Bill Shufelt, Co-founder of Athletic Brewing - Building the Non-Alcoholic Beer Category

In this episode, we discuss the tribulations of selling distributors and retailers on a new category, the value of having a co-founder with opposite talents, and the advantage of investors with long horizons. 

Chapters

• 0:00 From Wall Street to Brewing Revolution
• 8:45 Finding John Walker: The Perfect Co-Founder
• 15:05 Building a Supportive Board and Investor Base
• 22:10 The Growth of Non-Alcoholic Beer Market
• 28:30 Customer Impact and Health Trends
• 34:10 On-Premise Challenges and Industry Future

Transcript

0:00:00

The main reason I did jump careers to do this full-time was the chance to potentially positively impact tens of millions of lives. Hello, friends, old and new, and welcome to Drinks with Caroline. I'm so happy you've joined me for what I believe will be another stimulating conversation with an industry expert, founder, or otherwise fabulous person in the consumer industry.

So, Bill Shufelt, welcome to Drinks with Caroline. I am so excited to have you. I used to do this with our clients. We were both on Wall Street in the past, and my clients used to love these events because I'd bring in somebody who wasn't corporate and not allowed to say what they really thought, and we'd have these great discussions.

0:00:51

And so this is an opportunity for us to have a chat. And as my friend Harry Shoemaker says, everyone listening, they're just a fly on the wall. Thank you so much for having me. And it's nice to live outside of the world of quarterly earning cycles, for sure.

For sure. I do want to let everybody listening know that I have the great honor of serving on the board of Athletic Brewing. I don't know what Bill was thinking when he walked up to me one day and said, you know, I've got one open seat, and would you be interested?

It took me about three seconds because I knew a lot about Athletic Brewing at that point. But, Bill, what were you thinking? Thank you so much. No, it's an honor to have you and your advice and your enthusiasm in our boardroom. It's such a great group of people and you add such a great element to it with all your breadth of industry experience and perspectives.

So thank you so much.

0:01:39

Thank you, Bill. Well, it is an incredible story. You've been on How I Built This with Guy Raz. You've been on CNBC and many other forums. But I still think it's worth repeating that you left a trading job that I'm sure was paying you extremely well. And with the support of your wife, Jackie, you embarked on this very, very bold move.

What did that all feel like? What was the idea that drove you to start Athletic Brewing? Maybe I should have thought through it a little bit better. It's kind of scary to think about in hindsight. What was I thinking? It was like a very high probability of a safe, secure career that I did enjoy.

It was intellectually stimulating. I liked the people I worked with. To embark on a very uncertain brick by brick manufacturing story. And I really didn't have an entrepreneurial bone in my body at the time, too.

0:02:30

At no point during my financial career was I kicking around ideas of businesses I could start. And I had no intention of starting a business myself. It was this like really authentic place in my life. And it was such a need. It was so unmet in the world.

For the first time in my life, I saw the chance where I could positively impact so many people, too. In the hedge fund world, as much as I respect that world, I would have never had the chance to deal directly with customers, positively impact their lives, and make a real positive dent in the world.

And ultimately, that was what lit my fire. And that's been reinforced over and over again with tens of thousands of customer emails. I guess a little bit more about how I got there before the why. The why is so important in terms of me actually doing it at that moment.

0:03:16

I think the life I was living is representative of so many adults. We're trying to be a little bit more high performing. We're trying to be a little bit healthier, a little bit better family people, a little take our careers a little more seriously. And being out at three or four work dinners a week with colleagues, social things on the weekends, drinking four or five nights a week, even in small amounts, was a real limiter on my productivity, my health, my sleep.

It actually came about as I was training for my first ultra marathon and really evaluating some things in my life before I was about to get married. And I decided to stop drinking for a month up to that, and it was the biggest life hack I ever discovered.

And so as I went away from drinking, I was all of a sudden in all these very familiar places with colleagues and friends and family.

0:04:01

There were no menu options for me, and I was standing there kind of with my hands in my pockets or like a childish drink when everyone else had the adult things. And I looked around the world and did a little bit of light research. 50% plus of adults are really trying to moderate.

It's so limiting to the adult beverage world that there's not this cornucopia of amazing non-alcoholic adult beverages. And so it was this kernel of an idea that grew from there. I love that story. And just how long from that moment till you landed your incredible co-founder and brewer, John?

