BILL SHUFELT: People have been drinking beer since ancient Egypt. 5,000 years of history and all of a sudden changing dramatically. 45% of Americans believe one or two drinks is viewed as unhealthy now. That’s gone up 17% since Athletics started in 2018. I think people will look back on this decade and be like, “that is a huge different change in human behavior there”.

BOB SAFIAN: That’s Bill Shufelt, co-founder and CEO of Athletic Brewing, the non-alcoholic beer brand that’s been embraced by consumers, and in the process remade expectations in the beer industry. It’s also remade my expectations, by creating non-alcoholic beer that actually tastes good. Bill is a former hedge fund trader who found his way to the beer game almost by accident. Now he’s working with the likes of NFL star JJ Watt, model Karlie Kloss, and the Arsenal football club of the English Premier League. Still, Athletic finds itself at a crossroads, weighing how much to expand to meet rising demand, at a time when big beer brands have started pouring into non-alcoholic brews. Has the market turned frothy? Or will thirst for Athletic continue to grow? Bill argues that Athletic’s future still has plenty of hop. I’m Bob Safian, and this is Rapid Response. 

[THEME MUSIC]

I’m Bob Safian, and I’m here with Bill Shufelt, co-founder and CEO of Athletic Brewing. Bill, thanks for joining us.

SHUFELT: Bob, thank you so much for having me. Excited to be here. Long-time listener.

Breaking the stigma around non-alcoholic beer

SAFIAN: Athletic’s become the biggest non-alcoholic beer brand in the U.S., according to Wall Street Journal, recently valued at 800 million, double just two years ago. Non-alcoholic beer is the fastest-growing segment of the beer market. It’s kind of amazing. Do you ever think, like, ‘I’m dreaming!’ How do you look at this moment? 

SHUFELT: I mean, it’s been so step by step it’s hard to zoom out and really think of things in that totality. It’s also very ironic too because there was less than zero interest or enthusiasm on this segment, like, in very recent history.

SAFIAN: For a long time, non-alcoholic beer kind of had almost a stigma, right? 

SHUFELT: Exactly. I mean, non-alcoholic beer was basically only brought up in a joke-type scenario. And there’d been almost no innovation since prohibition 80 years before. And I found myself in that place just thinking, ‘this makes a lot of sense in modern life. I just wish there were some cool products here that I really enjoyed’. 

SAFIAN: Some of it was the stigma, and some of it was that it just didn’t taste that good too, right? Like how do you make it taste better?

SHUFELT: Well, that part of the journey started on Gatorade jugs and two grown men in an empty warehouse who didn’t know each other, just home brewing hundreds of batches on Gatorade jugs — which was huge step down professionally from my working at one of the largest hedge funds in the world as a prior career. But it really took that kind of first principles, taking it down to the screws approach to reinvent something that is really actually pretty complex scientifically, but the marketing challenge in the category was equally as big as the product challenge.

The origin story of Athletic Brewing Co

SAFIAN: Were you always into brewing beer or was this more like a business opportunity that you saw that you like became passionate about? 

SHUFELT: My roots are even less qualified and more delusional than that would even appear at face value. I resigned a great job in the financial world without ever having brewed a batch of beer in my life. 

So, 11 years ago I stopped drinking for lifestyle reasons. I had this very busy day job. I was about to get married. I wanted to be a little bit healthier. I wanted to sleep a little better. I wanted to eat a little better. Work out a little better. Like, all very average adult goals, and found all those things a lot easier to do without alcohol at all my work dinners and social things and everything. And so I was off on my way, living a slightly healthier, busier life. Except I still loved going to bars and restaurants and doing things socially with colleagues. And there were no options, which blew my mind because the whole beverage world and grocery store and everything had adapted into these like really exciting local organic amazing products, except this one extremely dusty corner of the bar or the grocery store. And I started to say this out loud a little bit, and my wife had seen this transformation in my life. Finally, we were walking to dinner one time, and I was just complaining about how we’re gonna have this amazing meal, and I’m gonna have to have, like, a sugary soda or virgin cocktail with it. And I was like, “why can’t someone just fix this?” And I was so exasperated. And she stopped me in my tracks and spun me around and was like, “you should fix it”. And I was like, “what?” Like, I never ever intended to be an entrepreneur without this very acute pain point in my life and decided to fix that. 

