🎧🍌 Creating a New Market with Bill Shufelt, Founder and CEO of Athletic Brewing
🎧🍌 Creating a New Market with Bill Shufelt, Founder and CEO of Athletic Brewing
Inside how AB created the non-alcoholic beer category, how Bill first marketed the product, how he got into Whole Foods, building a unique omni-channel strategy, and the importance of investor comms
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💡 In 2017, Bill Shufelt founded Athletic Brewing with a crazy idea: non-alcoholic craft beer. 🍺
At the time, non-alcoholic beer was only 0.3% of the US beer market. But Bill thought there was huge pent up demand for great tasting, non-alcoholic beer.
Fast forward five years, and Athletic Brewing did $90 million in 2023 revenue and is now the top selling beer (of any kind) in Whole Foods. Athletic not only created a new category, but is the #1 selling non-alcoholic beer in the US with over 50% market share.
And Bill’s not done. He thinks non-alcoholic beer could one day make up 50% of the entire beer market.
In this latest episode of The Peel, Bill takes us inside the early days of starting the company, including realizing there was an opportunity to make non-alcoholic beer, interviewing and getting denied by 100’s of potential co-founders, iterating on new formulas in his garage using Gatorade jugs to find the perfect taste, struggling to find early investors, getting into Whole Foods, and eventually building multiple breweries across the US.
Our conversation is a case study on creating a new category. He shares how he first marketed the product to consumers and retailers, Athletic’s unique omni-channel strategy, and the importance of over communicating with your investors.
I learned so much from Bill and I think you will too.
Timestamps to jump in:
04:10 Becoming the #1 beer in Whole Foods
05:54 The history of non-alcoholic beer
10:41 Why an outsider had to create this new category
15:34 Health benefits of avoiding alcohol
17:51 Turner tries the beer
22:49 Bill’s wife pushing him to start Athletic Brewing
26:38 Writing a 96 page white paper on non-alcoholic beer
28:42 Quitting his job to start six months of research and networking
30:21 Meeting the perfect co-founder after 100’s of meetings
32:34 Putting his life savings into a warehouse and brewing equipment
33:04 The importance of setting company values early on
34:23 Brewing the first beer in Gatorade jugs
36:16 Selling the first bottles to retailers
37:42 Explosive growth in 2019
39:39 Why new products and D2C helped them scale so fast
40:39 Using TikTok to sell-out new product launches in 30 seconds
42:00 The value of doing early customer service himself
44:45 Getting to 61% market share in non-alcoholic beer
46:10 Struggling to raise the first angel round
48:34 Using consistent investor updates to easily raise the Seed, Series A, and Series B
50:47 Transitioning to institutional capital for its Series C
52:33 Betting on a new category to expand market size
55:44 Information access is enabling healthier consumer behavior
58:11 Bill’s early strategy for marketing the product
1:01:43 The importance of over communicating with your investors
1:03:44 Why retailers like Athletic Brewing’s unique omni channel approach
1:06:16 How building its own breweries and supply chain enabled its unique strategy and better margins at scale
1:09:04 Getting into Whole Foods before launching
1:11:31 Doing unscaleable things over and over again
1:13:50 Why entrepreneurship is a long game
Find Bill on LinkedIn
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Bill, how's it going? Welcome to the show.
Bill Shufelt:
Awesome. Turner, thanks for having me. Excited to be here.
Turner Novak:
Yeah, so I'm excited for you. I read a stat recently that as of, I don't know exact date, but you were the number one beer sold in Whole Foods just by volume. That's pretty incredible.
Bill Shufelt:
The Whole Foods data set is definitely some of our best data.
When I was starting Athletic, a lot of where we could go was just narrative and we didn't have any real-world examples to hang our hat on, but I had my experience and I was like, "This is going to be huge. There's a sea change going on, and one day it could look like this.
But it was always pointing at other things, saying it could be that. And now we have real data. We have national retailers where non-alcoholic beer is over 10% of all beer sold in them, where it was like 0.3% of beer when we started. And in the most leading edge grocery stores nationally, Athletic is the number one adult beverage overall. So that has been the first, not the first, but a real, real proof point that it is happening and it's going to keep happening.
Turner Novak:
Yeah, because I remember even growing up in college, you're drinking Bud Light or whatever, and you kind of wonder, "Do I need to be drinking this?" There's obviously some benefits to drinking alcohol, but there's obviously a lot of downsides too. It’s so fascinating that it was just kind of not a market really, non-alcoholic beer.
How did you come up or how did you come across the opportunity originally
Was there a thing where you had this light bulb went off as like, "Wow, you can drink non-alcoholic beer"?
Bill Shufelt:
Yeah. I mean, it had to happen to me personally, and I apologize in advance, the scroll past rate on this episode I hope isn't too high in your episode list because it has non-alcoholic beer in it.
But there are such misconceptions about non-alcoholic beer, and I admit I was part of that. I only ever spoke about non-alcoholic beer if I was making fun of it until I was a drinker of non-alcoholic beer and really wanted it and needed it.
I think the hard part is, non-alcoholic beer was really born out of the Prohibition era. So it was when a alcohol was taken away, which was this fun thing, America was just into the roaring '20s, and I don't know when exactly prohibition went into effect. But essentially, fun was taken away, all these great options off the table, and this generic near beer entry emerged. It was so clearly a lesser than product and it was marketed as such, and it just carried these enormous stigmas forward 80 years.
There was really no marketing effort or product innovation effort to try to change those deeply ingrained stigmas in society. So non-alcoholic beer fell to very stigmatized, very niche populations. It was assumed that non-alcoholic beer is for people with medical conditions, religious preferences, or people in recovery, and really thought of this market that was 1% of the population, 1% of their life, like niche of niche, where really it's almost the exact opposite.
If you really think about non-alcoholic beer, the occasion base, when it could be consumed, it's not 1% of 1%. It's actually almost everyone is not drinking 99% of the time. And if it tastes well, if it's marketing great, and people are excited about it, this could be the best part of the day of a majority of the population. But here it was at 0.3% of the beer market, had seen no innovation in 30 years, less than no marketing.
So I was, call it mid 2010s, walking around in grocery stores. I had stopped drinking for just personal lifestyle reasons, and I can go more into that, but if you look around the grocery store at that time, every category had totally innovated. If you walked into Whole Foods, it's like local this, organic this. There were incredible sourcing on everything in the whole store, nothing looked like it did in the 1980s, except this one corner, and these two dusty offerings in the corner. It was like, why isn't that shelf changing? There's 10,000 breweries in the country, and why is no one thinking about this?
Turner Novak:
It's kind of an oxymoron, non-alcoholic beer. It sounds like that can't exist almost.
Bill Shufelt:
Yeah. Even the name of the category itself, might as well say not fun, not good. Non-alcoholic, it's just like no, no, no.
And here I was. I think just so many people fashion themselves. I'm not that special person. I thought of myself as a very average, modern, busy adult. I was working at a large hedge fund. I like to do my workouts in the morning, so wake up at 5:00 AM, workout, go to work. I was graded on my outputs at work in a very intensive trading hedge fund shop. And then after work, I wanted to do work dinners, social stuff, dinner with my wife.
But that was all alcohol occasions, most days of the week, most days of the weekend. And alcohol was such a performance ceiling on my whole life, and work was just following me around in my phone at those work dinners. I wanted to be totally coherent and taking notes and stuff.
At the end of it, I was like, maybe I'll stop drinking for a month. In that, I was training for a long distance running event, and I was like, I'm going to stop drinking for a month. And I'd been blowing myself up somewhat too regularly during that also.
