Keurig Dr Pepper just invested $50 million in Athletic Brewing, the brand dominating the nonalcoholic beer sector. Here's how the founder started and grew his brewery after leaving the hedge-fund world.

• Athletic Brewing was cofounded by the former hedge-fund manager Bill Shufelt.
• He saw a huge gap in the nonalcoholic-beer market, which has grown 352% the past 12 months.
• The brewery now controls 45% of the market and raised $50 million from backers like David Chang.

Editor's note: Keurig Dr Pepper, the soda and coffee giant, has taken a $50 million stake in Athletic Brewing, a leader in the fast-growing non-alcoholic beer sector. The investment gives Keurig a minority position in the beverage startup, which controls over half of the $328.6 million nonalcoholic-beer market. This piece was originally published in August 2021.

The hedge-fund manager and craft-beer aficionado Bill Shufelt was turning 30 and training for an ultramarathon in 2013 when he decided to stop drinking alcohol.

"It turned out to be the biggest life hack I've ever uncovered," Shufelt told Insider. He slept better, ate better, and was more alert at work, he said.

After his training, Shufelt researched the nonalcoholic-beer market and crunched the numbers for a few years before deciding to turn his life hack into a new career. He quit his position at Point72 Asset Management in 2017 and cofounded Athletic Brewing a year later with the head brewer John Walker.

"There's a huge percentage of the adult population that are underserved by current offerings," Shufelt said. An estimated 50% of adults worldwide don't drink alcohol.

Today, Athletic Brewing controls 45% of the nonalcoholic craft beer market in the US, which has grown nearly 352% over the past 12 months to $20.7 million, according to Nielsen data.

"Niches are not to be dismissed, especially if you do something great," said the sports analyst Darren Rovell, whose venture-capital firm Tastemaker Capital Partners backs emerging food and beverage brands, including Athletic Brewing.

In July, Athletic closed its largest round of funding to date with a $50 million raise led by the longtime investors and board members Alliance Consumer Growth and TRB Advisors.

The round also included backing from celebrity investors such as the chef David Chang, the cyclist Lance Armstrong, and the NFL player J.J. Watt.

Distinguishing itself from rivals

The nonalcoholic-beer segment includes powerhouse craft breweries such as Lagunitas, Samuel Adams, and Golden Road Brewing, which each produce at least one nonalcoholic brew alongside their massive craft-beer selections.

Athletic Brewing said it distinguishes itself from big beer brewers by being the only brewery in the country dedicated solely to nonalcoholic craft beer.

Its selection of nonalcoholic craft beers can be found in 15,000 retailers in 35 states, from small bottle shops to high-profile stores such as Total Wine, BevMo!, Whole Foods, and Trader Joe's. The restaurateur Danny Meyer and Chang serve Athletic Brewing in Eleven Madison Park, Gramercy Tavern, The Modern, and Momofuku Ko.

Athletic Brewing also has a large subscription membership, which allows it to ship six-packs across the US with few hassles because the company is not beholden to regulatory issues tied to shipping alcohol.

So far this year, the brewery has released 43 nonalcoholic beers. Subscription members get first dibs on new releases, a direct-to-consumer e-commerce channel that gave Athletic "a huge advantage" going into the pandemic, Shufelt said.

'Just make it good'

Athletic Brewing is benefiting from a fast-growing market, which also includes nonalcoholic spirits.

Overall US beer sales were down 3% in 2020, while craft brewer volume sales declined 9%, according to the Brewers Association. But Statista estimates that the global nonalcoholic drinks market will reach $1.44 trillion by 2025.

Shufelt didn't anticipate the demand. When he opened a 10,000-square-foot Connecticut facility in 2018, he thought it would last five years.

"We outgrew that first brewery in about 10 months," he said.

With $70 million in total VC funding raised, the company was able to open a 150,000-square-foot brewery in San Diego, a mecca for the craft-beer industry, in 2020. Athletic bought the brewery from craft-beer pioneer Ballast Point.

Another 150,000-square-foot brewery is in the works in Connecticut. The facility is needed to meet wholesale demand, in which sales are up more than 600% year over year.

Of course, this being nonalcoholic beer, there are naysayers.

Rovell, the sports analyst and early investor, has defended Athletic Brewing to his audience of 2 million Twitter followers and even offers discounts to nonbelievers. "No one can tell," he said. "I have never had anyone say, 'That's definitely not alcoholic beer.'"

When Shufelt first ran the idea of launching a nonalcoholic-beer brewery by Rovell a few years ago at a beverage conference, Rovell gave him one piece of advice: "Just make it good."