‘Going home with fires burning’

SAFIAN: We often have guests on the show talking about Rapid Response because of a crisis. Your story has been one that looks like unbridled success. I mean, the business is booming. What does that mean you have to do?

SHUFELT: Well, I mean, we’ve been through a lot of periods where absolutely nothing is going right, too. I couldn’t find a co-founder to brew with, couldn’t find a facility to brew with. We couldn’t raise money. We didn’t have product. We basically didn’t have a category, and getting the ball rolling was very hard.

I’d say we’re moving out of the first or second inning a little bit, and getting onto a bigger stage of business, which is really fun. Every day still has its explosions and fires and everything. I mean, I actually, in relation to this podcast, I used to take a lot of solace in the intro sound bite of Masters of Scale — the comment about going home with fires burning.

I was like, “Oh, those are my people. I’m one of them”. ‘Cause like every day there were just 38 fires, and I had to pick four of them to put out.

Marketing Athletic Brewing: From a tent to professional sports

SAFIAN: I’ve seen some sort of guerrilla marketing — you’ve done promotion around some running races, a video series called The Great Urban Outdoors, but I also saw that you have a partnership now with Arsenal of the English Premier League, which is much higher profile. How did that come about, and how do you think about the marketing of this kind of a product?

SHUFELT: Actually, the Arsenal relationship started with outreach from dissatisfied fans about the offerings that were at Emirates Stadium, and really one person reached out directly to me, and sent a picture, and was like, “How is there not a better menu here?” And, you know, that really got the wheels turning. We realized that it’s probably a great way to break into the UK. And then the second we did make contact, it was really reciprocated well on the other side. Many of the UK Premier League teams, especially top-of-the-table teams like Arsenal have ten times as big social media and fan bases as the biggest U.S. sports franchises. So we’re really excited to do a marketing agreement on a scale like that, but we started by no means anywhere near that.

We’ve scaled our marketing budgets very appropriately by year. And in the very early days, marketing was really just me in a tent. I was behind a sampling booth probably 75 times that first summer. We were on the market at all different places all over New England. Anywhere within a six-hour radius of our brewery, you could find me there handing out hundreds of beers at race finish lines on a weekend. My goal was just to talk to people directly and get beers in their hands, like create a thousand true fans who knew exactly what we were about and let them talk about it with their communities, and I invested a lot in that, so we wanted to start at, like, elite fitness endurance athletes, so-called Ironman, Spartan racers, ultra-marathons…

SAFIAN: It goes with the name of ‘Athletic’. These are athletes.

SHUFELT: Yeah. And so I knew if we had very limited resources and reach, we probably want to start at like the people that people in communities went to for, like, health and fitness advice. And, like, if they saw them drinking at a barbecue, they might be like, “I’m just gonna take the shortcut and do whatever that guy’s doing”. And so, we started with that group, and we’ve kind of expanded out in concentric circles as we have a little bit more time and resources and budget. And in the name ‘Athletic’, we’ve really always tried to be really inclusive and approachable.

I think one of beer’s probably most short-sighted marketing actions is, like, the world is big and has a lot of different neighborhoods and people and everything, and beer has traditionally been very homogeneous in who they market to effectively. And we wanted to open the tent up to men, women, all different kinds of people. And the word ‘athletic’ was meant to be positive, aspirational, not tied to any geography necessarily. So, that was kind of the nature of the word ‘athletic’. 