I make it sound easy. I realized that there was a big unmet need, but I didn't realize that was a business idea. It took me complaining about this to my wife for her to really wrap that all together and be like, that is a huge idea.

0:04:49

I knew nothing about the beverage world, which is a very good thing at the end of the day that I didn't come in with a lot of industry baggage. I did a lot of learning, a lot of phone calls to people all over the world and Europe before work. I was waking up at four in the morning and working on this idea, spending all weekend.

All of a sudden I didn't, my interest in this kernel of an idea was so much bigger than my interest in like watching college football on Saturdays or like going on bachelor parties. You were on a mission. Yeah. But I still probably would have never done anything with it at the end of that two year plan, because in many ways it just would have been such a bad business decision to leave Point72 and do this.

And it was really my wife who shook me again and was like, this is really big. You've done so much work here. I don't want to know you in 10 years if you haven't done anything with this.

0:05:35

And she encouraged me to walk in to work the next week and resign. And that I did. And we realigned our household budgets and it's tough. You know what it's like to be on Wall Street where the connectivity on Wall Street is amazing. If you have a question about anything or you want to learn anything, there's probably 200 people you could ring or chat or email and get amazingly well-informed answers.

And so I was used to like this overload of information stimuli. And the second I walked out the door on Wall Street and was home alone and out on my own, it just stops. And that was a really dark place. I got nothing but rejection. It was a long road to find John.

It was a long road to find investors. It was a long road to find distributors and retailers. In many ways, a good thing, because we learned so many lessons off-Broadway.

0:06:22

We could definitely talk about what the industry looked like at that point too. Yeah, it is interesting. What does long mean? Was it two years? Because I think you're still only six years into having founded Athletic, if I'm not mistaken? I'm 10 years into the idea of Athletic and essentially working on Athletic.

Six and a half years into commercially working on Athletic since we launched. And so John and I have been working together for upwards of eight years now. A big disconnect for me was the enthusiasm I had for this. I expected to be somewhat reflected out in the world.

And there was just no enthusiasm for it, which was a big miscalculation on my part. And it should have been foreseen because non-alcoholic beer was essentially zero revenue, zero momentum, zero buzz and excitement.

0:07:07

It was like the most hated part of the grocery store, the most hated part of any bar or restaurant. It was very stigmatized. And so asking anyone from the brewing world, which the craft beer world was really exciting at this time. Lagunitas and Bell's Point had just sold for a billion dollars.

And to ask someone to leave that world and start tinkering on non-alcoholic beer in a warehouse with someone who knows nothing about the industry, it was a really tough sell. And I very rightfully got hundreds of rejections. So I met John about five months after I quit my job, which was a really dark five months.

Basically every contract brewer in the country had said no at that point. And I'd gotten rejected by hundreds of brewers. Here was this outreach from someone in New Mexico who had seen on a job board what I was thinking about and wanted to hear more about it.

0:07:52

And John had by far the deepest list of brewing metals that I talked to. And let's just clarify for the audience, this is John Walker. And you'll tell us a little bit about him as a person and what it was like meeting him. Yeah. And I really knew I was about to get on the phone with someone very talented.

And I didn't want to just get another 30 second hang up phone call. And so I basically said, please don't hang up and like hear five minutes of what I've got to say. And he was like, okay, of course I'll listen. I wasn't going to hang up on you. And then I broke the news that it's not alcoholic.

And I could tell he was hanging on by a thread a little bit. But I've looked back at the emails many times and he emailed me back on a Sunday. And he was like, you know, I thought it was crazy at first. But he's like, dot, dot, dot, genius. You know, he'd grown up in restaurants.

His dad ran farm to table restaurants in New England.

0:08:39

And so he'd seen the inside of the restaurant world and the culinary world. And he'd been working at a very small craft brewer in Santa Fe, New Mexico, that didn't even have a canning line plugged in. He really saw the innovation challenge, the potential for a positive impact.

And he really reflected so many of my initial ideas and my enthusiasm right from the start. And it really wasn't long before we started exchanging hundreds of emails of collaboration. And we've been kind of off and running ever since. It's a totally underrated part of any founder story.

But like the thing we probably got most lucky at Athletic is to have two co-founders who are very opposite talents and love working together so much. There's really nothing I like more than having five hours in the car with John to talk about random things in the business and get on the same page.

Do you talk about the details of your individual beers and the brewing process?

0:09:27

Or what's the conversation like? Really everything, the future, friendship. We both really came into this industry with so little industry knowledge and no knowledge of scaling businesses. And we've learned step by step with our team along the whole way.

