Gen Z loves sobriety so much that America’s biggest nonalcoholic beer brand just doubled its valuation to $800 million

Athletic Brewing, cofounded by hedge fund trader turned chief executive Bill Shufelt in 2018, nearly doubled its valuation to about $800 million in just two years following a $50 million equity financing round led by growth equity firm General Atlantic, the Wall Street Journal reported, citing people familiar with the matter.

A spokesperson for Athletic said the company could not confirm or deny the new valuation.

The company will use the new financing to grow its team and fund renovations at its third U.S. brewing facility located in the San Diego area, Shufelt said in an email to Fortune. The new facility will allow the company to double its brewing capacity in the U.S., Shufelt said.

The upstart company has punched above its weight, beating out established names like Heineken and Budweiser to claim the title of the top nonalcoholic beer brand by sales in U.S. grocery stores, according to a Journal analysis of NielsenIQ data. With 258,000 barrels sold last year, Athletic ranked in the top 20 breweries in the U.S. The company said it topped $90 million in sales last year.

While the more well-known beer brands focus just part of their operations on nonalcoholic beer, Shufelt said its single-minded focus on the category has allowed it to get a leg up on the competition.

“Nonalcoholic beer was previously thought of as a very small market, but we see an enormous opportunity to add both occasions and populations to the adult beverage world by opening new days of the week for existing consumers and actively recruiting new consumers to the category altogether,” Shufelt told Fortune in an email.

Apart from General Atlantic, Athletic’s other big-name backers include beverage company Keurig Dr Pepper, which invested more than $50 million in 2022, as well as celebrities such as former NFL player J.J. Watt, Momofuku founder David Chang, and cyclist Lance Armstrong.

Athletic’s sales success, and investors’ confidence in the brand, is thanks in part to Gen Z’s growing curiosity about leading a sober lifestyle and nonalcoholic drinks. On TikTok, #sober and #sobercurious have racked up millions of posts with many influencers raving about the health benefits of their transition to sobriety. More than 60% of young people born between 1997 and 2002, up from 40% last year, said they plan to cut back on their alcohol consumption this year, according to a January survey by advertising company NCSolutions. Athletic’s chief executive, Shufelt, said that 75% of the company’s customers are under 45 years old.

While in years past, the emphasis on sobriety may have peaked during “Dry January,” Shufelt said summer is actually one of the company’s busiest times. The proliferation of nonalcoholic options would have been unthinkable just a decade ago, he told the Journal.

“Ten years ago, there were no options,” Shufelt said. “We had to totally change the product and the marketing.”

The growing trend toward sobriety or “mindful consumption” has turned nonalcoholic beer into the fastest-growing segment of the beer market, even as overall beer sales have fallen with changing preferences. As more young people cut back on their drinking, they have turned to alternatives, including mocktails and nonalcoholic wine, but also nonalcoholic beer, much to the benefit of Athletic.

“We’ve made nonalcoholic beer a positive choice and given consumers a product they are proud to hold in their hands,” Shufelt said.