Turner Novak:
Blowing yourself up, drinking too much, you mean?
Bill Shufelt:
Yeah, occasionally drinking too much. I was like, "Man, this is just so unproductive to everything."
I stopped drinking for a month, and I slept incredible. I felt great working out. I was unintentionally losing weight. I was super focused at work. I had no off days. It was just this positive cycle that I had entered into.
I realized alcohol was this big limiting factor on my lifestyle, and it didn't take long at all for me to realize that. But I was in all those social situations, all those work situations, everything, and I just had such an authentic need for better products there. I was either on the kids' menu or had these very inferior, older products, and it was just a product that really needed innovation.
Turner Novak:
Is it less profitable to sell non-alcoholic beer? Do you think there was some kind of incentive thing, the reason that people didn't really ever invest in it? Have you ever figured that out?
Bill Shufelt:
Well, I think there's a bit of an innovator's dilemma too. So if people who make 99.5% of their money on selling alcohol talk positively about non-alcoholic beer, there's like, "Ooh, do we really want to steer people in that way?" They may realize they don't need the money train as much. So I think there's a bit of innovator's dilemma, and there's a lot of friction to getting going. I mean, absolutely nobody in the industry wanted to work on this. Nobody wanted to talk about it. It was really hard to attract resources.
I went through some really big valleys of lack of awareness, and it took me forever to find our technical co-founder. I came in as an outsider, and our other co-founder John is an incredibly talented brewmaster. Both of us have grown a lot with the business as it scaled. But I talked to hundreds and hundreds of people before I got to John, and it was all nose, all rejection, contract manufacturer, and so we built it all ourselves.
So I think there was a huge amount of friction and disbelief to getting going, but obviously now there's hundreds of entrants who've come into the category since Athletic started.
Turner Novak:
Yeah. When you first started it, what do you think the opportunity was to build a big non-alcoholic beer business? Was there a reason that it didn't have to just exist inside of a different kind of incumbent? Was it just that nobody cared, it was just a new product or new market?
Bill Shufelt:
Yeah. I think for a true innovation to happen, it was almost too much of a bureaucratic risk to happen within a big company in a way, for someone to really make a big bet on and put their name on.
I do really respect and want to shout out Heineken especially, did a really nice job with their Heineken 0.0 and launching that from within the company. Since then, a number of the big brewers have launched products in the category, which is awesome.
It's a rising tide environment and very positive sum, but I think it had to come from the outside. It was such a hard road to slog both on product and marketing. I think it's natural that there's a specialist in the category.
Turner Novak:
And then do you have to do a different type of process to brew it? So it's almost different, like you need to invest in completely new machinery, maybe a new entire brewery or entire facility. Is that true?
Bill Shufelt:
So there are some pretty big technical and investment modes. So there's 10,000 breweries and 10,000 wineries in the country. And relative to the average brewer making a new product, say a hard seltzer or something, requires no new equipment, can just plug and play and go.
Turner Novak:
Really? So you make a hard seltzer with the beer lines?
Bill Shufelt:
I was comparing it to other types of innovation. So if your average craft brewer was to make a line extension of some new beer or some new hard seltzer, it's kind of plug and play and go.
For non-alcoholic beer, one of our first principles moments was not using all the existing technology that had been used to make non-alcoholic beer, come up with a new process ourselves from the ground up that wasn't as highly processed, and go about making the product in a totally different way.
Once we realized we actually had this very valuable proprietary secret on how to make it differently, that was a big part of our decision to stand up our own facilities. It is somewhat different equipment, a lot more actually on the food safety and quality side, which is kind of out of reach of most brewers in terms of capital expenditures, but really to protect it as a trade secret also and control the quality ourselves too. We knew coming into this category that was so stigmatized on quality, we wanted to have perfect beer every time, otherwise we were dumping it, and we didn't want to rely on a contract manufacturer for that. So that was definitely part of it.
Turner Novak:
So when you say compromising on quality, are you saying just generally, we'll say 10 years ago, pre-Athletic Brewing existing, the beer didn't taste that good?
Bill Shufelt:
Well, by TTB standards, we're not allowed to disparage other brands. So I will say the market itself was bleak enough that I didn't have an entrepreneurial bone in my body, and it was so bleak that I wanted to go out and reinvent the category. I saw an opportunity to make far better products.
I did see a big economic opportunity, but I was already in a great economic opportunity in my hedge fund job. The risk reward of leaving that job for better economics was very poor. You know how bad the percentages are of companies hitting escape velocity.
But a big part of it was the personal impact too. There's something beautiful about working a job and getting a paycheck, but there is part of life that I think the fulfillment and the impact is so important too, and I'd never really had that. So I kind of saw in my own life how positive an impact reducing my alcohol intake had on my sleep, my health, my performance at work, my personal relationships, my workouts, my fitness, and even things like, over time, my intellectual curiosity. I hadn't really been much of a reader for 12 or 15 years since high school.
And all of a sudden, at age 30, when I stopped drinking, I was mowing through books at night. It was like my intellectual light bulb had been turned back on. I was all of a sudden watching YouTube's on topics I was interested in. I was reading, I was just picking up books on all different topics for the first time.
So it was this really positive thing in my life. I actually had a couple friends, just on a lead by example, started to drink less or stopped drinking entirely, asked me how my journey was. Did anyone care? Did your coworkers treat you different? When I saw the impact on some of their lives, that was really meaningful to me on a one-on-one basis. And I saw the chance with Athletic Brewing to potentially do that at scale. There hadn't existed these moderation off ramps. It was either you were drinking, or you were not drinking and you were not participating before. And that was a pretty stigmatized choice.
If you look around at the stats too, alcohol has a lot of stats attached to it in society. Well past the 15 million documented alcoholics in the country. Every five deaths below the age of 50 is attributed to alcohol. 5% of all cancer. 70% of incarcerated people are under the influence. So there's just crazy stats on the impact of alcohol in the world.
And I never wanted to stand on a soapbox and be prohibitionist whatsoever. The world's a stressful place and people can relax in whatever way makes sense for them. However, if we could de-stigmatize other options that were more moderate, probably have an enormous positive impact on tens of millions of people over time. And that's been one of the most exciting things playing out that I've seen in Athletic room.
Turner Novak:
Yeah. I actually have one of the cans in front of me here. I'm going to open it in a second. There's technically a very, very small amount of alcohol. It says in the can 0.5% alcohol. So how would that kind of compare to just a traditional beer, like alcoholic beer?
Bill Shufelt:
So that's kind of just a labeling thing, and I know because it's called out on the label that it brings attention to it, but really an enormous percent of the food in grocery stores has alcohol. So basically, any drink you have with flavor probably has alcohol. All your favorite colas have trace alcohol, like fruit juices, really anything with flavor. Flavored sparkling waters have trace alcohol. Pasta, bread, anything with carbs basically. So bread can be up to 2% ABB.
There's a big misconception that everything is 0.0%. That's not alcoholic beer. It's actually pretty much everything in the grocery store has 0 to 0.5% alcohol. It's just labeled very clearly because this is non-alcoholic beer.
Turner Novak:
So this is almost, there's the same amount of alcohol in an Athletic Brewing beer as you'd get in a Pepsi or a Coke or a soft drink potentially.
Bill Shufelt:
It could be more or less depending on the beer and depending on the brand, but it's in the same non-alcoholic federal standard of all those products. Yeah.
Turner Novak:
Interesting. Okay, cool. I'm going to open this one up right now because I haven't tried this flavor yet.
I don't know how loud this will be on the mic for everybody…. cheers.
This is your IPA, right?