And we've been lucky to have such great advisors and investors, including yourself. And they've really helped us think through all the decisions we're making along the way. But yeah, John went from a 20 barrel brew house in Santa Fe, New Mexico with no canning line.

And now with ease operates 200 barrel fully automated five vessel brew houses. And we did right about 400,000 barrels of beer last year in 2024. So John has really grown with the business impressively on the operation side as well. Well, having walked one of the breweries, the one in Connecticut, the scale is incredible.

0:10:15

It's absolutely incredible. And now increasingly being able to walk into stores. I live in L.A. and see these beautiful displays of athletic brewing. And when I mention it, I mean, every bar I've been into in New York, I've been able to order an athletic.

It's super exciting. I just want to, before we talk more about the beer, talk about this group of advisors. Because for me, it's been a privilege to be in the boardroom. There are such incredibly intelligent people and wise and worldly people on your board.

And you've had really long term capital behind you. And the importance of that, of having investors who are not short term and thinking, just bringing them around to belief the way you have belief. What was that like? From day one, we've really been really fortunate with the investors we've had join our vision.

0:11:01

And similar to trying to find John as a co-founder, it was really hard to find investors. John and I didn't have product we were bringing around. I had a 96-page white paper on how we were going to change the brewing industry. But I didn't have a product to share.

There was no momentum. It was pre-revenue. So it was a really tough sell, very rightfully so, to investors. And a lot of great investors said no. But the 70 angel investors who said yes have been incredible. And they gave us a lot of freedom of momentum and strategy to run our business and learn our lessons and do a lot of things off-Broadway.

There wasn't a huge pressure to scale to different metrics at a speed that wasn't in our plan. And along the way, we've met some amazing people on that journey. And right from our Series A, our lead investor, Tim Barakat, in his family office, joined our team and he's been an amazing advisor.

0:11:49

As well as Darren Revelle's tastemaker, Capital, Blake Mycoskie, the founder of Tom's Shoes, JJ Watt, and a number of other great early advisors and investors. We've also, as we scaled as a business, aligned consumer growth as a world-class private equity firm who's been a great board member for upwards of five years now on the athletic journey.

And so we've kind of ridden through every kind of market cycle in a very short amount of time with them. We were lucky to pick up a much bigger beverage strategic who's been an amazing people and great advisor in Kirk, Dr. Pepper, Justin Whitmore, their Chief Strategy Officer, and now GM of their energy division is on our board.

And General Atlantic, the world-class financial private equity firm, joined this past summer to help finance our newest brewery build. It's a great group of perspectives. And I think one thing we got right is really trying to communicate our vision for what we want the category and company to be.

0:12:39

People were signing up for that. And there are five different groups with five different ideas of what the future of athletic could be. I think it's a really good cohesive boardroom and investor team, which has always been really important to me. Well, I think, Bill, that people trust you because I think you've been able to really clear it with one vision, and the partnership with you and John is so strong.

The proof is now in the pudding, but I can only imagine just how grueling those early years were, and it takes a lot of fortitude. Unfortunately, I met so many entrepreneurs who they're just struggling, struggling, struggling, and to keep getting your financing through that journey is really challenging.

So to even be here is just remarkable. I'd love you just to summarize how big you are today, how many doors and things like that, just sort of a sense of how many different varietals you're offering.

0:13:25

I'm saying that like a wine person, but how many flavors of beer and styles. And then what the vision is for non-alcohol beer and your role in it. We really started out with this idea of like authentic innovation. I think especially in CPG, there's so much trend chasing and opportunists.

And I think the reason we have been able to have such a long lead time on our innovation is because it's kind of authentically ours. We have a real mission around it. It's what we're focused on. Every year, a lot of brands are in like four new categories every year with 2% of resources in all of them.

This is our thing and we're focused on it. And that white paper I had in the very early days was pointing towards Spain and Germany. And as they went from like 12 to 15% of their beer market being non-alcoholic beer. You've got to just repeat that. That's such a stunning number.

0:14:12

Yeah. So when we started non-alcoholic beer in the U.S. was a rounding error to zero. It was like 0.3% of the beer market. It had been under $100 million market very consistently for 30 years. And we had this vision that the U.S. is lagging for really like post-prohibition reasons still.