America’s changing perception of drinking

SAFIAN: Some people look at the success that Athletic’s having and they say, you know, “Oh, like alcohol isn’t cool in the same way it once was for younger people”. But at the same time, we’ve also seen younger people take a turn toward hard liquor, cocktail bars, canned cocktails — it’s kind of ironic. Like, how do you keep up with how people feel about drinking, particularly younger people, Gen Z, where Athletic’s been so popular? 

SHUFELT: So I think A: The information at people’s fingertips, and like in fitness wearables or iPhones or whatever is more present and available than ever before — so people are really good at seeing how inputs affect their outputs and their health. And it’s a lot easier to make those choices these days.

But also the availability is better than ever before. Ten years ago, if I was at a work dinner and didn’t want to drink, there were no options to be there and have something in my hand, and now you can open a menu, and the non-alcoholic side is often equally as exciting as the alcohol side. But also those attitudes are changing really fast. I think just a week ago, Gallup had this data out that said, it was something like ‘45% of Americans believe one or two drinks…’, like, which is a moderate amount of drinking, ‘… is viewed as unhealthy now’. So that’s gone up 6% just in the last year and gone up 17% since Athletics started in 2018. Like 17% of Americans changing their view on the health of moderate drinking is a huge shift in six years. And so I think, kind of undertones the seismic change going on where people have been drinking beer since ancient Egypt or even way before, so like 5,000 years of history and all of a sudden in six years changing dramatically the view of alcohol, which is a really exciting disruption to be a part of. I think people will look back on this decade and be like, ‘that is a huge different change in human behavior there’.

SAFIAN: How much do you think about like, ‘oh, we’re riding this wave’, versus like, ‘oh, we’re making this wave happen’. 

SHUFELT: I’d like to think it’s a little bit of both. I mean, I saw the trends in my own life in the financial world. When I came into the financial world, it was very expected that people were out at boozy dinners, clients entertaining multiple times a week. And 12 years later, I saw the whole shift playing out where there was just such a focus on productivity, alertness, like performance at the desk. And that was playing out in my own life and seemed so obvious that a big human trend going on. And Athletic’s by no means on a soapbox trying to point fingers at people and criticize choices like that. The world is a stressful place, and however people want to unwind from the world, whether it’s reading a book, yoga, meditation, exercise, or alcohol, there’s no judgment here. But we are a great, tasty, high-quality option if people want to opt out of that and just have something different in their hand. And people are choosing that a lot.

We came into the market in 2018, there were no name brands in the non-alcoholic category. It was all sub-brands. Now, I think with a lot of the work on the marketing front, it’s permissioned that, you know, Heineken, Bud, Stella, Corona, Guinness have all put their main brand in the non-alcohol category. The de-stigmatization is happening really fast, and we’ve been really lucky to have a lot of celebrity endorsers, like J. J. Watt, the NFL star, David Chang, the chef, Karlie Kloss, the supermodel, who’ve really helped us break through some of those ceilings and the stigmas before.

Competing with non-alcoholic offerings from big beer brands

SAFIAN: I can see though when, you know, you have those big beer brands that you mentioned also moving into making non-alcoholic beer more of a priority, that that can also be intimidating? 

SHUFELT: I got asked that a lot by our early investors and my father too. He was really the only one that encouraged me not to quit my job. But he said, “as soon as you have any success, like all the big brands are going to show up”. And this is such a competitive commoditized industry. I always thought that we went down to the basics of things and like, so our co-founder John and myself, like, really reinvented how non-alcoholic beer is made. And I think that’s a really hard moat to cross with the trade secrets we have. And we’ve invested a lot in the change of this category, and our people, and our marketing, and everything, and so there are moats there. 

But we are counterintuitively really excited to have the big brewing companies interested in our category because we do think it’s such a sea change going on. And the alcohol category right now is so big — it’s estimated to be about $115 billion at U.S. retail. The non-alcoholic beer category is still only about $650 million and so like in my head, I think that category’s growing, probably… I won’t say the real number, I think it’s growing. But at least 25x the size in my head. And that just points to a very rising tide situation that Athletic couldn’t possibly serve by itself. But also, the more well-rounded the category is, the more inclusive it’ll be, the more accepted it’ll be, and so I’m really excited about that future.