Bill Shufelt:
Yeah, so that's our Run Wild IPA. That was one of two brands we launched with. It's still our most popular beer. It's really the most highly awarded non-alcoholic beer on the planet. So it's meant to be a traditional but very approachable West Coast IPA. It's got a Vienna malt backbone that's pretty hardy, and a few different hops make up the hop pill.
Turner Novak:
Okay. Yeah, it literally tastes like an IPA that you'd get from any craft brewer. Very comparable.
Bill Shufelt:
Oh, thank you. It's definitely the goal.
Most of our flagship beers have won awards versus full strength alcohol beers at different competitions and stuff. Yeah, the goal is to ... I said the word without compromise earlier, but that's one of our main slogans. It's meant to be the same flavor, the same experience as alcoholic beer, and that lets someone have it as a dinner pairing on Tuesday. Or you can drink non-alcoholic beer at any time and have a great culinary experience, and then get back to whatever you were doing too and not feel like you'd cross this alcohol line in the sand for the day.
Turner Novak:
Yeah. I think when I first reached out to you, I mentioned, my father-in-law has been drinking it for a couple years. I remember the first time I noticed it, I was like, "Non-alcoholic beer. What? This is so crazy." But he's like, "Yeah, I like beer." But for some health reasons he can't really drink it anymore, he has to be pretty careful. And yeah, just have a couple Athletic Brews and he's still good. There's no real impact from it. So it's super impressive. It's really cool.
Bill Shufelt:
Awesome. Yeah, that's what it's all about, is you just said with your father-in-Law, but anyone not drinking for any reason at all, they may drink alcohol at other days of the week, 80% of our customers do still drink alcohol at other times. It's just they like a good tasting beer with flexibility in other times.
Turner Novak:
Yeah, it's almost like you hit this, you mentioned a bunch of reasons of why you may not want to drink alcohol, but there's still this kind of social signaling reasons that like, hey, you might want a can of beer in your hand just to fit in or for social purposes. And you've also kind of solved that too, where if you look at the can, it just looks like a can of beer. There's no like, "Oh, that person's drinking a non-alcoholic beer," or, "They're not cool," or, "It's a can of water or something, or a bottle of water or a glass." It fits right in.
Bill Shufelt:
Yeah, there is. Even in a group of five people, there's so much stigma around choosing not to drink. It does make everyone uncomfortable because it's so ingrained in society, and we really just wanted to give people options that they can be proud of and comfortable with.
One of the big things for me was realizing I just love to be in bars, and it was more about getting to the place and seeing the people and being with the people I wanted to be with than it ever was about the alcohol and the drinks itself. But it took me a long time to realize that it actually wasn't about the alcohol that I was doing anything on weekend nights.
Turner Novak:
So then, what was the moment that you started the company? I know that you kind of have a story of that specific time or that period. Can you just talk us through that?
Bill Shufelt:
Yeah. As I said, I didn't have an entrepreneurial bone in my body. I thought I had just stopped drinking and I was on with my finance career.
So about a year and a half after I stopped drinking, me and my wife were walking to dinner, and I was just complaining about like, "I know there's going to be ..." We were walking to a great dinner I was really excited about, but I was saying, "I bet there's going to be a sugary soda, at most, a mocktail that they take no pride in." And I was basically like, "Why can't someone just fix this? It's so annoying."
I was basically saying it's going to ruin the whole dinner just because there aren't any good non-alcoholic drink options. I was like, "I'd pay anything for a good non-alcoholic beer to be on that menu." And my wife hit me so hard in the shoulder. She never tells me I have good ideas or anything. She is definitely my biggest critic and advisor. And she was like, "That is a good idea, you should do it." And I was like, "What are you talking about?" It hadn't even crossed my mind that this was an idea.
She was actually getting her MBA at the time, so she was probably in a really receptive place to hear that also and to help me in business planning. But it was just this incredible snowball feeling of passion and intellectual curiosity and research.
You know that feeling when you just get absolutely lost in a project? That happened for two years. I was just having so much fun working on this project and researching and calling people and reading brewing textbooks. But eventually, that got to a point where I was two years in and I honestly didn't know if I was ever going to do anything with it.
I had actually told a colleague about it for the first time. I had told no one that I was working on this the whole two years until a couple weeks before I quit. And I told a colleague finally and I said, "But there's like 10% chance I ever do anything with it."
And then fast-forward a couple weeks, it's like the last couple days of the year, December 27th, and me and my wife go out to dinner and I didn't realize, but she basically wanted to go out to dinner to sit me down and talk about this. She's like, "I want you to walk in on the second of the year and quit your job." She was like, "We can figure out the budgets, we can make this work, but this is such a passion and I don't want to be talking about this in 20 years as non-alcoholic beer becomes an enormous thing. You had the idea, you didn't do anything with it, you had this business plan." She's like, "I don't want to know you if we're talking about this as we get old and gray, and you don't do anything with it."
I was kind of blown away and thought about it for two days, and walked in and quit my job. But it was like, yeah, my wife was super involved in those two very pivotal moments and has since. We talk about it every day, obviously. But yeah, and then I was all of a sudden out the door, hadn't intended to quit my job even a week before, and I was just kind of off and running. It was very much a burn-the-boats moment. I was a accidental entrepreneur. I've had one idea ever, and I've just been so excited about it.
Turner Novak:
Were you almost approaching this maybe from an industry research standpoint? Like if you found an investment opportunity at the fund you were at, maybe you would be able to take advantage of it? Was that maybe the initial stages of research?
Bill Shufelt:
For some reason, not. I guess I had scoured the internet, and you're pretty hard for non-alcoholic beer. So I was pretty confident nothing that great existed and there wasn't anyone at least talking publicly that they were working on it or anything. So I had kind of hit a dead end in many ways. I had never thought about that way, but actually, I don't think I was looking to invest in something. I think I was just ready to build it and make it happen.
Turner Novak:
I've heard you mention this before, you had a 96-page business plan. I mean, that's intense. What was in those 96 pages?
Bill Shufelt:
It was a real white paper on what non-alcoholic beer in America could be, why it doesn't exist, why it could exist, analogs in the real world. Everywhere else in the world, non-alcoholic beer was already essentially 5% of the global beer market. In a lot of European countries, it was upwards of 5, 8, 10% at the time already. So there are real places around the world, even where alcohol is a big part of customs and social norms, that non-alcoholic beer was going to be a big thing and some green shoots that way. But I have every respect for serial entrepreneurs and people who can identify something and be like, "That's probably going to be big." And they develop it, they spin it up, and they sell it and they're onto the next thing. I had such a deep feeling in myself, just that I am an average modern consumer and I need this so badly that there've got to be a hundred million other people just like me looking for this.
So kind of went out there to fix it with, of course I ran surveys and stuff, and I had a lot of survey data in that business plan, but I just had such confidence that this was going to be big. I will say it did really help that at the moment, as I was in business plan, there was the biggest craft brewery buying spree ever going on. Anheuser-Busch had just bought 10 craft breweries at mostly undisclosed sums, but there were two enormous headline transactions. Lagunitas and Ballast Point both got bought for a billion dollars right around that time. I think one of those happened before I quit my job, one happened after, but I had these two great exit stories, even though I was not planning on building foreign exit necessarily, but it at least made it somewhat easier or more real world to raise money with there's actually industry activity happening.
Turner Novak:
So then what came first? Did you raise money or did you find your co-founder?
Bill Shufelt:
So I was dialing in the business plan for the next six months after I quit my job and immediately started networking. So I was going to brewing conferences with 10,000 people, really out of my comfort zone, just trying to talk to people.