Like it has a real branding and innovation and quality problem. And we're going to reinvent and reimagine this category. And it should snap pretty quickly to the worldwide average, but there's every reason it should be an even bigger part of the future globally.

And so at that time, non-alcoholic beer was 5% of the worldwide beer market, but there were all these other places in the world like Spain, Germany, Japan, where it was higher upwards of 10% and trending towards 12.

0:14:58

And now it's 15% in Spain and Germany, which is a really exciting data point to point at. But now we've taken it from narrative to it's actually happening in the U.S. And it's been a lot of resources to invest behind that. And it takes real time to make real change.

I guess I should clarify too, like Athletic Brewing is not out to bring back prohibition. We're not out to point the finger at people and make them feel guilty about alcohol. We're not out to steal those occasions even like the world's a stressful place and people want alcohol great.

But 10 years ago, there was no option to even be moderate if you wanted to be moderate. And we just want to have great, exciting options alongside the alcohol options. So more people can enjoy great adult beverages. More people can be included in occasions.

People don't feel like their alcohol and fun is boxed into like one or two days a week.

0:15:45

They can have seven days a week of great beer and feel fine about it. And it's a good, healthy decision. And we're really trying to grow the category, not cannibalize the category where most adult beverage innovation is a one for one substitute for an existing occasion.

Like if a bourbon drinker is going to drink a tequila this year, it's like a one for one swap for the most part. Or if like a light beer drinker is going to drink a white claw, that's a one for one swap. We want to take it from, yeah, you can have your white claw on Saturday, but I'm going to give you a beer five days of the week.

And that's real growth for the industry. And so those were all theses five years ago. And it's been really fun to play it out with data tests all across the country. And at first non-alcoholic beer went from like 0.3% to 0.5%.

0:16:31

And now if you exclude the convenience channel, non-alcoholic beer is about 3% of total beer. So category has grown about 10X since we got going. But if you look at the chain by chain level, it's much more exciting. You know, a lot of the mass national retailers like Walmart and Target and Total Wine that leaned in earlier than most, they're starting to move above 4%, 5%, 6% of all beer is now non-alcoholic beer.

And we're seeing some of the leading. natural channel retailers move above 12, 15, and the first national retailer just passed 20% of all beer. So like that's out in front of even where anywhere in Europe is. The U.S. has gone from the ultimate laggard to the leader of non-alcoholic beer, and that gets me so fired up.

It's really interesting, Bill. I'm thinking about how with infrastructure in China, they had nothing, and because they were coming from nowhere, when they built it, they built it right and bigger and better than anyone.

0:17:28

Our infrastructure in the U.S. is challenged. And I guess the U.S. had minimal decent tasting non-alcoholic beer, and now you're building it right. You're building these delicious beers so that if someone actually tries it for the first time, they go, I'm shocked at how good it is.

I'm shocked at how low the calories are. You know, I almost had one for breakfast, quite frankly. Why not? It's 11 o'clock in the morning, and I have one next to me, and it's not because we're going to be on a podcast. I was like, oh, it's a Friday morning.

I might have a peach beer while I do my work. It's funny you said manufacturing. We did look also at the industry, and one of our first principles thinking things was we really have to reinvent this. And in many ways, craft beer reinvented a lot of beer production in this country.

I did think it required like a better look at how is non-alcoholic beer made?

0:18:17

Is there an artificially low ceiling on what can be done here? And everyone knew marketing had to be revamped, even though people weren't talking about that. If we got the product right, we got the nutritionals right, and then we turned on the marketing, I think that's a really interesting, successful cocktail there.

But we deliberately made the choice to lean in and build all US manufacturing, and so a really unprofitable idea to begin with, but increasingly so as the CapEx decisions start to play out over a longer timeframe. Well, you get an incredible cash flow generation once you hit certain capacity usualizations and then, you know, add growth on top of that.

So it's a very bold move. I mean, so few startups in beverage, be it soft drinks or alcohol, across spirits, wine, be it whatever, they don't tend to own their assets.

0:19:05

So how hard was it to persuade your investors that this was the way to go? We're really lucky to have great alignment on our investor team. And even though I honestly make modeling mishaps, I, you know, when you build an operating model projecting a facility, and you usually do it with a utilization assumption that assumes you're going to operate these facilities at some point, relatively fully utilized for a decent amount of time.

And I underestimated how quickly we would grow out of facilities and need to jump to a next one. And that made the investment picture even harder. It is really tough to build manufacturing, and it's also triply easy for me to talk about it as if it's happening in Excel.