SAFIAN: It’s fascinating how Bill looks at the competition from big brewers: Not as a threat, but as validation that the market Athletic is pursuing still has plenty of untapped opportunity. Okay, enough bad puns. The point is, if you’re confident about your product and the connection you have to your customers you don’t need to control 100% of the market. Indeed, aspiring to that sort of domination may build bad habits. After the break, Bill explains how Athletic is structured to encourage good habits. Plus, how he’s applying lessons from the hedge fund world to the beer business. Stay with us.

[AD BREAK]

SAFIAN: Before the break, Athletic Brewing’s Bill Shufelt explained how homebrewing beer in Gatorade jugs helped build the biggest non-alcoholic beer brand in the U.S. Now he explains the business advantages that non-alcoholic beer has over traditional beer, and how he’s applying the lessons of hedge funds to the beer business. Let’s jump back in.

Quitting a good finance job to become an entrepreneur 

You mentioned you were a trader at a hedge fund. When you announced you were leaving to go and do this, did people look at you like you were crazy? Or was it like, “Oh, that’s great!”

SHUFELT: At first, they definitely thought I was joking. So my boss who sat next to me came back from vacation. It was the first day of the year back in January, and he said, “did anyone have any epiphanies over vacation?” And I was like, “actually, Jeff, could we, uh, catch up for a second?” But I think everyone just knew I was serious. So, at that firm, I really thought I was going to be there for the next 25 years. I don’t think anyone had resigned voluntarily from the desk I sat on like the 20 years prior. So I think it was generally a big surprise. But also, everyone there was so supportive, and we have a great board member from that firm and a number of great supporters as well. 

SAFIAN: Yeah, I mean, I guess it’s a good resource to build initial funding from too, right? 

SHUFELT: You would think so, but Athletic Brewing was a very bad investment profile to start. It took me a lot of fundraising meetings. I did about 120 meetings over a nine month period. I got a lot of no’s. I mean, we were building the first non-alcoholic beer brewery in the country ever for basically a category that didn’t exist.

At the sampling booths that first summer we were on the market, I got a lot of no’s, very little interest at the tent. Like, it was hard to get people to walk over. So I knew in the first five seconds I had to have something compelling to say to people to get them to try the beer. And I’m thankful for how tough that is, too, because I think it really helped me refine how I talk about and sell to retailers at the end of the day, also.

Scaling Athletic Brewing

SAFIAN: Alcohol’s obviously a regulated beverage and I can imagine starting out thinking, “Oh, non-alcoholic will be easier”, but non-alcoholic beer is regulated too, right? Did you know that going in? And how do those rules compare to regular beer?

SHUFELT: So I thought I knew a lot going in, and in hindsight, I knew nothing — which is probably perfect, because I don’t think John and I ever would have signed up for it if we knew the millions of steps between here and there. So we kind of catch regulation from everywhere. Me and John spent Valentine’s Day 2018 before we launched, getting food safety certifications. It was a tough road to climb. But we did have inherent flexibility in marketing, too. Like, you can sample at races that finish at schools, which you can’t hand out beer there. We can sell beer at national parks, at beaches, at all different kinds of places. One thing that helped particularly: In 2020, like talk about crisis response, we had just made our biggest investment ever. March 17, 2020, we bought a brewery 3,000 miles across the country to expand our capacity. 