Turner Novak:
Did you tell them what you were doing or were you pretty quiet about that?
Bill Shufelt:
I tried to. In business planning, I was so secretive of the idea, and then immediately once I crossed the threshold to talking about it, I was open to talking about it with anyone. And I'm glad I did that because I got a lot of really good feedback along the way, and it's something that took me a while to realize, is that an idea is an idea.
An idea is like 0.1%. The chance someone takes your idea and goes and works relentlessly on it and spins it up and is successful as a competitor is so, so low. Even at the biggest competitors or multinationals, people don't just grab onto ideas and incubate them. There's literally not a process for it.
So I generally find sharing ideas and talking about it is a very positive feedback loop. What was not a very positive feedback loop was talking to people about my idea because it was just straight rejection across the board. And very nice people, the brewing world is full of extremely nice people, and-
Turner Novak:
Even they were dismissive?
Bill Shufelt:
Yeah. In the nicest way possible, they'd be like, "Man, we see thousands of people at our tap room every year and not one of them has ever asked for non-alcoholic beer." Or I'm like, "Oh, have you tried offering it?" Or do a survey, do say like, "Would you have had a non-alcoholic beer today if we had one?" So I started putting up job ads on message boards and stuff.
I literally talked to hundreds of people before I got to our co-founder. By the time he responded, non-alcoholic beer was not in the job ad, and he applied and he had all sorts of awards. He had won a bunch of the highest to win IPA craft brewing awards at very peak industry times too. So super competitive awards he had won or meddled in. So I knew I was talking to an extremely talented person, probably the most talented of everyone I had talked to.
I basically started the conversation with like, "Please don't hang up. I know you're going to say no, but please don't tell me no till Monday." I was like, "If you promise me you'll just listen for five minutes and say no on Monday, that would really make my weekend." And he was like, "Okay."
Turner Novak:
He's probably like, "What is this guy about to tell me? What is he going to say?"
Bill Shufelt:
And then he gave me all the time in the world, and I was just rambling about my non-alcoholic beer manifesto. I think he was a young parent at the time. He had a one-year-old and a five-year-old. He'd grown up in the food service industry. His dad had been a pioneer on farm to table restaurants. He really understood the food industry, but also the alcohol side of that a little bit. So he was like, "Well, thank you. This was really interesting. I'll think about it over the weekend." Apparently he talked to his family and thought about it a lot.
The innovation challenge of it, coupled with the potential for positive impact, and he hit me back on email and he was like, "I was immediately going to hang up, but you convinced me to stay on a few minutes." He is like, "Then I was a hundred percent going to say no ... and I think it's genius." He is like, "I see it." He's like, "The world needs it. This will be such a fun challenge.” Me and him just spun off and talking about it and emailing about it. And then I flew down probably within a few days to see him in New Mexico. Yeah, by the way, he was almost perfectly across the country, the one person interested in this.
Turner Novak:
Yeah. You are still in? I don't know if you mentioned.
Bill Shufelt:
Connecticut.
Turner Novak:
Yeah. You were in Connecticut. Okay.
Bill Shufelt:
Yeah. So I basically put my life savings into securing a warehouse and some very small brewing equipment.
Turner Novak:
This was pre-meeting John?
Bill Shufelt:
Right about the same time. Yeah. So I actually didn't commit to the warehouse until three months after I met John. So I convinced him to move across the family with his one-year-old, five-year-old, and his wife. Yeah, basically we started home brewing in empty warehouse, just like two grown men who didn't know each other, but it gave us a really good chance to set the company up for the long-term, things that I didn't expect to be so important because they'd never been important in prior organizations I worked at, like the employee handbook, company values, setting the team and the foundation of the company up for the long term with the impact we want Athletic Brewing to have in the world, which was in my business plan and all my planning materials.
But really concretely setting that up and then communicating to everyone who joined our company along the way went way farther than I ever would've thought. I would've thought I'd write the employee handbook once and put it in a filing cabinet, and if we ever ran into trouble, I'd be like, "Well, you read it," but it actually is something I sit down and talk to with every single person who joins our company still to this day, and it's been really a north star. Yeah.
Turner Novak:
Wow. Yeah, I mean, I think of all those corporate employee handbooks that they give out on the first day, and then you put them in your desk, and then you never look at it again.
Bill Shufelt:
Yeah. I think the difference is, me and John, we iterated on it. We were like, "Okay, this is a good version of this handbook." And then I think early in their employment with Athletic, people sit down with me and they're like, "Wow, he's really excited about this handbook. It must be important."
Turner Novak:
Yeah. You did this while you were testing the first recipes basically, right?
Bill Shufelt:
Yeah. So to set the stage a little bit, John moves across the country. I bought these stainless steel tanks and fermenters that were about as tall as me. There was a three-and-a-half barrel system. And John goes, "Those are way too big." And he brought in Gatorade jugs the next day from his house and literally a gas stove to cook them on.
So we had this string of Gatorade jugs stacked three high in a row in a stair formation almost, and we did hundreds of trials. So we'd probably do three a day. It was purely scientific method. It was like, we're going to change the temperature in this tank one degree today, and we're going to do this thing different the next day, this thing different the next day, and see how it came out.
At any given time, we had this, we called it a fermentation cart, but we had 20 or 30 experiments going on at once, and they're bubbling in these carboys. We'd monitor them, we'd taste them, and we'd take notes, and we'd adjust back in the process. It was a really fun time and super small scale.
I'd say around four or five months into it, the beer actually started to taste pretty good. So at that time, we moved the home brew set up to his parents' garage actually, which yeah, another embarrassing thing for two grown men, but they just had a little more space there, and we started to do construction on the warehouse. Oh, I didn't realize the home brew setup is on the wall behind me there.
Turner Novak:
Oh, nice. Okay, so this was the one in your warehouse or in his parents' garage?
Bill Shufelt:
Yeah, so that's Stratford, Connecticut. It was our first brewery. It was about 8,000 square feet.
Turner Novak:
So when you say Gatorade jugs, it's like the football sideline Gatorade.
Bill Shufelt:
Exactly.
Turner Novak:
I thought you meant Gatorade, a little big thing you drink out of, but okay.
Bill Shufelt:
Yep. Yeah, we went from that, the beer started to taste good, then we started hand-bottling it. I started taking it around to retailers. I built a list of 300 interested retail clients, took it to a distributor, and then that way, when we finished construction, we had a distributor ready to go, we had a retail list ready to go.
I had a full list of summer sampling events ready to go. We're kind of like a coiled spring ready to hit the market a little bit, a market that didn't want our products at all.
Turner Novak:
Well, so the retailers didn't want it or the consumers didn't know that they wanted it?
Bill Shufelt:
Kind of exactly that. It's like, there's such overused quotes about Henry Ford saying if he asked customers what they want, he'd say a faster horse or something like that. It was one of those situations where the distributors didn't want it, the retailers didn't want it, and the customers didn't know they wanted it.
So there was no dialogue around the category. I had to find the customers, find the retailers to convince the distributors, but then once it was on the retail shelves, I marketed and sampled crazy to make sure people were coming to the stores to clear it out.
It actually was the biggest oxymoron or ironic shift where we literally could not have a discussion or get someone to care whatsoever in 2018. And then coming around to the next summer on the market for 2019, we'd been sampling like crazy and opening retailers, all of a sudden in summer 2019, this enormous brewery we had built that we thought was going to last us for five years potentially, we outgrew it in 10 months.