Like everything I do in Excel, John has to do in the real world with like 18-month lead times. And, you know, our last brewery in Connecticut, just the first phase of it was something like 110 shipping containers of steel and electronics and everything.

0:19:58

We had did 40,000 hours of stainless steel welding went into that building. And so taking it from Excel to the real world is a huge lift too. I really appreciate our investors and advisors and trusting us that the three-year turnaround in gross margins and growing into our facilities would play out.

But there's a lot of elements of that conversation too, is it's hard for most CPG categories to have a lot of confidence that there's going to be like a 10-year bull trend ahead that you can make those kinds of investments behind. Because if we thought non-alcoholic beer was a wave we had to time right, like three to four years, that wouldn't have made sense in building manufacturing and making 10-year investments and 20-year investments.

And so there's huge differences between this trend and like Seltzer and RTD Spirits and everything where you like really have to catch the wave.

0:20:47

We're really lucky to have long-term investors, long-term trend, really be building around that. What are some of the comments you hear from your customers and retailers and restaurants and so on? Just love you to share some of the enthusiasm with us.

Yeah. The main reason I did Jump Careers to do this full-time was the chance to potentially positively impact tens of millions of lives. I saw the positive transformation in my life and that access to great non-alcoholic beer could potentially have. And if we just made moderation accessible, there could be so much fun and so much impact on people's lives there.

And I had a funny error about two weeks ago that actually turned into a big positive. I accidentally emailed about a thousand of our highest lifetime value customers ever and not something you'd typically want to do, but it gave me a great chance to interact directly with a lot of our best customers of all time and hear those stories directly from them.

0:21:44

It was like such fun email exchanges. And some examples were like I stopped drinking in 2005, they would say, and I felt totally shut out of the social world and my life and all my favorite things, sports, venues, music. And people tell these stories about once they discovered athletic in 2018, 2019, they were like so comfortable in reentering society and having fun and they were de-stigmatized.

And then there was all sorts of other stories about like positive health impact. And like we don't make health claims with our products, but it's like great to hear from customers and or people telling us that they're a better parent than they could ever imagine they could be.

And it was really touching. And we do hear from thousands of customers a week via just regular emails to our company as well. So that is like really what continues to get me out of bed and light my fire ever stronger.

0:22:31

Plus, I love being an employer too. Our team at Athletic Brewing is incredible and I love all our teammates. And it's been a under-expected part of this journey that I love so much has been building this company with John and all the great teammates who work alongside of us along the journey.

Well, I can certainly attest to the quality of the people that are behind the Athletic Brewing success. And you're always one to say it's never just one person, it's always the team. As an analyst on Wall Street, I always did look for the leader though, because I think the way someone leads defines what that team is going to look like and how empowered they feel.

And there's just clearly such a shared sense of vision and mission and wanting to know everybody's opinion. I think one of the things I admire most, Bill, is you're always asking how you can be better.

0:23:20

And you really want to know, you're not being polite. And so that level of humility is unusual, quite frankly. And I think why you're going to be so incredibly successful, I mean, you have already, you've built something that I think so many people didn't think was possible.

You could say non-alcoholic beer is an oxymoron. And wow, try and go into a retailer and sell that. And that is hard to do. But I'm on your same page that I think that if there's an example of where it can be 12% or 20%, then we're going to be very surprised by how big this can be.

I want to ask if you think GLP-1 drugs have any impact on your consumers. Yeah. On that last topic too, I think I'm probably right, like 20% of the time. My goal is to be very right in that 20%. But I have a great teammate keeping me on the rails and the other 80%.

0:24:08

There's so many trends happening concurrently in society right now. I think one thing that was probably underrated in helping my decision to quit drinking, in the beginning of my finance career, work actually kind of stopped when I left work. And as interconnected as the world was in 2005, it really didn't follow you home that much.

So you could go out to work drinks, you could have drinks and you could relatively unplug and catch up in the morning. And I found as we started to have more and more sophisticated phones and connectivity in the next three years, work actually followed me around the clock.

And there was all of a sudden like real alpha to be made at like three or four in the morning. There was a lot of reading to be done. There was a lot of writing to be done at night. As the world became more interconnected, like that information trend is such a mega trend.

0:24:54

Alcohol may or may not fit great in a world that's that connected. And I think part of that is the health information that's emerging too. Like 15 years ago, people still kind of referred to the FDA food pyramid and how bread at the bottom was like a huge part of everyday health and nothing against bread, but like the quality of health advice and real-time data inputs and podcasts and everything is happening alongside that too.

