BevAlc Insights’ 2H 2020 RTD Cocktail Forecast
RTD cocktails grew considerably this year; retailers and experts evaluate what’s next for the category
Ready-to-drink (RTD) cocktails have experienced new growth in recent years, but the impact of Covid-19 set the category on a skyrocketing trajectory. The convenience and portability of RTDs, which have become more varied in recent years, offer consumers safe access to high-quality cocktails amidst bar and restaurant restrictions. Still, despite the rapid growth, the category’s share of sales on Drizly remains relatively small, prompting the question: How significant will RTD cocktails be in the months and years to come?
Inside the RTD Boom
2020 has been the year of the RTDs. According to Nielsen, year-over-year off-premise dollar sales growth was 57 percent for the 52-week period ending August 8. On Drizly, the RTD segment has grown 416 percent in share of sales year-over-year.
The category was already poised for success in 2020 after experiencing marked growth in 2019. Data from IWSR shows that RTD sales volume increased 43.2 percent in 2019, nearly tripling 2018’s 16.9 percent growth. Nielsen data indicates a similar trend in measured off-premise channels: Sales were up 20.7 percent year-over-year in 2019, up significantly over the prior year’s 7.1 percent year-over-year growth.
However, the onset of Covid-19 set the RTD cocktail category on fire. When restaurants and bars shuttered in March, consumers brought on-premise cocktail culture home. While this resulted in a purchasing uptick in the ingredients to recreate their favorite restaurant cocktails, it was also a boon for canned, single-serve RTDs.
“Canned cocktails are a convenient and quality solution for cocktail lovers,” says Earl Kight, the co-founder and chief sales and marketing officer for Cutwater Spirits. “No ingredients, no prep or clean up. They offer controlled ABVs and consistently taste delicious.”
According to Nielsen, for the 23-week, Covid-affected period ending August 8, year-over-year growth in off-premise dollar sales for RTD cocktails was 86.8 percent. Before Covid hit, year-over-year off-premise growth was just 21.5 percent for the 52-week period ending February 29.
RTD cocktails are also seen as safer alternatives amidst pandemic health concerns. Like other canned beverages, the single-serve format reduces potential contact points (such as shared glassware or bottles) and offers glass-free portability for outdoor gatherings. “They are great for people who are willing to socialize [but want to] minimize contact by doing so outdoors,” says Jill Burns, a co-founder of Austin Cocktails.
Without the recent evolution of RTD cocktails, though, it’s unlikely that the category would have benefited from these new consumer purchasing preferences.Today’s RTD cocktails have come a long way from decades-old predecessors like wine coolers and malt-based hard lemonades.
“The RTD category has grown from less expensive offerings made with artificial ingredients and neon colors to cocktails made with natural flavors and premium spirits,” says Kelly Gasink, the other co-founder of Austin Cocktails. While RTDs can range from full-strength cocktails, like Austin Cocktails’ cans, to lower-ABV options that can compete with hard seltzers, premiumization has resulted in a new wave of products that boast less sugar and more ingredient transparency.
“RTDs have evolved from basic, low-ABV drinks to true, high-proof cocktails,” says Mollie Cook, the director of marketing for Molly’s Spirits in Denver. “In the past, all that was readily available was usually-too-sugary margarita mix. Now, we see a massive variety that encompasses everyone’s tastes.” The wide variety also allows consumers to experiment with new types of cocktails without purchasing the ingredients needed to make them at home, she says.
Despite rapid growth, however, RTD cocktails in 2020 still represent a small share of sales on Drizly: .62 percent share of sales overall, and 1.79 percent share of liquor category sales. This is up significantly from .12 percent share of sales in 2019, but the category is still niche but growing.
Which RTD Cocktails Are Selling?
The increased variety of RTD options on the market has contributed to the category’s growth — which, in turn, has resulted in even more brands releasing RTD products. The number of RTD brands available on Drizly nearly doubled over the past year, growing from 85 brands in 2019 to 168 brands in 2020.
However, the growth of one brand in particular has set the RTD category as a whole on fire. In 2020, High Noon accounted for 55 percent of RTD share, compared to just 13 percent in 2019. The brand’s success has been driven by its positioning within the hard seltzer category; though High Noon is vodka-based, therefore categorizing it as a RTD cocktail, it is marketed as a vodka-based hard seltzer.
“This strategy has allowed High Noon to capture share of hard seltzer buyers and carry over into the RTD category,” says Liz Paquette, Drizly’s head of consumer insights. High Noon dominates Drizly’s list of top-selling RTD SKUs, holding seven of the top ten spots.