And when we launched, basically there were a couple beverage companies that were doing a little bit on e-commerce — Hintwater was an early e-commerce innovator, but very few companies were available on the internet. I told our investors, you know, I was going to pack and ship boxes, and if our e-commerce takes off, great. And at first it was, you know, five packages, three packages. But then all of a sudden I was in and there was 30 packages, a 100 packages to ship on any given day. And what I realized is that the non-alcoholic beer category at the time was a shelf of like very bland lagers with very little marketing, no online presence. And from day one, we launched a lineup of innovative IPA stouts, golden ales, and like very quickly after sour beers and all sorts of variety. And in that first year, we probably launched 25 varieties of beer, and they were launching on e-commerce. We were a small brewery in Connecticut, which most breweries traditionally would have had to launch within a 10-mile radius. We’re launching nationally and digitally on e-commerce. And so, before we knew that we were selling out limited releases in like 30 seconds, like it was a Ticketmaster concert. But that stubbornness and actually pushing through and building an e-commerce platform suited us really well.  

But we were moving really fast too. We built two breweries from 2020 to 2021. We hired a hundred people in the nine months after the start of COVID. We kept that sprint going for probably the appropriate amount of time, and then really grew into that.

Increasing the product line

SAFIAN: Now you also have started selling flavored sparkling water. Why was that the product extension? 

SHUFELT: So that one kind of snuck out the door on us, honestly. We had leftover ingredients. We had these premium hops and so our brewing team was actually making this hopped water in our breweries and drinking it as a team.

And we were serving in our tap room also. And eventually, people started to ask if they could buy it. Pretty unexpected. And before we knew it, we’re like, “Oh, well, we should sell it on e-commerce next”. And then, also a couple of our retail customers wanted it at retail. We do think it belongs in the water aisle though. Like it’s more a daytime premium water occasion than a beer replacement occasion.

SAFIAN: Do you ever think about releasing an alcoholic version? Like people like the flavor of what you’re producing. Do you guys think about that?

SHUFELT: Anything we do, I’d really want to fit with our brand values, our ethos. We’d want to have a real reason for being a competitive advantage. And at the end of the day, I think alcoholic beer is so well done and covered. And I think it’s inconsistent with our ethos and marketing messages. 

If I look out 25 years and think is the alcohol category going to be bigger or smaller than it is today, you know, without judgments, I do think it will be significantly smaller in the future, likely. And we generally want to be in categories with very large, rising tailwinds behind it.

Why Athletic is donating $2 million toward hiking trails around the U.S

SAFIAN: So I wanted to ask you about your Two for the Trails initiative — giving two million dollars toward hiking and biking trails around the U.S. Why is that how you’ve chosen to give back? Do you want to be known as an eco-conscious environmentally friendly company? Is that part of your branding? 

SHUFELT: Going all the way back to the start of Athletic, John and I had a really good chance to think about what we wanted this company to be, what did we want our legacy to be, what did we want our worklife to be, because we had both come from other careers and wanted to take a lot of those learnings into Athletic. So we took a lot of care in our culture. Like our employee handbook, I still sit down with every teammate who joins Athletic and go through the values, and the handbook, and our north star, and stuff like that. Every one of our teammates is an owner in the company from day one, and that builds with tenure. We are a certified B Corp. And at the end of the day, I thought it was possible to build a really long-term, sustainable business if you’re a better member of the community and a better steward of the world. And I figured hard coding something into our DNA at Athletic from the start. So 2% of sales up to 2 million dollars a year to enhance outdoor access for generations to come, like a pretty broad mandate, gave us a lot of flexibility to do a lot of good in the environment locally where we do business. In our first year, it was one $5000 check to the Appalachian Mountain Club. But every year it’s grown a little bit and now it’s up to 2 million a year, to hundreds of outdoor organizations, not only across the country, but in Canada and the UK and everywhere we do business. So, generally really meaningful.

Structuring Athletic Brewing as a B Corp

SAFIAN: It’s really interesting that for someone whose background is in finance and working with public companies, that you opted to structure your business as a B Corp. What drove that decision for you?

SHUFELT: If you think on a long enough time scale, we’re definitely capitalists and if you have happy, fulfilled employees who feel like owners of what they’re building, our team’s gonna hang around for a long time, be great to work with, probably do better work, you know?

