man creating a market for a product Americans didn't know they wanted. Welcome to The Journal, our show about money, business, and power. I'm Kate Leinbaugh.

It's Tuesday, March 5th. Coming up on the show, the story behind America's growing obsession with non-alcoholic beer. Ready to kick off? Discover exciting games and events. Plus, find amazing hidden gems in cities full of adventures, delicious food, and diverse cultures. You'll love it so much you'll want to extend your stay beyond the matches. Get the ball rolling on your soccer getaway. Head to visittheusa.com. Bill Shufelt is the co-founder of Athletic Brewing. He got interested in non-alcoholic beer after he decided to stop drinking. I loved craft beer. I loved all kinds of beer. I knew what good beer was like.

And when I made the choice 10 years ago to stop drinking, all of a sudden it was just like such a dearth of options. If you go back 10 years, non-alcoholic beer, when you tried to order one in a social setting or with work colleagues or anything like that, it was almost this like moment where the music goes off in the bar or restaurant and everyone looks at you. It's so hard to order. And I always had to explain myself why I was drinking it, like what I wanted at the place. It was always an awkward experience. And I also realized I was trying to order non-alcoholic beer from anywhere in the world and there was nothing out there that was good and up to my standards. Bill, at the time, worked for a hedge fund. But he got curious about non-alcoholic beer.

At the time, it accounted for less than 1% of U.S. beer sales. Bill started doing some market research. In surveys he commissioned, a majority of people said they would buy non-alcoholic beer if it tasted better. And that convinced Bill that non-alcoholic beer if it tasted better. And that convinced Bill that non-alcoholic beer was an untapped market that could one day be worth billions. The real light bulb moment was my wife sat me down right before the turn of 2017. I'd been away for a few days on a ski trip, and I came home, and my wife had gone through all my business materials.

And she basically told me she wants me to quit my job and just give this a chance, and we'll budget for it. And if it doesn't work in three years, I can always go back to finance. But she basically said she didn't want to know me if I didn't go for this passion, which was like a very cool moment of support from inside my house. So do you remember the day you quit? Yeah, it was January 2nd, 2017. So first day of the year, my boss came in and jokingly said, did anyone have any epiphanies

over vacation? It was a pretty funny moment. I worked for two more weeks and then I was off. And Bill got to work building a non-alcoholic beer company, Athletic Brewing. How did you come up with this name, Athletic? We chose the name Athletic because it was a universally positive, aspirational word, easy to hear and recognize in a loud or crowded bar. But we were really trying to take non-alcoholic beer out of the penalty box and these stigmatized, like, designated driver,

recovering alcoholic-type conversations into just everyday life where, you know, anyone can drink it for any reason. We like to say everyone's an athlete. And then what was the first thing you had to find? There was a lot to do. It was, you know, I had this business plan, but there's a lot of learning. I had never brewed a batch of beer in my whole life. And so I set out to find a really talented brewing partner to build the business with.

And it was a lot of rejection. I put up job ads. I went to conferences. I tried to talk to hundreds of people. And really, there was very little interest in it for, like, very good reasons. Like, non-alcoholic beer had no traction, no excitement, no one was asking for it. To find an experienced brewer willing to make non-alcoholic beer, Bill discovered he needed to be a little creative.

Here's Ben again. So eventually, he takes out a classified ad on an industry message board called probrewer.com. He did not say, I'm looking for someone to make non-alcoholic beer. He titled the classified ad, the most innovative sector in craft brewing. He had to obscure the fact that he was trying to make non-alcoholic beer in order to find a partner. And the guy he ended up finding was a guy named John Walker. Yes, that is like literally his name, John Walker. And, you know, within a few months, they were partners and John Walker moved to Connecticut and they set about trying to make a non-alcoholic beer that people actually wanted to drink.

So then how do they go about making non-alcoholic beer that met their standards? So the process starts with orange Gatorade jugs, the way that like every great invention always starts. Like the kind they pour over the coach's head? Exactly that type, yes. I mean, either like, you know, the kind that you pour over the coach's head at the Super Bowl or like the kind that you see at a youth soccer game, those types of classic orange Gatorade jugs. Yes, it was orange. I like literally fact-checked and said it was orange, right?

Because it has to be orange. We like orange here at the Journal. Yeah. So they started by brewing five-gallon batches of non-alcoholic beer in classic orange Gatorade jugs. And they would basically split these jugs into three parts, and each of the recipes would be slightly different so they could figure out exactly what they wanted.

And one of the tricky parts of brewing any type of beer, especially non-alcoholic beer, is that you have to wait two weeks for the results. So what they would do, they almost treated these beers like any tech company treats products, that they like had slightly different versions and they beta tested and they figured out which ones they liked the best and that one would survive. And then they would put it up against two more options. And they did this for a really long time. They did

this for like nine months and they went through like hundreds of potential options for non-alcoholic beer before they finally had something that met their standards. If making good-tasting non-alcoholic beer was hard, so was convincing investors that it was a good idea. Bill needed to raise two and a half million dollars, and he reached out to friends and contacts to see if they would invest. Some contacts would be nice enough to organize a dinner with like eight people to like hear the idea. And I definitely had like 10 dinners with five plus people where no one invested. And when I say we had no momentum in fundraising, just like not a whiff of positivity going on and, no one wanted

to invest. There was no market to point to. There was no product for us to sample. After 120 meetings, Bill finally cobbled together the money, not from top-tier VC funds, but from investor connections, some of whom wrote checks of $5,000. How did you find customers and distribution? I knew there was a latent demand for the products. It just had to be communicated and found because no one was walking into a grocery store and looking for this because they didn't think it existed. And we had to get people who weren't necessarily shopping this part of the beer category to go back to it and take a second look. I did a lot of in-store samplings.

