The hottest beer in America doesn’t have alcohol

When he took out the classified ad that changed everything, Bill Shufelt was desperate.

When he took out the classified ad that changed everything, Bill Shufelt was desperate.

He’d quit his job on the trading desk at one of the world’s richest hedge funds to start a business that sounded absolutely nuts: He was going to sell nonalcoholic beer. He didn’t have a product or even a prototype. Or investors. Or any sort of industry experience. And he’d been turned down by hundreds of brewers who basically hung up as soon as he mentioned what kind of beer he wanted to make. Finally, he went to a message board for professional brewers and advertised a job in “the most innovative sector in craft,” which isn’t how anyone else would have described nonalcoholic beer.

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He’d quit his job on the trading desk at one of the world’s richest hedge funds to start a business that sounded absolutely nuts: He was going to sell nonalcoholic beer. He didn’t have a product or even a prototype. Or investors. Or any sort of industry experience. And he’d been turned down by hundreds of brewers who basically hung up as soon as he mentioned what kind of beer he wanted to make. Finally, he went to a message board for professional brewers and advertised a job in “the most innovative sector in craft,” which isn’t how anyone else would have described nonalcoholic beer.

His idea was to create a new kind of nonalcoholic beer: one that people would actually want to drink.

At that point in 2017, Shufelt had left his job at Point72 Asset Management, Steve Cohen’s hedge fund, after spending two years obsessively researching the business on the side. He’d become convinced that it was an untapped market that could one day be worth billions of dollars. Now he just needed a partner.

That’s when a talented craft brewer named John Walker responded to his cry for help and kept listening when Shufelt made his pitch. At the time, nonalcoholic beer accounted for less than 1% of U.S. beer sales. But in surveys that Shufelt commissioned, a majority of people said they would buy nonalcoholic beer that tasted better. That is, if it tasted like beer. “All of a sudden,” Shufelt said, “I felt like I was sitting on an enormous secret.”

Even a small change in consumer behavior in this $115 billion market had the potential to be a huge business, so Shufelt and Walker founded a company together in 2017 to focus exclusively on nonalcoholic beer. They called it Athletic Brewing Company.

Athletic has since become the country’s king of nonalcoholic beers, recently passing Heineken and Budweiser as the No. 1 brand by sales in U.S. grocery stores, according to an analysis of NielsenIQ data by consulting firm Bump Williams.

In fact, at Whole Foods Market, Athletic now sells more than any other beer. Including the ones with alcohol.

“I never would have seen that coming,” said Mary Guiver, Whole Foods’ principal category merchant for beer.

Before they found success, Athletic’s founders tinkered in a garage in Connecticut, brewed hundreds of experimental beers in orange Gatorade jugs and hand-bottled early batches for samplings. What they made was such an improvement over the existing competition that equating their reimagined craft brews with other nonalcoholic beers is like comparing the iPhone to a brick phone.

Bill Shufelt, left, and brewer John Walker founded Athletic Brewing in 2017. (Photographs by Evan Angelastro for The Wall Street Journal)

Their technologically advanced techniques and canny marketing have taken a product that was generally regarded as abysmal and made it surprisingly enjoyable. Athletic’s beers taste better. With their colorful packaging, they even look cooler. And the brand has developed a following that includes everyone from college students to middle-aged dads to 100-year-old grandmothers.

This is a peculiar moment in the U.S. beer market. Sales are flat. Shipments are down. Americans are drinking less, and younger Americans are drinking the least. A recent Gallup Poll survey found that 62% of adults under 35 drink, down from 72% two decades ago, and that number is likely to keep dropping since Gen Z drinks the least of any demographic. They increasingly see nursing a nonalcoholic beverage as a socially acceptable, perfectly normal alternative to downing shots and chugging beer.

These days, nonalcoholic beer has become the fastest-growing sector of the sluggish beer market, even if it only accounts for a tiny fraction of total sales. As big alcohol companies pour money into making healthier options, the industry uncertainty has created an opening for upstart niche brands like Athletic. January was the biggest month in the company’s history for reasons that extend beyond millions of people challenging themselves to temporary detoxes.

“It’s not just Dry January,” said Kaleigh Theriault, NIQ’s associate director of beverage alcohol thought leadership. “This is about a broader trend of moderation.”

Athletic’s business model is also about addition. The brand’s founders say they will never get on a soapbox and vilify alcohol. They sell their beer as a complement because, for most people, it isn’t a replacement. As it turns out, 80% of Athletic’s customers still drink, according to the company. Some of them choose Athletic when they don’t feel like raging. Some of them mix in Athletics to pace themselves and keep drinking without getting too drunk.

They don’t buy Athletic instead of beer. They buy Athletic in addition to other beers.

“Most beverage-alcohol trends are one-for-one substitutions within the same occasion,” said Shufelt, Athletic’s chief executive. “But most nonalcoholic beer occasions are totally new occasions. New days of the week. New hours of the day. More rounds that people wouldn’t have drunk.”

Any epiphanies?