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Drizly’s Top-Selling RTD Brands in 2020
- High Noon
- Ranch Rider
- Fisher’s Island
- 1800 Tequila
- Cutwater Spirits
- Canteen Spirits
- The Long Drink Company
- On The Rocks
Drizly’s Top-Selling RTD SKUs in 2020
- High Noon Hard Seltzer Variety Pack (vodka-based)
- High Noon Watermelon Hard Seltzer (vodka-based)
- High Noon Pineapple Hard Seltzer (vodka-based)
- High Noon Grapefruit Hard Seltzer (vodka-based)
- High Noon Black Cherry Hard Seltzer (vodka-based)
- High Noon Peach Hard Seltzer (vodka-based)
- High Noon Lime Hard Seltzer (vodka-based)
- Fishers Island Lemonade (vodka and whiskey-based)
- Ranch Rider Ranch Water (tequila-based)
- Montebello Long Island Iced Tea (vodka, rum, tequila, gin-based)
Canned formats dominate Drizly’s top-selling RTD SKUs and brands, underscoring how the category has largely shifted from bottles to cans to meet consumer preferences. “In early 2019 we saw popularity of cans early,” says Burns of Austin Cocktails, “and knew we had to expand our offerings to single-serve cans.” Perhaps buoyed by the rise of hard seltzers, canned cocktails are now essential products for retailers to carry.
As indicated by the success of High Noon, consumers are most often reaching for simple, refreshing, low-ABV cocktails like vodka-sodas or gin-tonics. “These offerings are lower calorie and lower sugar alternatives to other RTDs and often compete with hard seltzer,” says Paquette.
It seems that the challenge for retailers is not to decide which RTD cocktails to offer, but to actually keep inventory in stock, if summer sales are any indication. “We recommend retailers work closely with their wholesale partners to plan their RTD inventory,” says Paquette. “With supply challenges with popular brands like High Noon, consumers are searching for alternatives RTDs. Stocking other brands can differentiate retailers amongst their competition and attract new buyers.”
Who is Buying RTDs?
Overall, purchasers of RTD cocktails on Drizly skew female, comprising of 57.6 percent of buyers compared to 42.4 percent male. “The gender demographic skew of the RTD category is similar to that of the hard seltzer category,” says Paquette. “Similar to hard seltzer, RTDs offer an alternative to traditional canned offerings that appeal to the female demographic with differentiated flavors, lower calories, and lower sugar.”
Predicting the Future Success of RTDs
Despite representing less than one percent of sales share on Drizly, the RTD category is becoming more significant by the month. Nationwide, it accounted for more than $539 million in off-premise sales over the 52 weeks ending August 8, according to Nielsen, and it has already begun to steal share from major categories like vodka on Drizly. In fact, Paquette recommends that retailers stock vodka-based RTDs to supplement vodka inventory, given the category’s success.
“As Covid-related on-premise restrictions persist through the second half of the year,” Paquette says, “we expect that will continue to drive growth in the RTD category.”
At Molly’s Spirits, Cook expects that the category will continue to boom throughout the holiday season, particularly because of new socialization habits. “We see canned cocktails as an easy way for people to bring their own boozy treat to a holiday party to enjoy,” she says, “while maintaining a safe distance and not cross-contaminating in a punch bowl.”
However, don’t expect consumers to toss aside RTDs once the pandemic has eased. According to the IWSR, the RTD category is projected to grow at a 11.5 percent compound annual growth rate between 2019 and 2024. “We are confident that the category will continue to grow because quality canned cocktails like ours offer an efficient, quick-service alternative to beer or hard seltzers,” says Kight, “made without mystery ingredients.”
“We anticipate that as the RTD category continues to grow, new entrants will look to get in on the category’s success,” says Paquette. “It is likely we will see more national brand names in the liquor space launch their own RTD products.” Already, major spirits brands like Absolut, Tanqueray, and Malibu have launched canned cocktails.
These new products from established liquor brands, along with increased distribution of current RTD offerings, will likely determine the future growth and success of the category. “With recent and continued product innovation in the RTD space,” adds Paquette, “there is certainly potential for it to become an even stronger category in coming years.”
There may even be the potential for RTDs to capitalize on — and compete with — the success of another booming category: Hard seltzer. “As RTD brands position themselves as direct competitors to hard seltzer, the category has the opportunity to gain significant share in coming years,” says Paquette.Though the first hard seltzers were only released a few years ago, already the category accounts for 4 percent share of all sales on Drizly.
2020 may have accelerated the RTD cocktail category’s growth, but producers have been laying a foundation for this success for several years. Don’t call it a fad: While the RTD cocktail category’s potential to drive retail sales — both now and in the future — is huge.