And I think you layer in things like GLP-1s on top of that health trend and people are just making more and more informed choices about what makes sense for their life and not just one size fits all recommendations from society. So it's really tough to discern if GLP-1s have had a big impact on our business yet.

Like in the context of fairly steep growth, it's tough to say exactly what is driving different things.

0:25:42

But I do think in aggregate, things like GLP-1s, things like Andrew Huberman commenting on alcohol, the Surgeon General's comments a few weeks ago, they're all just informational or somewhat habit-driving and I think they would all be classified as tailwinds.

But I do also think the other side of that argument could be made is that if people aren't drinking as much alcohol or not socializing as much, or like are they actually socializing as much? Are they going to bars and restaurants as much? So there is potentially like a shrinking of occasions if people aren't having adult beverages as much.

I think we need to rethink adult beverages to meet people's future dietary habits also. So I think there will be things that come in. I think our products help meet those needs, but I think there might be more seltzer type options.

0:26:27

There might be lower calorie, higher protein things and across all different food categories, I would say. That makes a lot of sense. I actually sat next to someone who works for a wine and spirits distributor and they were bemoaning the fact that restaurants are having a really hard time right now with traffic, but also with their alcohol sales, their wine and beer sales and so on.

So there is a need for the industry to get together and think about this holistically. How do we grow the pie again? Because it's been very challenging. Yeah. And that's something I've been really trying to beat on the drum with our partners is, so Athletic is working really hard to drive programming at on-premise bars and restaurants.

Last month was our best month in the on-premise by over 20% ever in terms of on-premise sales. January is usually a really bad beer month at the on-premise and we created programs to get people out to bars and restaurants and support bars and restaurants in that bad month.

0:27:21

I think that's such a bedrock of the industry too. People don't just go buy a 12 pack of very expensive things at the grocery store. They love to try one or have it recommended to them first socially or at a bar and restaurant before they go buy it in the on-premise, off-premise.

At Athletic, it's very difficult to service the on-premise. It typically takes us three to five visits to a bar to open the account. So it's like a very hand-to-hand sell. And then once we've proven that we deserve to be there, it's even harder, unfortunately, to get it delivered.

The distribution tier is so focused on the high volume off-premise. I think everyone got addicted to COVID margins and being able to drop pallets at chain retailers and not do much of the rest. And unfortunately, I think for the long-term health of the industry, the industry really needs to get behind the on-premise again because that's where like new drinkers, young drinkers are having fun.

0:28:12

And I have a really strong opinion on that. Yeah. I mean, it would be cool if the industry can actually create some programs reminding people that part of being healthy is having social time with friends and chats, random chats. I think they have found that a really important part of longevity of mental health is even just three or four random interactions with someone during the course of a day.

And we all know how big the mental health issue is in this country right now and probably across many countries. Yeah. And not to make this all about me, but when I lived in New York City, I lived right above a great independent corner bar and I was working incredibly hard.

And it was such an important part of my daily stress relief and fun to pop in there and have a beer after work. And very often friends would just expect other friends to be there and go there and catch up after work and then go on our ways.

0:29:01

I hate to lose that in society, but athletic right now, I just said how hard it is to win a new account because of distribution service. We end up churning about 40% of new wins within three months. So this is a plea to distributors to get back to building brands, you know, which they could do really, really effectively if they put their minds to it.

We're out there making the sales. We're asking for deliveries, just the deliveries. Yeah. And I've explained to our audience, if someone's not deep in the weeds here, that by regulation, a brewer can't sell directly to a retailer or bar. Now because you're non-elk beer, that might be different, but we've chosen to go the beer distribution route.

So we're very reliant on distributors. If they don't do a drop for you, that is lost sales.

0:29:49

There's not much you can do except fight for it back. You know, if we sell into a restaurant and they don't deliver the placement and we lose it, there's at least a thousand people a month and they're drinking something that's not our beer that could have been people falling in love with Athletic and then buying it at the grocery store.

So it's really important. It's a big theme for us for 2025 that we're going to be pushing on. So this is an ask for Athletic call. Exactly. Yeah. And I always thank the bartenders for serving me Athletic if they have it. So Bill, we see a lot of competition coming in now, and I'd love your view on whether more push from an Anheuser-Busch and the Constellation brands with their Mexican beer portfolio.