So like, a potential alternative could be say, there was like 25 to 50% employee turnover every year. Where at Athletic, we have extremely low turnover. It’s like under 5%. And I think that comes back to productivity and in a fast-growing company also everyone’s learning and even if the same people every year they are more and more impressive people, better educated, better trained, better at what they’re doing. So it’s an improved team on the field every year. 

SAFIAN: You’re also intimately aware of the downsides of that quarterly earning structure and the unseen costs sometimes that falls on organizations that find themselves trying to hit those kinds of metrics.

SHUFELT: The short-term targets and planning are really hard and volatile where if you have long-term agreed upon targets, it’s a lot easier to see through the noise of the macro economy or unexpected things in your business supply chain or whatever and so, definitely trying to think very long term in what we’re doing. 

When do you know if your scaling too fast?

SAFIAN: So you raised a round of capital this summer. So what are you going to do with it? 

SHUFELT: This summer, we’re really excited to welcome General Atlantic to our cap table. They helped us by another production facility on the West Coast, which basically doubles our overall company capacity. Right now, Athletic Brewing owns and operates the two biggest non-alcoholic beer breweries in the world. So we’re just continuing to lay the tracks out ahead for the category that we hope to build.

SAFIAN: I mean, with all this growth and all the potential that you see, like, how do you know if your plans are getting ahead of themselves? You know, like you need to expand ahead of demand, but there’s always a risk in that too, that you’ve gone too fast or too far.

SHUFELT: I mean, that’s really been the question the whole time. Scaling manufacturing ahead of demand and having accurate forecasting has been one of the hardest things we’ve had to do as a company. I’d say one of the most pivotal decisions John and I ever made was that we were operating a 8,000 square foot brewery in Connecticut that was capable of making 5,000 barrels of beer. And it took us forever to finance and build that brewery. And then we outgrew it in 10 months, and we doubled the capacity and outgrew it again in three months. So we decided we had to make a much bigger facility. The two of us walked around, we saw the facility and we walked around San Diego for about eight hours. We sat in a coffee shop and mowed through our Microsoft Excel for a while. And basically we agreed that we just have to do this. It’s the right move. And we’ve come to a number of those moves and have had great advisors. But we’re at another one of those crossroads. And ultimately we have to believe in the trend. And this is our life’s work. And we’re so close to our customers that I think we have a really good pulse on what the future looks like there. 

SAFIAN: But sometimes, you just have to make the bet, right? 

SHUFELT: Yeah, and at the end of the day, we’re wrong all the time on all sorts of things. I mean, even the best stock traders or baseball hitters connect between 30 and 60 percent of the time, and so, we’re wrong all the time. It’s how fast we course correct and recognize our mistakes. As long as we’re trying to do good and we’re honest and accountable, there’s very little we can do wrong, I think. 

What’s at stake for Athletic Brewing?

SAFIAN: So what’s at stake for Athletic Brewing right now?

SHUFELT: We have all the biggest beverage companies in the world interested in our category. It’s growing very fast. It’s just about the only place in adult beverage experiencing significant growth. So It’s probably the most challenging place to be, but we wouldn’t have it any other way.

My feet hit the floor every day thinking about Athletic Brewing. All sorts of random, fun ideas, and I love the group of people I work with, and I’m so excited to support them. My name ends up on very few projects, but I love playing a supporting role in a lot of different things every day.

SAFIAN: Well, Bill, this has been great. Thanks so much for joining us. We really appreciate it.

SHUFELT: Thank you so much.

SAFIAN:  What strikes me in listening to Bill is how he meshes both passion and discipline in his leadership decisions. He talks about “random fun ideas” and how much he likes the people he works with. But he also talks about the importance of leaning into a fast-growing category with a tailwind. What I may remember most, though, is his acknowledgement that we’re wrong all the time. If star hedge fund traders and all-star baseball players strike out repeatedly, then what’s so bad about business people striking out? As long as we keep pushing forward, we can have a positive impact. And I’ll drink to that! I’m Bob Safian, thanks for listening.