The Shout Magazine (New Zealand)

Cocktail culture driving the evolution of spirit-based RTDs

Hard seltzers have made an important contribution to the rise of the RTD category, says global liquor analysts IWSR.

In the US, the RTD share of the total beverage alcohol market expand from just 4% in 2017 to 11% in 2021.

While hard seltzers make up over half of the volume share of the RTD category in the US, the fastest-growing RTD segment is RTD cocktails (from a smaller volume base).

IWSR says the increasing investment in RTD cocktails is contributing to the premiumisation of the overall RTD market, as well as the evolution of the spirit-based RTD segment.

“Spirits and cocktail culture are extremely popular right now, and with consumers wanting more and more convenience, there is a clear opportunity for brands to fill the gap for high-quality canned and bottled cocktails,” says Adam Rogers, North America Research Director at IWSR.

“Many well-known brands have leveraged the opportunity to add another convenience-based consumption occasion to their portfolio, while raising overall brand awareness.”

Brandy Rand, Chief Strategy Officer, IWSR, says alcohol under-indexes in flavour options compared with other CPG categories.

“RTD cocktails help to fill that gap by offering more choice and variety, while still meeting the convenience needs of today’s consumer,” she says.

“This is also reflected in findings from our consumer research: flavour is the number one reason people choose RTDs.”

IWSR consumer data shows that drinkers in the US perceive spirit-based products to be more premium and brands have consequently started to use their choice of spirit base as a point of difference to indicate quality.

Vodka overtook tequila as the leading RTD spirit base in 2021, bolstered by the fact that around half of the most popular cocktails in the US are vodka-based.

Tequila is also an important ingredient in some of the most recognised cocktails, including the Margarita and the Tequila Sunrise.

Margaritas in a 1.75 litre format are relatively long established, says IWSR, and this can be accredited to the high share that tequila traditionally held as a spirit base.

The 1.75 litre format, though, has seen its share diluted as more premium and fashionable smaller-format canned RTD vodka drinks emerged.

IWSR is, however, expecting the erosion of tequila’s share of spirit-based RTDs to slow.

Vodka and tequila’s dominance within the RTD category also relies on the fact that they are relatively more mixable than other spirit bases, such as whisky, which makes up just over 5% of spirit-based RTDs.

With use in very specific cocktails, such as the Old Fashioned and Manhattan, whisky-based RTDs tend to over-index against all other RTD types in terms of pricing.

However, consumer demand for more premium offerings will help, and whisky’s share of the RTD spirit-based market is expected to increase.

It is this constant innovation and a consumer demand for drinking ‘less, but better’, that is underpinning the evolution of the RTD category, says IWSR.

“The market landscape will continue to see more entrants carve a niche for themselves, for example, through new start-up launches, brand line extensions, co-brand partnerships, or influencer investment,” says Rand.

“Unlike spirits portfolios, a single RTD product doesn’t fill a brand’s portfolio gap. Because there are so many types of RTDs and constant evolution of the category, having a wide RTD portfolio can be advantageous.”

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