- [Narrator] Store beer sales have gone flat, but non-alcoholic beer is growing fast. Since 2020, its sales have seen double-digit growth every year, hitting more than $440 million in sales in 2024. And in the US, Athletic Brewing is leading the way. Less than a decade old, Athletic has driven about a third of all category growth for the past four years. - When Athletic entered the category, there was basically one style of non-alcoholic beer available, very few brands, very poorly distributed. - [Narrator] And in 2024, so far Athletic has outsold its non-alcoholic beer competitors, beating out Heineken and Budweiser. But as Athletic rapidly expands its production, can it keep the buzz going? This is the economics of Athletic Brewing. - One of the advantages that Athletic has over huge beer companies is that it is able to focus exclusively on this niche of non-alcoholic beer.

- [Narrator] Since Athletic's founding, it has invested over $100 million into manufacturing and developing its own process of non-alcoholic beer production. - Non-alcoholic beer was born out of prohibition and it was a really penalty box concept, and then there was basically no innovation for 80 years. - [Narrator] Even as more companies have added alcohol-free beer to their repertoire, it's common for them to just make their original product, beer, and then remove that alcohol through additional processes. Athletic takes a different approach. Instead of adjusting just one part of the process, Athletic makes 10 to 12 changes across all brewing stages. It's a new process and a single mistake could make alcoholic beer ruining a batch. - Their process can be more complicated, but in some ways it can also be more efficient. - [Narrator] For example, for every three and a half gallons of water Athletic users,

it creates one gallon of non-alcoholic beer. Whereas the Brewer's Association estimates that the average craft brewery uses about seven gallons of water for every gallon of beer. - So, we're almost two times better than that. What we're trying to figure out is how we can squeeze every last drop of product out of every single batch. And so, we're investing in equipment that can help us do that. - [Narrator] And Athletic could tailor its process to the specific needs of non-alcoholic drinks, like pasteurization, one step traditional beer doesn't need due to its alcohol content. - It's very challenging for an alcoholic beer brewer to go into non-alcoholic beer, because there's so many food safety requirements. You're answering to different regulatory agencies, you have to have food safety plans, and it's just a lot more involved. - [Narrator] Now, Athletic's Connecticut facility

has the capacity to make 450,000 barrels a year, making it one of the largest dedicated non-alcoholic breweries in the world. And with one San Diego facility up and running and another underway, it will soon be able to make over 1 million barrels per year. - This is a massive amount of growth, and it represents a huge bet from Athletic that people are not just going to keep drinking non-alcoholic beer, but they're actually going to increase their consumption. - [Narrator] Where Athletic scales up is also strategic. Data from its direct-to-consumer sales helped guide its initial decision to build that first San Diego facility. - We were really following our e-commerce data. We right from the jump, we're selling a lot of beer in California in the Pacific Northwest, and so, we bought a brewery and quadruple the size of it in 2020 to 2021 to meet that demand. - [Narrator] And DTC sales is one arm of distribution

Athletic has that its beer counterparts don't always get. - We had the option of distributing and marketing in ways that alcohol had never been marketed before. - [Narrator] In the US, alcohol sales are heavily regulated. - With Athletic, because we're non-alcoholic, we immediately listed on our website everything for sale that we were making. - [Narrator] In 2018, over 50% of Athletic sales were direct to consumers, which let it gather actionable data on its customers. - So, we had really fast feedback loops on what kind of beer they liked, where they live in the country, what the purchasing patterns are, and that really informed our distribution and marketing strategy is like where are we resonating early and can we build on that and what are we learning from those consumers? - [Narrator] Athletic found that 80% of its customers still drank alcohol, and more than 75% are under 45 years old.

- Historically, people drank non-alcoholic beer instead of alcoholic beer. Now, they're drinking non-alcoholic beer in addition to alcoholic beer. And it suggests that as young people get older, the market is going to get even bigger. - Really, I was kind of the target consumer, someone who fashions themselves as slightly athletic, but likes to work out and stay healthy. - [Narrator] So, as Athletic explored other distribution avenues, Shufelt brought it to places he naturally went, from 5K races to Whole Foods. - The beer aisle is immensely competitive. It's really hard to get space on that shelf. - [Narrator] But at Whole Foods, about 50% of the cooler space is dedicated to craft beer. So, its customers are used to trying new brands. And the fact that Athletic was a non-alcoholic craft beer gave it a much higher chance of getting a spot.

In June of 2018, just one month after launching commercially, its beer was on Whole Foods' shelves. As Athletics scaled up its production, Whole Foods was able to distribute it across the country. [Narrator] Now, Athletic has been Whole Foods' top-selling beer across all beer for over a year, and wholesale distribution has transformed Athletic sales. In Athletics' first year, it sold 875 barrels. In 2023, it sold more than 258,000 barrels. With Athletic beating out Heineken and Budweiser in non-alcoholic beer sales in stores for the past two years. But today, the non-alcoholic beer industry is becoming increasingly competitive. The other question for Athletic is, how much non-alcoholic beer can Americans actually tolerate? The answer to that question is higher than we used to think, but it's not really clear how much higher it can go. If non-alcoholic beer turns out to be a short-term trend,

that's not a huge deal for alcoholic beer companies. But Athletic exclusively focuses on this one product, and that's usually an advantage for Athletic, but it's also a huge risk. - [Narrator] Athletic says it's focusing on getting customers to view its product as more than just a substitute for beer, especially since beer is less popular than ever before. So, while Athletic's 75,000 points of distribution are mostly places like grocery stores and bars, about 5% of these places aren't licensed to sell alcohol. - It could be anything from coffee shops to convenience stores to state park beaches, things like that. Every year we branch out more and more, so we have our beer trucks going to stores they've never considered going to before. - [Narrator] Athletic says that over 50% of its customers are buying Athletic in places they would normally have grabbed water or a soda. And if that number continues to grow,

the chances of alcohol-free beer being just a trend could diminish. They believe that there are more times in the day, more opportunities for people to drink non-alcoholic beer than alcoholic beer. You wouldn't have an alcoholic beer for lunch when you're at work, or, you know, at 5:00 PM when you're still stuck at work, but you might drink a non-alcoholic beer then. So, they think that there are opportunities here that just don't exist in other parts of the beer market. (upbeat music)

Whole Foods’s Top-Selling Beer Is Actually Non-Alcoholic | WSJ The Economics Of

The Wall Street Journal takes you inside carefully selected stories and events in a visually captivating way so you can dig deeper into the news and insights that matter to you. 

Whole Foods’s Top-Selling Beer Is Actually Non-Alcoholic | WSJ The Economics Of

Whole Foods’s Top-Selling Beer Is Actually Non-Alcoholic | WSJ The Economics Of

Scripts