Beer is one of the most beloved products in the history of the world. Nonalcoholic beer is not.

“Nonalcoholic beer in the U.S. was born out of Prohibition and it’s always had this lesser-than stigma,” Shufelt said. “It was by default a lower-quality product that you would drink when you were not having the full experience.”

It is more popular across the globe, especially Western Europe, where nonalcoholic and low-alcohol beers account for almost 8% of beer consumption, according to Euromonitor. It is even big in places where dressing up in lederhosen to celebrate the glory of beer is a national pastime. In Germany, 10% of beers will soon be brewed without alcohol, according to the German Brewers’ Association, and Oktoberfest attendees can hardly taste the difference between a Pilsner and a Pilsner Alkoholfrei.

Shufelt didn’t know any of this when he started working at a hedge fund and never would have predicted his career pivot into beer entrepreneurship.

“I always assumed that if I was ever in The Wall Street Journal,” he said the first time we spoke, “it would be for a trading error.”

A former Middlebury College football player, Shufelt woke up at 5:30 a.m. to hit the gym and get to the office by 6:30 a.m., and he was intense about both his work and workouts. “He does things at a level that far surpasses the average,” said Jeff Miller, his former Point72 boss. “If I worked out with him 20 times, I think he threw up in 15 of them.” His job was demanding. He went out for business dinners during the week. He went out with friends on the weekend. “Before I knew it, I was drinking five or six days a week,” Shufelt said. “Alcohol was really the only inconsistent element of a high-performance lifestyle, and I found it to be a ceiling on everything I was doing.”

But at work dinners and social outings, he felt uncomfortable ordering nonalcoholic beer. “It was like the music in the restaurant stopped,” he said. And he was unsatisfied by the dusty old bottle the waiter inevitably pulled from the back of the fridge. He realized why people who drank beer refused to drink nonalcoholic beers: because most tasted like swamp water.

Shufelt, now 40, was complaining about the lack of options on the way to dinner one night in 2014 when he told his wife that someone should just fix the bleak state of nonalcoholic beer. “You should,” she said.

His personal frustration became his passion. When he looked into this corner of the beer market, he noticed something odd in his survey data: 55% of adults said they would drink good nonalcoholic beer, but nonalcoholic beer accounted for roughly 0.3% of U.S. beer sales.

“We didn’t need to get anywhere near 55%,” Shufelt said. “We had to get to, like, 1%.”

Still, he didn’t leave his job for two years as he secretly researched the industry. But over the 2016 holidays, Shufelt had an epiphany: It was time to leave the hedge fund to make the biggest trade of his career.

When he walked into work on the first business day of 2017, he was so nervous that he’d barely slept the night before. He was still working up the courage to tell his boss that he was quitting when Miller wandered over to the trading desk. “So,” he said. “Did anyone have any epiphanies over the holidays?”

Making a better beer

Shufelt was able to secure $3 million to get started, but he remembers how many potential investors wouldn’t give him a penny—and what they said when they turned him down.

“Everyone told us we were absolute morons to raise that much money for nonalcoholic beer,” he said.

The only thing harder than landing investors for a beer that doesn’t make you drunk was finding a brewer. He became so accustomed to rejection that he obscured the truth in the hopes of getting someone to hear him out, tactically removing any references to nonalcoholic beer in the Connecticut-based job he posted on ProBrewer.com.

John Walker, 43, was a brewer living in New Mexico when he came across the ad. When they spoke by phone, the idea resonated with him. Shufelt hopped on a flight to Santa Fe to keep talking before Walker could reconsider.

When he moved to Connecticut, and they began experimenting with a product that wouldn’t make people spit out their drinks, Athletic’s founders had a century of brewing history working against them. For most of that time, the process of making nonalcoholic beer was simple: make beer and remove the alcohol. “We wanted to think of a different way to do it,” Walker said. “Our whole theory was that if we can, we should make a product that respects the ingredients that we very intentionally put in there.”

They started by homebrewing in five-gallon batches and tweaking the recipes to figure out which ones worked and why. Then they waited two weeks for the results. Some were pretty good. Some were bad. “Some were outright dangerous,” Shufelt said. The experience of drinking Athletic had to be nearly identical to the experience of having any kind of beer, said Justin Whitmore, the chief strategy officer of Keurig Dr Pepper, which invested $51 million in Athletic in 2022.

“The quality of the product was priority No. 1,” said Walker, the chief product officer . “The idea was that it could be better and should be better. People want to enjoy good beer, regardless of the alcohol.”

Athletic’s founders won’t disclose the exact details of their brewing process, which they described as “a combination of multiple unique steps that allow us to naturally ferment our brews to be nonalcoholic while maintaining full flavor.” But making something delicious from water, malted barley, oats, hops, wheat and yeast was more complicated than they anticipated. It took 100 batches over the course of nine months before they had a product that met their standards.

Once they were done with the initial research and development, they began hand-bottling beer in Walker’s garage for distributors and early adopters. Last year, when Anheuser-Busch InBev pumped out 500 million barrels, Athletic produced 250,000, and the company’s new brewery was designed to handle 450,000. But in its first year, Athletic churned out 875.

