Partake Brewing makes non-alcoholic craft beer
Partake Brewing
Up-and-coming Canadian non-alcoholic beer maker Partake Brewing has raised $4 million as it looks to expand its presence in the United States.
The beverage company announced Wednesday that San Francisco-based CircleUp Growth Partners — an early-stage consumer fund that leverages a proprietary machine learning platform to help brands scale — led Partake’s first institutional capital raise.
Export Development Canada, Natural Products Canada, McLean & Associates, and Barrel Ventures also participated in the Series A funding round.
Founded as a direct-to-consumer brand in 2017 by entrepreneur Ted Fleming, Partake bootstrapped its way to about 10,000 barrels of annual production across Canada and the U.S. with just $225,000 in initial funding.
Now that it has the backing of CircleUp and other investors, Partake plans to grow its team in the U.S., expand distribution and launch a more extensive marketing campaign to support retailers.
The company is currently searching for a vice president of marketing and looking to fill several sales positions, Fleming told me.
The additional funding will help Partake more effectively compete with a growing number of companies all vying for a very small slice of the overall beer market.
According to market research firm IRI, which tracks sales at major off-premise retail stores, the total non-alcoholic beer market in the U.S. was only about 421,000 barrels (excluding on-premise and direct-to-consumer sales) through the 52-week period ending August 9, 2020.
By comparison, popular U.S. craft beer maker Sierra Nevada made more than twice that amount — over 1 million barrels — in 2019.
Nevertheless, numerous notable players have already begun investing heavily into the space, in hopes that more health-conscious drinkers will gravitate to non-alcoholic brews on a more frequent basis.
Most recently, Boston Beer Company announced plans to launch a hazy IPA containing less that 0.5% ABV in early 2021.
Meanwhile, upstart non-alcoholic beer company Athletic Brewing scored $17.5 million in Series B funding earlier this year, and Heineken launched its alcohol-free “0.0” brand in 2019 with $50 million of support.
The world’s largest beer maker isn’t sitting on the sidelines, either. Anheuser-Busch InBev recently unveiled its Budweiser Zero brand in the U.S. in partnership with former NBA all-star Dwyane Wade.
Despite the stiff competition, which also includes several other smaller brewing companies, Fleming is bullish on Partake’s prospects.
“Our belief is that the non-alcoholic beer category in the U.S. will be worth over $1 billion annually within five years, with further room to grow,” he told me.
I asked Fleming about Partake’s recent capital raise, and the emerging non-alcoholic beer segment. Here’s what he had to say:
The following responses have been lightly edited and condensed for clarity.
Chris Furnari: Why was now the right time for Partake to raise money, and why CircleUp?
Ted Fleming: We had grown the business as far as we could with bootstrapping, particularly as we developed plans to expand further into the U.S. market. The U.S. market is 10x the size of our domestic market in Canada. CircleUp has been a fan and believer in the potential of the non-alcoholic beer category for many years, and we have built a strong relationship since the inception of Partake Brewing. As a founder, I was impressed by their unique category insights, data analysis capabilities, and proven track record in beer and beverage that ultimately could help us succeed in growing our brand in a big way.
CF: How many employees does Partake currently have, and where does it expect to end up as a result of this new funding?
TF: Currently, we have 15 team members across North America. With this new funding, we will be adding key roles and team members to further our market expansion within the U.S. as well as continuing to grow in Canada. By the end of this calendar year, our team is projected to be 20 people.
CF: Where are Partake products sold in the U.S., and what markets are on the radar?
TF: In the U.S., we are sold within various retailers, including Total Wine & More, and select Whole Foods
WFM
CF: Who are the core consumers of non-alcoholic beer in the U.S., and how does the market differ from Canada?
TF: Within the U.S., the core consumers are no longer just individuals who have to abstain from alcohol but are instead choosing to for a variety of factors and discovering use occasions where non-alcoholic beer fits within their lifestyle. We are seeing an influx of new, younger, and health-conscious consumers into a category that has been largely ignored for decades. These trends are similar in Canada and the U.S., with only small nuances between customers in the two countries.
CF: How much of a factor is the direct-to-consumer piece of the business for Partake, and will this new capital enable the company to grow its e-commerce and DTC business as well?
TF: Our business was launched as an exclusively DTC brand in 2017, and we continue to have a vibrant business in e-commerce but now in parallel with traditional retail. With the new funds, we hope to improve our DTC experience with quicker shipping, more selection, and customization options. Warehousing and shipping our product from cold-storage locations closer to our customers, particularly in the west, is a key element of that planned improvement and growth.
CF: Are there any plans to refresh packaging or begin more robust marketing and advertising efforts?
TF: Our plans involve a much more robust marketing plan aimed at supporting our retail partners, driving brand awareness, and communicating why Partake is a great tasting, fun, and healthy option for non-alcoholic beer drinkers. The packaging is something that we will also look at over the next year, but we have no immediate plans for a change.
CF: There’s growing interest in the segment, and now Boston Beer is getting into the game. How will that change the landscape?
TF: I think it was a matter of when, not if brewers like Boston Beer entered the category. The net result, I think, is greatly enhanced visibility for the category, a higher average quality of product, and it ultimately signals that non-alcoholic beer is fundamentally changing in a positive way.