So it was just like all of a sudden, every week, the shelves were getting cleared out, we could not keep up, we had to hire more people, we raised more money. We doubled the size of the brewery in very short order in June 2019, and we were like, "Whew, we're going to be good for another few years now." And we outgrew it in two months.
Turner Novak:
Holy cow. Wow.
Bill Shufelt:
We kind of knew we were in scaling trouble there because it's not like a piece of software where it can basically scale infinitely if you get the cloud space. It's, we had to actually build the manufacturing, and manufacturing is like, if you're absolutely flying, manufacturing building is 18 months. So we started hunting for distressed facilities at that point. So we were-
Turner Novak:
You said distressed?
Bill Shufelt:
Yeah. I don't mean to use that term so lightly. It's just underutilized breweries essentially that we could go out and potentially purchase.
Turner Novak:
Okay, so get a good deal basically.
Bill Shufelt:
Yeah, because we were pretty undercapitalized in all directions. So undercapitalized on working capital, undercapitalized on being able to acquire a nice brewery or surely build one.
So we went out there and started kind of knocking on doors and seeing, is there any underutilized capacity out there? Where would it make sense?
I guess a big part of what I left out before too and why we hyperscaled so fast is, we entered a category that had been nothing but lagers. It was like boom, one kind of beer, that was all the category was. If you were drinking non-alcoholic beer, you got a lager.
Come Athletic Brewing, we made a whole range of beers, and so we launched with an IPA and a golden ale, but we also launched digitally native on D2C. So most alcohol breweries, when they launched, they launched locally and then you open beer distributors, but it's extremely fragmented and takes a long time to scale out your web.
Even as recently as 2018 when we launched, there was almost no CPG selling on the internet, and definitely not in beverage. Hint Water had launched online, and they were a real pioneer on DTC. I kind of read about that story in Kara Goldin, and I was like, "Athletic could definitely sell online. Why not?"
So we launched online, and I was packaging the packages. I was like, if we sell five a day, whatever, it's great. At first it was like five a day, that was 10, that was 25, that was like 50 a weekend.
Before I knew it, it was over a hundred orders a day coming in on our e-commerce because where the category had been one style, we were all of a sudden offering. We launched 15 beers that first year, and we averaged 50 new beers a year since then. So it was more variety than the category I'd ever known.
By no means am I a TikTok genius or anything, our social media was just very authentically our company story. And at 12:00 every day, I would just walk into the back and be like, "This is what we're doing today," or, "This is the race I'm at. This is where I'm sampling," or, "This is where I am in the world." It was in a very authentic feed of what's going on in Athletic Brewing.
So every Monday at 5:00, we'd release our new flavor of the week and I'd post about it lunchtime, what it is, and all of a sudden people became very accustomed to being at their computers at 5:00 and buying the week's release, and we started selling out of these releases in 30 seconds.
Turner Novak:
Wow. Okay.
Bill Shufelt:
I think a lot of people have a concept of what a craft brewery hype releases and people go wait in line for a beer release for a big one, and that line can be hours long.
What was different about us is we're launching just online, like a Ticketmaster concert or something. Me and John were absolutely shocked that a thousand orders would go through in 30 seconds. And then I'd get phone calls, I was customer experience, I was everything. So my phone would just absolutely blow up for six hours after that, and I'd have to apologize to people, tell them when the next one is, what's coming next week, things like that.
Basically, anytime we released a beer, I'd spend till 2:00 AM on my phone talking to customers after that. But that was great in many ways too because the iteration, the feedback we got through the whole ... I was doing our social media and our customer experience for at least the first 18 months of the brand, and that customer touch point was so valuable.
Everyone has their own journey and ours surely hasn't been perfect, but I am thankful that I wasn't over resourced and I didn't launch with a big team or especially a team of senior people, because I think a lot of times companies almost build too much and they never get that feedback around launch time from their customers. I had to face our customers every single day on social media, in phone calls, in emails. I was doing 75 sampling events a summer, giving out beers too. So I had constant contact with our community. I think that was very formative also.
Turner Novak:
Yeah. So I think you started the company in '17, launched in '18, and then 2019, you did about $2.5 million in revenue, roughly. I think that was the numbers that I saw.
Bill Shufelt:
Yep. So then we had a LOI and a facility all the way across the country because we're selling a lot of beer in California and just generally the West Coast online. So in March 2020, we bought a facility, me and John were in Connecticut, and we bought a facility in San Diego, and COVID hit.
Turner Novak:
Anytime someone says March 2020, I always know something is about to go down.
Bill Shufelt:
So we had made the biggest financial investment of our company's life, thank goodness we had just closed our Series B until we were well capitalized, and we had some great teammates heading that direction.
We actually hyperscaled like crazy during COVID. We finished 2019 with 26 teammates, and we finished 2020 with about 120. Most of those were on the West Coast. I would say extremely high percentage of those teammates are still with us, four years in here. I moved to the West Coast myself to be closer to that newly gelling team out there. So we bought a 40,000 barrel brewery, scaled that up to about 160,000 barrels. It's like 80,000 square feet was that facility, so about 10 times the footprint and 15 times the output of our initial facility.
Turner Novak:
I think in 2020, you did about $15 million in revenue, is what I saw.
Bill Shufelt:
Yeah. Somewhere around there. Yeah.
Turner Novak:
Yeah. And then you had 61% market share of the non-alcoholic beer industry in the US or something like that. I mean, that's a pretty big percentage.
Bill Shufelt:
Yeah, it's kind of held pretty close to that. I think we're still 55% share of the craft non-alcoholic beer market. When we launched, there were about 8 to 10 maybe non-alcoholic beers in the country. There's now 150 brands and about 500 beers in the market. Athletic is about a 55% share of the craft non-alcoholic side. It's been fun since then.
In 2020, we were finally able to open more states of distribution. So we probably opened about 20 states of distribution that year, and then we also started to look at where we could scale up our East Coast manufacturing footprint as well.
So in 2021, we lost a lot of facilities to bigger warehouse type companies over that time period, but we finally found a great one on the East Coast in August of 2021 and scaled that up and opened it in June of '22. So the new brewery in Connecticut that I'm in right now is about 50 times the capacity of our original brewery and about a little over 15 times the footprint.
Turner Novak:
One thing I really wanted to hit on was fundraising. You touched on it a little bit, but I know you had a lot of conversations and it was a long grind, from what it sounds like.
What was that very first round that you raised? Was it before you launched? Was it just after you had kind of brought John on as a co-founder?
Bill Shufelt:
So most of our angel investors, as unbelievable it sounds, I can't believe I was actually raising the money at this point, it almost seems asynchronous to company progress, but I raised most of our angel round without anyone having a chance to taste the beer. So it was total narrative, and it was like, "Believe me." I thought it was going to be all friends and family that knew me really well, and I actually got a lot of no’s from that cohort. I wasn't the pushiest person ever because people are funny about money, and I really just kept talking to people.
A lot of my no’s led to, "It's a no for me. I don't really do pre-revenue or the privates, but this person I know would probably be really excited to talk to you or this person might be really excited to talk to you."
It was really bleak for a while. I remember I went out to a college friend, organized a dinner with five of his friends, and I didn't have huge expectations for the dinner, but was really thankful for the audience. I'd had 40 nos at this point, which is pretty exhausting. You travel an hour, you have a long conversation, you travel an hour home, and then you get a no a week later. Rinse and repeat 40 times was pretty tough.
Turner Novak:
Had you gotten any yeses at this point?