I got made fun of a lot, for sure. You know, a lot of high school kids made fun of me. But like when I was sampling and if people were struggling to like, people heard the non-alcoholic beer has such a stigma against it because it was born out of prohibition as this lesser than product that you can't have when you're enjoying the full thing. And so a lot of people hear the word non-alcoholic beer and immediately are like, that's not for me. So Bill had beer and money, but not customers. What he did, embrace it. Journey starts when you say so. If you've got five minutes or 50, Peloton Tread has workouts you can work in. Or bring your classes with you for outdoor runs, walks, and hikes led by expert instructors on the Peloton app. Call yourself a runner.

Peloton All Access membership separate. Learn more at onepeloton.ca slash running. OnePeloton.ca slash running. DQ presents. Picture this. Picture the DQ freezer, home to all the blizzard flavors of the past. Picture it opening to bring back the salted caramel truffle blizzard for a limited time. Picture that salted caramel truffle blizzard in your hands. It's all yours.

No, really, it's all yours. This treat is too good to share. Everyone will have to get one for themselves. Hurry in to get this flavor before the DQ freezer closes. DQ, happy tastes good. Bill was confident that once people tasted his beer, they would buy it. So he came up with a marketing plan. It involved runners. Bill drove up and down the East Coast to set up tasting tents at all kinds of road races, from 5Ks to ultramarathons to weekend warrior events. Why races? So you would think races because our name, Athletic Brewing, lends itself to races. But my insight really was, where are people like thirsty, happy, sweaty,

and like really receptive to trying a beverage? And, you know, the thought might be that you want to catch people in the grocery store near the point of sale. But like people are so busy and like so few people interact with like a sampling table at a store that you really only get to sample like 20 people at a store. But if you set up at a local 5K on the weekends where there are 500 people running and they all finish in a 20 minute window, people aren't going to be looking to drink alcohol at 10 a.m. on a Saturday morning, but they're up for something super refreshing and fun and relaxing. And so I'd be able to give out hundreds of cans in like a couple-hour period and probably convert a lot of customers.

Bill was also going a more conventional route and trying to connect with retail chains. One of those meetings really paid off with the grocery giant Whole Foods. Here's Ben again. Non-alcoholic beer is much bigger in natural groceries than it is in other groceries and even liquor stores and convenience stores. And there, non-alcoholic beer already accounts for about 10% of beer sales in these specialized grocery stores. What has Whole Foods said to you

about why they bet on Athletic? I think at Whole Foods, they were also seeing consumer behavior start to change. And, like, there's all this interesting data out there about how Gen Z is drinking less than any other generation. And, you know, Americans especially are becoming more health conscious and mindful of like what they are eating and drinking. And that means for the most part, they are drinking less alcohol. After success in nearby Whole Foods stores, the chain eventually started selling Athletic nationally.

That helped stoke more interest in its beers. And now when Athletic releases limited edition beers on its website, like Closer by the Mile IPA, they can sell out. The non-alcoholic beer moment that Bill had always believed in was finally happening. beer moment that Bill had always believed in was finally happening. So I wanted to give his beer a try. And during our interview, in the middle of a workday, I cracked open his Upside Dawn Golden Ale. Okay, well, I'll give it a go. I would say it's crisp. It's light. I would say it's light. Not what I generally drink in the afternoon of a workday. Do you think I'll be okay through this interview? Yeah. And that's the goal with how light it is. You know, a lot of beer,

even the lightest of the light beers, tend to be 95 calories. That beer you're drinking is 45, but has a full malt bill, like full malton hops and has like all the flavor. But you can kind of take it anywhere, any day of the week and feel good about it. I'm feeling good. I'm feeling good. and feel good about it. I'm feeling good. I'm feeling good. Bill's goal is to get customers to drink more beer more often. As a company,

we definitely don't stand on a soapbox and, like, vilify alcohol. We just want to give people options and bring a ton more occasions. Like, alcohol really has found its way into, like, one day a week for most people, if anything. And this is a way to give people great beer seven nights a week that they can pair with any food.

Even though athletic is a hit, non-alcoholic beer sales at stores are only 2% of the broader beer market. But the growth potential has the makers of Bud and Coors putting out rival products. Anheuser-Busch, the world's most valuable beer maker, said that they want 20% of their global beer sales to be non-alcoholic options. That is like a remarkable sea change. They acknowledge now that they're nowhere near that, and it's taking longer than they expected. But like athletic is not alone in seeing this market changing.

What did that feel like to go from kind of like being nobody to having so much traction? Oh, we're definitely still nobody. I don't think our heads have gotten ahead of us at any point in our journey, for sure. Relative to the scale of very big companies, we're still, even though we're number one in non-alcoholic beer in the U.S. with like a 20% share now, we still, it's been brick by brick and like definitely no room for egos, for sure. Bill has hit the targets that he laid out back in his kitchen in 2016. And he says his wife still approves. She's still one of my best. She's happy.

You said there was like a three-year timeline, right? Yeah, so we survived that. And my wife remains one of my best advisors and sharpest critics. And, you know, she's my best supporter in the valleys, but like also takes the tops off all the peaks as well, which we all need to. That's all for today, Tuesday, March 5th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon.

Thanks for listening. See you tomorrow.