Is that a good thing, a bad thing, or you're just not sure? I think going back to kind of what I said earlier is I think a big part of Athletic success is authentic innovation.

0:30:39

I think in the adult beverage industry, we've seen a number of cycles and seemingly every three years where something starts to grow and 2000 SKUs launch into that category. And craft beer had a very durable wave, and now there's 10,000 craft brewers in a pretty tough time in the industry.

Then it was seltzer. Three brands had success and 2000 brands launched behind it, and essentially three brands remain now. So it's been through a whole churn there. And then immediately after that, similar dynamic happening with RTD seltzers, like the shelf expands, the shelf contracts, and on and on with like waves of innovation.

We're seeing that with non-alcoholic beer now where we've already gone through a lot of brands have come in and cycled out already in this, but the number of brands is increasing dramatically.

0:31:28

And I think the key thing is just what incremental buyers or people bring to the shelf. Is it authentic innovation? Is it additive to category? And I love having a competitive category. I think this category is going to be very big and there's room for a lot of brands in it.

I think people should be authentic with their innovation and maybe everyone doing the same category every year isn't the right move for the category. Maybe people should think about what's great for their own brands as well. And so in that there's about 150 brands and I'm so glad to have a variety of brands on the shelf.

And I'm more often than not selling other brands alongside athletic and recommending a more full menu or a more full shelf. However, there is a lot of like contract brewed cut and paste going on as well.

0:32:13

We have had a lot of issues, I would say upwards of 25 companies that probably copied word for word our whole about story off our webpage and things like that. So there's a lot of diluting, confusing things for the customer as well. You know, there's a brand out there in the world right now that's identically copied our packaging and they're trying to sell it right next to us on the shelf.

And so I wish distributors and retailers would push back on, be like, Hey, this is actually our best brand in the category. This is our highest potential for repeat buyers. And we want people to start here and to put something that mimics it right next to it is a disservice to the category and customer, not an ad.

So there's celebrity brands coming in. There's new powerhouse brands like McCulture coming in. I think all this is great because it'll come with real investment, new eyeballs.

0:32:59

Athletic over the life of our brand has always put double digit millions by marketing the category. And because of that, we estimate that almost a third of our buyers of beer are new to the beer shelf. Like people walking into the grocery store and walking to the shelf because to find athletic and they weren't going to visit the beer shelf when they were in the store.

Otherwise, I wish more brands. I think it's only athletic Heineken and now Bureau and McCulture who do much marketing at all. Most brands to show up at the shelf, get next to get on the shelf and don't support the shelf. So in the overall dynamics of the category, it is about five brands driving about 70% of the sales and growth of the category.

Athletic drives about 32% of category growth in any given period. I love a competitive category.

0:33:44

I just wish a bit more of it was an authentic approach. So do you have anyone approaching you from the retail side and saying, will you be the category manager for non-alcohol? Could you also set just adding to that, could you imagine a Walmart or Target actually creating a whole focus around non-alcohol beverages?

Many of the chain retailers, including the ones you just mentioned are great. They're so accessible and so approachable and they want insight from the industry and the leaders of categories. And so it would almost be unfair to name, but Whole Foods, Walmart, Target, Total Wine, HEB, Wegmans, so many approachable chain buyers who are really data-driven and who don't just rely on the pen of an Anheuser-Busch to draw the set.

And I think this is a really evolved category for the most part.

0:34:31

These are starting to be really productive SKUs, so it's going to be an exciting five years. The first 0% to 2% of beer is going to be the hardest. I think 2% to 10% or 2% to 20% is going to happen way faster than people think. Exponential. Hopefully.

Yeah. What do you want to leave our listeners and viewers with? What thoughts about new flavors coming, what you have planned for the year and where they can find Athletic? We had a really fun innovation planning meeting yesterday at the team. We have two operational breweries right now and we're building our fourth total brewery and all of them have pilot systems.

So it's a great chance for our extremely talented brewing team to flex their creativity. And so we probably have about 40 new beers coming this year. Most of them will be on athleticbrewing.com and the biggest successes will go from there to the outside world.

0:35:17

Yeah, really excited about some of the innovation we have coming. Overall, more just excited about the future of the category. It's an exciting time. Thank you so much, Bill. We really appreciate you doing this and I look forward to doing this in a year and hearing about another great success, the opening of the San Diego Brewery, the second one and a whole lot more.

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