*This article was originally released in May 2021 and updated with additional material in May 2023
As consumers around the world were stuck in their homes for months on end in 2020, the ready-to-drink cocktail category (RTD) soared as consumers looked for ways to still enjoy bar-quality cocktails. And while most spirits categories have begun to slow the pace of growth compared to the peak pandemic period, RTD beverages have continued to move the needle forward.
RTDs have been the fastest growing spirits category since the start of the pandemic. In 2021, the category added almost 4 million cases year-over-year for a 36% jump in total volumes according to the Beverage Information and Insights Group. In 2021 California, Texas and Florida were the top markets for the ready-to-drink category, respectively. Rhode Island saw the biggest increase in RTD volumes of any state in 2021, rising 133%.
Between October 2021 and June 2022, NielsenIQ found that spirits-based RTD seltzers saw a dollar growth increase of 73% while RTD cocktails saw a 61% increase by the same metric. Within the total spirits category RTDs take up a 6.2% share, making it the fourth largest segment behind whiskey, vodka, and tequila.
The popularity of the RTD category is reflected in retail channels, as well. In a recent study, Nielsen IQ examined the value and volume differentials for beverage alcohol categories in the off-premise channel. A snapshot of spirits’ performance in this channel indicates that the category’s value was up 1.6% and volumes were up 3.6% in the 52 weeks ending on March 18th, 2023, but without the influence of RTDs over this period the value and volume of spirits drop to -0.7% and -3.1% respectively. At retail, RTDs are now a key accelerator of spirits growth, helping boost the category’s performance.
Access to spirits-based canned cocktails is growing as well, with many states expanding their access at retail to align with beer and wine-based ready-to-drink beverages. So whether you’re thinking about extending your existing brand to include a ready-to-drink product or launching an entirely new one, here is the best advice from our experts on Park Street University.
How Consumers Are Shopping the Ready-to-Drink Category
Understanding how consumers interact with ready-to-drink alcoholic beverage products is a great starting point for launching an RTD.
The overall RTD category now accounts for 20% of all beverage alcohol occasions. Within the category seltzers represent the lions share of occasions for RTD beverages at around 65%, according to NielsenIQ. Meanwhile, prepared or pre-mixed cocktails are taking more and more share from seltzers and currently take up 35% of occasions.
Pre-mixed cocktails remain unique in that the timing of their consumption tends to skew towards later in the day or early evening while other varieties have an earlier start time. Pre-mixed cocktails also tend to peak on Saturdays while other categories are more popular on Fridays. NielsenIQ also reports that prepared cocktail RTDs have the highest share of occasions consumed with a significant other compared to other RTD categories at 44%
L.A.-based Greenbar Distillery’s decision to launch an RTD was born of a failed attempt to use cocktail-making classes to increase bottle sales.
“It finally dawned on us that people love to drink, they just hate to make that drink,” says Melkon Khosrovian, CEO of Greenbar Distillery. “The re-revolution that took place 20 years ago to reintroduce high-quality cocktails to the public—first through speakeasies and then mixology bars, and pretty much now any corner bar—stops more or less for most people at the home. They’re too tired, too busy, or too challenged to make those drinks at home.”
- Greenbar’s Melkon Khosrovian on the Lessons He Learned Launching an RTD
- Producing an RTD with Premium Ingredients and Flavors
- So You Want to Create an RTD?
Considerations for Launching a Ready-to-Drink Product
Adding an RTD is a major commitment for wine and spirits producers and much more is involved than simply a line extension or a new category, according to Mark Shilling, a partner at Big Thirst Consulting and former president of the American Craft Spirits Association. Wineries and distilleries have plenty of stills and tanks, but additional equipment such as brite tanks, brew kettles, a commercial juicer, pasteurization system, or a canning line may be necessary to produce a ready-to-drink cocktail.
Similarly, there are new production techniques that will come along with the creation of an RTD you intend to scale, including getting the carbonation and mixology correctly. Brewers are familiar with ways to control diastaticus, a brewer’s yeast that can cause a can to explode if not controlled properly, but it’s not typically something a distillery would come into contact with.
“It’s not something you can decide to do at a small scale and play around with it a little bit. Everything about this is like creating an entirely new business.” says Shilling.
- Mark Shilling: What to Know Before Committing to an RTD
- Beam Suntory’s Heather Boyd on RTD Innovation Strategy
Best Practices for Ready-to-Drink Labels
In 2018, Cardinal Spirits launched a canned cocktail line inspired by the most popular cocktails in its tasting room. Unlike with 750ml bottles or cocktails, cans can travel with consumers and are more likely to be photographed on social media at the pool, at a party, on a hike etc.
“Our fans are now our brand ambassadors, effortlessly helping tell our story and sharing images of our cans,” says Erica Sagon, the Director of Communications for Cardinal Spirits. By 2020 the RTD offering was the distillery’s No. 1 product by volume.
Britt West, Vice President of Spirits at E&J Gallo, suggests that brands have very clear consumer targets making the case for brands to launch focused tests in target markets much like White Claw did in its early stages. West also highlighted that pushing the inherent quality advantage of spirits based RTDs and making sure to differentiate its offerings were key to brand success in the category.
However, proliferation of RTDs in the marketplace has been accompanied by increased scrutiny about how these products are being marketed. Many companies are capitalizing on the consumer-driven health and wellness movement by incorporating “better-for-you” claims in their packaging. But according to Heather Boyd, Managing Director of US RTD at Beam Suntory, incorrectly labeling RTDs can expose brands to potential litigation.
Boyd recommends that brands use realistic claims on any product containing beverage alcohol. Boyd suggests that RTD brands limit the amount of claims on their packaging, stay on top of litigation trends, and consider their own risk tolerance.
For Beam Suntory, Boyd shares that a robust approach to transparency has helped the drinks-giant navigate the regulatory pressures around RTDs. The company has set up a website to display all nutritional information on their products to help consumers understand exactly what they are drinking. They’ve also partnered with industry groups like DISCUS and NABCA to bring awareness to the importance of transparency.
- Heather Boyd on Beam Suntory’s RTD Innovation Strategy
- How to Position Your RTD to stand Out From the Competition
- Gallo’s Britt West on How RTDs Are Opening Doors for Spirits
Leverage Your Successes to Create More Opportunities
LIQS, a premium shot RTD that launched in 2014 and sold to E&J Gallo in 2021, grew its brand by owning the festival circuit. Instead of paying expensive sponsorship fees at festivals, LIQS was able to get into events through concession sales where they sell thousands of individual shots per event. “Always, always try to speak to the beverage buyer and the concessionaire, not brand partnerships because their first question is ‘What’s your budget,’” says LIQS Founder Michael Glickman.
Following one of the brand’s first festivals, the LIQS team brought in a professional photographer and made a book that detailed the margins and sales potential festival partners could make if they brought in LIQS.
“The point of this is… leverage relevant success to build up case studies to create more opportunities,” says Glickman. “Fast forward six months after we did our first festival, we had 20 festivals under our belt and it almost became a no-brainer. Whoever didn’t say yes to us, you’re an idiot.