Bill Shufelt:
Yes, some of my former colleagues and friends, basically it was like immediate yes, a hundred percent, here's 25 or 50 grand, which is like, I also didn't realize that the size of angel checks is typically very small, even for super wealthy people, which was a miscalculation on my part too. I would've thought that very wealthy people do $250,000 angel checks, and I think that happens in some spheres of the economy, but not in unproven pre-revenue manufacturing. So it was a lot more checks that I had to recalibrate. But yeah, back to that example of the dinner, I'd had so many nos at that point that all five of them went in for $5,000 each, and I was so excited.
Turner Novak:
Yeah.
Bill Shufelt:
I ended up cobbling together an angel round with 70 investors, of which me and my wife were the largest single investor and then a very long tail. But that group of people, a lot of people who had invested not much money in the angel round, I was writing monthly investor updates that were very accountable, saying exactly what we were doing.
Every time we did a bridge round in October 2018, so six months on the market, and I was like, "Hey, investor team, essentially I'm looking to raise a $500,000 bridge round strictly for working capital to scale. We're starting to see some traction as you've seen in the investor updates." And it was like boom, immediately oversubscribed.
And then our Series A, about six months later in March of 2019, I gave people a couple months notice. They were like, good traction in the market. I was like, "Spring is gearing up pretty nicely. These are plans for the year ahead. I'm looking to raise this Series A." And it was like boom, oversubscribed.
Almost the same thing with our Series B a year later, which is a big step up. It was $17.5 million dollars. Actually at that point, so all along the way I had always thought I wanted to get institutional capital and funds that had seen other brands emerge from this stage and get going. And I really got a lot of no replies or no’s outright or people got fairly far into the process and then declined for any number of reasons. I don't really blame them. We didn't have a great margin profile at that time. We had good unit economics, but terrible EBITDA and realized gross margins and stuff.
Turner Novak:
But you were building breweries, right?
Bill Shufelt:
Yeah, and hiring a sales force and doing a lot of unscalable behavior. So it was always a no from the VCs, but I had this incredibly passionate angel cohort that was very passive, let me run the ship. I was giving great updates every single month, which I think won me a lot of accountability. So we got supported really well through our series B by a group of angels and had no institutions along that way.
Turner Novak:
You mean even at the series B?
Bill Shufelt:
Yeah. So Series C was our first institutional round, which I think it gave us a lot of freedom to run the business really fast up to that point. Our Series C was led by Alliance Consumer Group, who's a great name in consumer CPG. I'd actually been fortunate enough to meet their CFO at a farmer's market in the world a few years earlier. She had joined my board of advisors, so I knew them well by the time they got onto the cap table too.
I think that was the perfect time in our company's life cycle to get a real institution on the cap table who could help us with things like running proper board meetings and what is a proper monthly close and things like that look like, not monthly close, but monthly financial packet and long-term planning, long-term organizational planning, stuff like that. So mostly on people and hierarchies and stuff like that. So it was the perfect spot to go from this great groundswell of angel support to institutional investors at that point.
Turner Novak:
Was that 2020 or 2021?
Bill Shufelt:
2021 was our Series C.
Turner Novak:
Okay. I think I saw $37 million in revenue that year?
Bill Shufelt:
Yeah.
Turner Novak:
That was definitely time. It's like, "Okay, this is a real business." It's like, "People really want this stuff. Should probably institutionalize it a bit."
Bill Shufelt:
Yeah, it was a good opportunity to get really focused. We have an incredible well-rounded team. We brought in a couple more senior leadership team members too at that point. It was the time to team up with some people who really knew what the road ahead looked like as well. So in many ways, just a hundred percent still running the show. We have a very clear, long-term vision, and operating consistently towards that has been our thing.
Turner Novak:
So what is the long-term vision? We're talking 10, 20, 30, 100 years. I don't know how far out you plan and think, but what is it?
Bill Shufelt:
Yeah. I mean, it's basically beer for the modern adult.
People have been drinking alcohol for 5,000 years, and it's fine, but I just think there's going to be a majority of occasions in the future where people want to socialize, want to have something delicious, but not the alcohol. We want to have a huge positive impact in the world on the way there too.
So I, in my head, think that non-alcoholic beer is easily going to 10% or 20% of beer, if not 50% of beer over time, as increasingly influential people continue to talk about it publicly and destigmatize it and stuff. But I think this is just the very emergence of a long-term emerging category. If you look at the emergence of the energy drink category, it was like from nothing, and Red Bull and Monster came out of nowhere and just were really focused on it and grew it into this enormous category.
What I think is different about non-alcoholic beer than all the other beverage alcohol trends is, every other beverage alcohol trend has been a one-for-one substitution of the same occasion. If someone's drinking tequila this year, it's probably, they may have moved from whiskey to tequila, but in the same occasion.
What we're doing is totally reinventing and opening up occasion. So it's more occasions for existing drinkers. So take your average drinker who drinks one or less day per week, this permissions to people to drink five to seven days a week and feel guilt-free about it and do it at a fraction of the calories and not slow them down at all.
So there's the occasion growth, but then there's the population growth too. In my age group, per Nielsen, 32% of adults don't consume alcohol. But as you go down the two generations after it, 36% of the next generation don't drink alcohol, and the next one is 45% of Gen Z, legal drinking age consumers don't consume alcohol. In two generations, 13% change of the adult population drinking habits.
So there's a big opportunity to welcome them into the adult beverage world. Plus, anyone who's lapsed from drinking alcohol for any reason at all, we can welcome them back into. So there's a lot of growth there.
In my travels and readings, one thing I heard Marc Andreessen say is, if you could have people, product, or category be right, you want category to be right more than anything. I think that's what we have here, is a really strong health and wellness and occasion growth category.
And then we're trying to be the best product and the best market and the best distributed and the most focused in that category. I'm just going to be here just ruthlessly focused on it for 25 years. I think there are going to be a lot of people who come and go and stay focused on it for three to six months, and people within a big corporation might care about it for their two-year stint at the company, but we are just going to be here talking about non-alcoholic beer in 25 years still.
Turner Novak:
Yeah. I don't know if it's, the internet's mature and the way people discover information has just changed, but I feel like we are definitely not going back to consuming unhealthy products. I don't know the best way to tee up or to phrase what I'm trying to phrase, but we are only going to be probably making more informed decisions.
I mean, you look at what's the most popular podcast, content influencers out there, it's health stuff, wellness stuff, taking care of your things, going around the incumbent solutions that have been created and pushed to us. So I feel like just this general trend of being healthier, whatever that means, we're just going to keep going that direction.
Bill Shufelt:
Yeah. The number one most forwarded Apple podcast last year was Huberman on alcohol, which so obviously hit an audience. I mean, I know I'm like a walking prototype for our product and I've built the product after myself, but I have literally a WHOOP and an iWatch, and if you drink alcohol or get a bad night's sleep, they wake up, blaring at you basically. It's like the first thing you see on the phone is a WHOOP, "Did you drink alcohol last night?". There's just such more access to information.
When I was growing up, if you needed an answer to a question, no one in the family knew off the top of their head. You'd maybe think about the FDA food pyramid and encyclopedia. I'm not trying to totally date myself. We had dial-up modems and stuff, but it's crazy how much information access has improved in a 20-year period though.
Turner Novak:
Yeah, and then it's crazy the things that your parents or grandparents, whatever, told you or knew is kind of the truth. What we know today, it's like, yeah, that was completely wrong. That was just some unfounded fact or stat. It was just pushed by who knows who or why.
I feel like there's definitely some downsides to it though. I feel like there's some information that maybe people are getting access to, it might not be correct. There's definitely two sides to it. But on the health side, I feel like people are generally, they're able to inform themselves and make a little bit more of their own decisions, which generally I think is a good thing.