Then came the hard part: changing people’s minds.

“We wanted to position nonalcoholic beer as really exciting, aspirational and positive,” Shufelt said, “instead of a penalty-box experience.”

They didn’t have to convene focus groups to figure out who their customers were and where to find them. “We were our customers,” Shufelt said. “We went where we would be on the weekends and poured beers there.” He drove to Spartan Races, ultramarathons and Ironman triathlons to catch runners “when they were happy, healthy, sweaty and enthusiastic,” he said. “I was trying to find people at times when they would be receptive to trying nonalcoholic beer.”

There were early signs that the demand for good nonalcoholic beer was greater than the industry believed. When new products graduated from Athletic’s pilot system, the brand sold them directly to consumers through its e-commerce platform. “We’d sell 30 cases in 30 seconds,” Walker said. They opened a brewery in Stratford, Conn. Then another one in San Diego. They moved from Stratford up the road to a bigger space in Milford, Conn., which is now under construction to expand again.

Athletic’s bright beers sell more than any other beer at Whole Foods’ stores. Including the ones with alcohol. (Photographs by Evan Angelastro for The Wall Street Journal)

To get their beers into the hands of potential customers, Athletic signed athletes, chefs and supermodels as celebrity investors. But some of its most effective marketing was simply word-of-mouth.

Robert Ottenstein, a beverage analyst at investment bank Evercore ISI, was shopping in a Connecticut grocery store in the early days of Athletic when he noticed a woman in the checkout line with two six-packs of a beer he’d never seen. He couldn’t help but ask what she was buying. When she raved about this new brand of nonalcoholic beer that her husband drank every day, Ottenstein was stunned. “People didn’t talk that way about O’Doul’s and Sharp’s,” he said. He left the line to grab a six-pack of Athletic for himself. “It blew me away,” Ottenstein said.

A regional Whole Foods buyer had a similar reaction when Shufelt gave her a sample in a brown bottle. Athletic started in a few states as soon as the beers were in cans and soon made its way across the country.

Nonalcoholic beer sales in U.S. grocery, convenience and liquor stores have nearly tripled since 2019, and its market share in groceries specifically has grown from 0.8% to 2.2%, according to Bump Williams. But in Whole Foods, it is already 10%. When the grocer’s head of beer sales recently ordered an Athletic at dinner, it took one sip to remember why shoppers can’t get enough of it.

“Man, this is a good beer,” Guiver thought.

Everywhere all at once

When I walked into Athletic’s offices on a snowy morning in Dry January, I met Shufelt and Walker in the Run Wild conference room, named after the India Pale Ale that is the brand’s top-selling beer. We put on hats and goggles for a tour of the brewery, where the robotic production line resembled a model train of beer cans. They were being cleaned, filled, topped, pasteurized, packaged and shipped across the country, where they would live next to Heineken 0.0, Guinness 0.0, Peroni 0.0, Budweiser Zero, Stella Artois Liberte, Corona Cero, Blue Moon Non-Alcoholic and Dos Equis Lime & Salt Zero.

None of those nonalcoholic beers existed a decade ago.

Last year, Athletic exceeded $90 million in sales, according to the company. That is partly because nonalcoholic beers are now prominently displayed in stores where they used to be hidden. Total Wine & More managers have cleared room for eye-popping cans like Athletic’s Upside Dawn Golden in their most valuable real estate: the coolers.

“People see it, recognize it and love it,” said Emily Heintz, the owner of Sèchey, a nonalcoholic beverage shop in Charleston, S.C., where Athletic is the top-selling beer.

Whether they are breaking up with alcohol or just taking a break—for a month, a night or maybe a few minutes—people are now walking into bars and ordering nonalcoholic beer. Last year, sales increased 13% in restaurants and bars, beating the 3% bump in total beer sales, according to NIQ. They are even on the menu at Michelin-starred restaurants, like Eleven Madison Park in New York, which offers almost 100 carefully selected alcoholic beers and one nonalcoholic beer: Athletic’s Free Wave Hazy IPA.

The question is whether this is merely a trend or a more permanent transition. How much nonalcoholic beer can Americans really tolerate?

Athletic is betting that it’s a lot more because people like Chad Dickerson are reaching for a product they once ignored. An executive coach and the former CEO of Etsy, he isn’t easily impressed when it comes to beer. “There was a period when I was a pretty serious home-brewer,” said Dickerson, who is 51 and lives in Brooklyn. So he was skeptical when the drummer of his indie-rock band came over to practice last year and brought some Athletics. Dickerson had tried other nonalcoholic beers and found them to be awful. Then he cracked open this one.

He still drinks regular beer. But like most people who try Athletic, he now also drinks nonalcoholic beer. A product that began with a secret has become a habit.

“Ever since I had that first one,” Dickerson said, “I have it all the time.”

Write to Ben Cohen at ben.cohen@wsj.com


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