Bill Shufelt:
For sure. There's definitely bad health advice out there too.
Turner Novak:
Buyer beware or consumer beware.
When you were first figuring out how the heck do I market this thing back in 2018, 2019, maybe it wasn't as popular yet, not quite as many people were thinking about this stuff or open to it, what did you do? What was the strategy?
Bill Shufelt:
Yeah. We've literally never done focus groups, never done real surveys to try to get at things. We do measure and everything. We survey our existing customers, for sure.
At that stage of the company, I was just thinking like myself, like where would I want to encounter this product and discover it? It took some trial and error. I definitely tried sampling beer all over the place because I knew people would have to try it to believe it, that it was good and imagine when it would fit into their life.
I really chose athletic events, not because of the name of the company, but because you could interact with hundreds of happy, sweaty, enthusiastic people in a very short amount of time and be very efficient with your time at athletic events. If I were to sample in a liquor store or grocery store, I might interact with 10 or 20 people per hour. Some of them are there to buy a handle of vodka and are definitely going to make fun of me. And I spent so many nights in liquor stores on Friday nights getting made fun of high school kids. It's unbelievable.
Turner Novak:
So the high school kids were making fun of you?
Bill Shufelt:
Oh, for sure. Yeah.
Turner Novak:
Oh, man.
Bill Shufelt:
So I started to set up at local 5-Ks, half-marathons, anything from that distance all the way up to ultra marathons and Iron Mans and triathlons and everything. Any given weekend I'd be at at least two races. We also had a tap room in Stratford, Connecticut I opened. I was the bartender there.
So I'd wake up at 3:30 AM on a Saturday. I'd drive wherever my race was that day, I'd pour hundreds of beers, get back to open the tap room, and then do something else on Sunday. But I was giving out thousands of beers a weekend on average, and a lot of those people having pretty good experiences with it and then rushing into stores around that area. I had really good data where I would do a race in an area and then measure the rate of sale around those stores would be like. So I knew I was onto something with that. But it was rolling up my sleeves and just getting out there and talking to people, and it cost almost nothing besides the cost of product and my time.
Turner Novak:
Yeah, I was going to say potentially, when you talk about financial profile not being the best, just giving out all these free products, I could see how that could impact the gross margins a little bit, but it's marketing also.
Bill Shufelt:
For sure. Yeah.
Turner Novak:
I mean, just generally, I don't know where the trade-off is, but I feel like as an early stage investor, you have to be comfortable with the financials not looking that pretty in a lot of cases, which is super hard.
But I think my strategy for almost coping with that or getting comfortable with it is I usually try to not look at the actual financials too early on because then it doesn't automatically turn you off like, "Oh, this company is burning twice as much as they take in revenue. I'm not interested at all." You can kind of get the vision, the product, you understand their strategy.
When you see the financials, you're like, "Okay, it does make sense. I understand why they're losing so much money." But you can piece that together, the spreadsheet, you go a couple columns out a couple years out, and maybe start to look a little bit better.
Bill Shufelt:
Yeah, as long as there's a real plan to change it and it's an agreed upon time where the company's going to change it and you're honest with your shareholders and your board about when that's happening.
In 2021, we were still unprofitable, we'd invested in a third facility, and 2022 was looking like a deeply unprofitable year too, but we had good unit economics. I went to the board and I was like, "This is our four-year plan at this point. Wrapping up '21, '22 is going to be deeply unprofitable, '23 is going to be close." But kind of wanted to all hold hands as a board, as a management team and say, we are going to execute on this plan. If we deviate off this plan, this is where we're going to cut hard in 2022 on marketing and overhead and things to get closer to plan on EBITDA.
But I was really thankful our board saw the timeline. All different classes of our investors were on board with that. I appreciate that I had that leeway, but I don't necessarily think that works as well without a communicated plan.
I have a lot of friends who are founders of all different types of companies, outside of CPG too. Where I've seen trouble is where they don't communicate that plan far enough in advance and then they get ambushed at a board meeting, where it's like you haven't changed fast enough and you're basically out or we're cutting for you. They're like, "Wait, but I've been meaning this." You have to communicate that plan farther in advance.
One of our great board members always said to me, "I can take any amount of bad news, but I want my expectations set and communicated when there is bad news." So I generally try to set long-term expectations.
Turner Novak:
Yeah, that's smart, the point about being able to take bad news but just make sure it matches expectations or it doesn't catch me too off guard. One of the I think super interesting pieces about your strategy is, you did pretty heavily online pretty quick, but it seems like you got into retailers relatively fast also. How did you manage that so early on?
Bill Shufelt:
It was kind of just an overall omnichannel strategy. It was like different teams working on different channels. We tried, we had this unbelievable data set from our online business, and we're learning a lot from that side of the business, so we wanted to provide the best customer experience we could, but we did kind of learn that it was almost like two different customer bases in a way.
Also, the customer base not only being the end buyer, distributors and retailers have very different needs from an online shopping customer too. So distributors and retailers wanted efficient use of their square footage and high velocity per square foot basically. We were kind of uniquely set to do that where, historically, beer brands of alcohol do all their innovation testing on retail shelves.
So these big breweries launch like 40, 50 innovation products per year and maybe five are back the next year. So they cycle through all this waste and unproductivity. With Athletic, we were doing all that testing on ourselves and then bring the next season like a tried and proven lineup. And usually, if we make any swaps, it's one of our products killing an existing product. So that way, with our distributors, with our retailers, it's very focused, what we're putting investment behind this quarter is going to be similar to next quarter and the next quarter. And the customer that we convinced to fall in love with Run Wild at a certain store in one quarter is going to be able to find that beer for years to come there. And I think that investment adds up over time. But yeah, retailers and distributors generally want simple, and then we kept all the noise off to the other platform.
Turner Novak:
So you kind of inversed what the general strategy is in food and beverage specifically, is you did your testing online, and then your retail channels was the proven, the hero products, the ones that you know are going to sell, so that when they're ordering, they know you maybe have a smaller percentage of shelf space, but even higher velocity and more sales. So you just look so good. When they're looking at all their data, they're like, "Holy cow, we got to get more of this non-alcoholic Athletic Brewing stuff. We got to reorder faster."
Bill Shufelt:
Yeah. And it's simple too, so it's really efficient and profitable for them too.
I think a lot of brands don't have variety online too because they use contract manufacturers in 3PLs, so to get a complex lineup out to the D2C world can be tough sometimes.
At Athletic, we own and operate all the breweries. So in our breweries, we have everything from three and seven barrel systems to 20 to 200 barrel brewery houses. So we can make anything from a hundred cases to thousands of cases at once. That lets us be really nimble on what we make, what system we make it on and different things, and where we make it.
Plus, we do all of our fulfillment and packing in-house, so we pack and ship over a thousand packages each day on both coasts. So they can be incredibly customized. We can do returns ourselves. We can do a lot of variety ourselves easily. So owning all of our rails has really helped also.
Turner Novak:
Yeah, I was going to say that's also, in terms of margins, a little bit more capital intensive, but once you get scale, probably better margins by just owning it all in-house.
Bill Shufelt:
Yeah. What's interesting about our breweries, it's definitely better economics over time owning your manufacturing. Scaling manufacturing, utilizing properly is definitely difficult. There's nothing worse for margins than an underutilized facility. So we've definitely been through those valleys as well.
An interesting thing too on the supply chain is, if you own your facilities and make all your product, you can be more long-term forecast and hedge your inputs. Brands who contract brew tend to just be price takers, so it's like real-time commodity costs to the contract manufacturer, and there's a big fluctuation of input of cost too. So you may be fine in one season and not really thinking about it, but there are huge risks to contract manufacturing out there.
Turner Novak:
Interesting. The other thing I've heard with contract manufacturing too, if you are building the ... It sounds like what you guys did, you kind of built up almost proprietary or a new way of doing something. But if you are using a contract manufacturer, it means that other people are also able to build their product the same way.
So in terms of defensibility longer term, it's like, "Oh, I'm just going to use whoever contract manufacturer you are and I'm going to make the same product." They're going to make it exactly the same way, and maybe I'll just undercut you on price or something, and then that just ruins your margins.
Bill Shufelt:
Yeah, and contract manufacturers have shifting priorities too, where if a brand who pays a majority of their bills or more bills than you do needs extra summer canning line capacity, they will get it and you might get bumped and stuff.
Turner Novak:
So I heard your story of getting into Whole Foods. I know that was kind of how we started the conversation. How did that happen? I feel like there's ... I've heard the story's kind of interesting. Can you talk through that?
Bill Shufelt:
For sure. Yeah. So me and John were hand bottling beer in his parents' garage. It was unlabeled beer, definitely not exciting packaging. And I went into local Whole Foods, and the local forager in the store was like, "This is amazing".
Basically I got presented with a plain brown bottle and was like, "I'm really excited about this. Been working on this company for about a year, really three years, but in business planning." But she tasted the beer and was like, "This is amazing. We've been waiting for this. I think you should go and talk to our buyers at regional." She's like, "This is something we talk about, and I think our customers would really like it."
So literally, the next week I went to the regional Whole Foods in New Jersey. It was so cool to see for such a big company, Whole Foods, in many ways, it still is your local natural grocery store, but for a big company, I was so shocked that discovery could happen at the local level like that, and immediately they got something up the chain so fast to a decision maker who can make a pretty big decision.
Within two weeks of meeting that first buyer, I basically had a commitment for Connecticut statewide whenever we launched, they obviously wanted to see the branding and make sure it was compliant. And then since then, it started selling well there, and they've taken us to every state we've gone to and opened the stores immediately. So really cool to see a big company like that be so nimble.
Turner Novak:
Yeah, that is super impressive, especially when you think it's Amazon, it's one of the biggest corporations in the world at this point.
Bill Shufelt:
Great super accessible team at the store level. It's really very decentralized. It's kind of the way we built the brand. A lot of things these days, there's the temptation to hyperscale and do things at a touchless pace. At Athletic, we've really kind of gone backwards and just done the local thing, met with key partners in person.
When we have big news, we travel and we tell people. We sample our beer in person. Our team did over 55,000 store visits last year as a team. We're literally in market talking to people all the time.
I think it's a Brian Chesky quote, but “do the unscalable thing over and over again”, which I'm sure I got wrong, but I always tell that to my team. It's like, sure, there's all this you want to do, but if you just start doing it, and if you do 10 unscalable things every day, at the end of the year you've done thousands of unscalable things every day, and that's pretty darn scalable at the end.
Turner Novak:
Yeah. Well, you were mentioning before that you have gone very slow, kind of, compared to maybe what someone would expect, but I'm just looking at, you launched in 2018, and in 2023, I think you did like $90 million in revenue, or maybe that number is wrong, but that's pretty fast. Six years to get $90 million in revenue. My opinion is, that's pretty good. So you actually still did end up going pretty fast even though you kind of went slow also.
Bill Shufelt:
We've added more dollars every year of revenue growth. Every year of growth has been better than the year prior, so it is kind of like a freight train. Once it's started moving, it was really tough to get it going.
But my big thing is just being super consistent. Of course there are periods where we ship a bunch of meaningful work and stuff, but regardless, every day we're showing up and thinking about this and doing more stuff. I'm a big believer in being able to go 65 miles an hour for a very long time, and it may not seem like the fastest time in the world.
And I've had all sorts of times where investors or other industry participants or teammates have reached out to me with real concern being like, "I don't think you're going fast enough on this. Why do you miss this opportunity? We should launch a canned water. Do you see what these guys are doing?" Or all sorts of stuff.
I'm sitting here doing my thing, going 65 miles an hour every day, and there are people who go screaming by us or things we could have done, but at the end of the week, every week when you look back, it's like, "Wow, we made a bunch of progress at the end of a month." It's like, "Wow, we made a lot of progress." But I look in our buildings now in our breweries and it's all literally thousands of small steps. In putting that to words, I think entrepreneurship is just such a long game.
And as I said before, I have all the respect in the world for people who can hyperscale and do things and sell them really quickly, but I think the really big outcomes happen over much longer time scales, and it's just got to be consistent effort and work and progress. I think we are just that relentlessly consistent, compounding over a long time, and I'm so excited what this looks like in 10 years.
Turner Novak:
Yeah. You also said something super interesting in a different interview I listened to. You said that most of the ideas, and it seems like new products and concepts comes from the team. You just kind of let people run with ideas. What did you mean by that?
Bill Shufelt:
I've always been a big believer in decentralizing power as much as we can. I kind of realized early on, there's this great book, the E-Myth Problem, which is basically the concept of if you want to do everything, the company's not going to grow. Where an example for Athletic early on is like, I thought I was really good at the canning line and fast, which sounds so dumb at the time.
Turner Novak:
So this is actually pouring the beers into the cans and bottling them and stuff?
Bill Shufelt:
Like doing the pack-tech’s on top of the packs and stacking them in cardboard cases and putting them on pallets. For sure, maybe I was 10% faster than someone we would hire to do it, but our co-founder was like, "You got to get out of the back and go think about big term, big pictures, sell beer, work on finance."
Where I'm going with this is, if a founder is like a single touch point that has to touch everything the company's done, it's like a very narrow funnel and nothing's going to ship quickly. No one's going to learn, no one's going to make mistakes. Innovation's not going to happen. The company can only be as good as I was in that instance.
I've been a big believer in giving people way more decision-making authority, more responsibility, letting them grow into things, letting them be challenged, come at things with outsider perspectives. People who have never been in our industry, just jumped into the industry.
But I think through all our mistakes and through that, decentralization has been so much more progress too. I have a general sense on what's going on with everyone in the company, and we have pretty good reporting structures on a monthly and quarterly basis where you get a bunch of material to read, and I try to catch up with people as regular as I can, but there are a lot of people out there just running incredibly effective business units within Athletic Brewing who I totally trust also.
Turner Novak:
Yeah, I mean, you could not probably be doing $90 million in revenue. You were doing everything all by yourself. At some point you've got to figure out how to delegate.
Bill Shufelt:
Yeah, I'm definitely the master of none for sure.
Turner Novak:
Yeah, I mean, I don't know if I could ever do it. I'm very bad at delegating, so maybe that's why I have a podcast and invest in startups because it's just not my skillset.
Bill Shufelt:
I'm definitely delusional optimistic and overly trust people to run with it and learn. When we see people make mistakes multiple times or not have that initiative and not be able to make progress, that's when we typically tend to move on. But a lot of people have grown into it incredibly well too.
Turner Novak:
Awesome. Well, this has been a great conversation. Thank you so much for coming on.
Bill Shufelt:
Yeah, thank you so much. I feel like I could have done this for hours, so if I can be helpful to anyone in your audience, please reach out on LinkedIn, might be the easiest way. But yeah, I'm past the days where I've given out my cell phone number as the company number reluctantly. But yeah, thank you so much for having me on. I've loved following you on Twitter for years and your content, so really appreciate being a part of it.
Turner Novak:
Yeah, thanks for coming. This was a lot of fun.
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