Editor’s Note: This is the first in a quarterly series of beverage-alcohol thought leadership pieces from market research firm NIQ’s bev-alc team of Jon Berg (VP) and Kaleigh Theriault (associate director).
The beverage-alcohol industry is undergoing a transformative shift driven by the explosive growth of ready-to-drink (RTD) products.
NIQ defines RTDs as single-serve offerings in portable packages. RTDs encompass hard seltzers, flavored malt beverages (FMBs), spirits, canned cocktails, and small-size wine and canned wine. These innovative products are not just reshaping existing mega categories of beer, wine and spirits, but are poised to become a mega category on their own.
Rapid Growth and Consumer Appeal
Compared to the traditional mega categories of beer, wine and spirits, RTDs are experiencing rapid dollar sales growth. This surge is primarily attributed to their unique selling points of convenience, variety and portability, which cater to specific consumer needs and occasions. Whether it’s the ease of carrying a canned cocktail to a picnic, the simplicity of enjoying a hard seltzer at a casual get-together, or the straightforward appeal of an RTD wine to unwind during a night in or out on the town, RTDs offer a distinct and appealing alternative.
The draw of RTDs extends beyond mere convenience: The wide variety of flavors and styles available means there is something for every palate. Consumers are no longer limited to traditional beer, wine or spirit options – they can explore an array of exciting new beverages that suit their taste preferences and lifestyle needs.
Continuous Innovation
The RTD market is a hotbed of innovation, with new flavors, formats and functions emerging. This constant evolution keeps the category exciting and engaging for consumers, encouraging frequent trials and repeat purchases. Brands are experimenting with bold flavors, unique ingredients and novel packaging solutions, ensuring that there is always something new for consumers to discover.
Moreover, the innovation in the RTD category often reflects broader consumer trends, such as the growing interest in health and wellness. For instance, the rise of hard kombucha and other functional beverages that offer additional health benefits aligns with the increasing demand for products that support a healthy lifestyle.
Broad Demographic Appeal
RTDs have a broad demographic appeal, attracting younger legal-drinking-age (LDA) consumers seeking new experiences and those looking for convenient options. They often cater to moderation-minded consumers, thanks to the perception of lower calorie content in some offerings. This broad appeal helps RTDs cut across traditional beverage alcohol boundaries, fostering significant overlap in purchasing behaviors.
Younger LDA consumers are driving the growth of the RTD market, as this demographic values convenience, variety and innovation, all of which are hallmarks of the RTD category. Additionally, RTDs are often seen as more approachable and less intimidating than traditional alcohol categories, making them an attractive option for new or occasional drinkers.
Overlapping Categories
Historically, there has been a significant overlap in household purchases across beer, wine and spirits. This overlap has intensified with the introduction of RTDs in each category, driving product diversification and experimentation.
Consumers are now less concerned about the alcohol base and more drawn to flavors, cocktail varieties and convenience. As a result, RTDs contribute to a fragmented consumer repertoire, with a noteworthy 14% of households purchasing all four categories (beer, wine, spirits and RTDs), responsible for 29% of overall beverage alcohol volume.
This overlap underscores the flexibility and versatility of RTDs. Consumers are increasingly looking for products that fit their specific occasions and preferences, and RTDs offer a wide range of options to meet these diverse needs. This trend toward a more fragmented and diverse consumption pattern is reshaping the beverage alcohol landscape.
Beer
RTDs are carving out a distinct identity within the beer category. Malt-based RTDs show unique sales trends, with seltzers declining and FMBs growing. RTDs are quickly building loyalty among consumers who frequently try these products.
Retailers leverage RTDs in promotional rotations to drive traffic to their stores, maintaining high visibility for big brands. RTD pricing strategies also differ from traditional beer products, with unique thresholds and gaps. This evolving landscape highlights the importance of continuous monitoring to understand consumer dynamics and capitalize on emerging trends.
The distinct sales trends within the beer category underscore the dynamic nature of the RTD market. As consumer preferences evolve, brands must stay agile and responsive, continually adapting their offerings to meet changing demands. This adaptability is a key strength of RTDs, ensuring their continued relevance in the ever-evolving beverage alcohol market.
Wine
The wine category also feels the impact of RTDs. While there’s a need to revive the still wine business, wine-based RTDs are making inroads, especially among consumers seeking flavor-driven experiences.
These RTDs serve as a “bridge” for new consumers, with the potential to enhance loyalty through strategic promotions and approachable pricing. The $20 price point is particularly effective in still wine, offering a perceived premium experience without the high cost, making it a sweet spot for both consumers and retailers.
Wine-based RTDs provide an accessible entry point for new wine drinkers, offering familiar flavors and convenient formats. This can help demystify the wine category and attract a broader audience, including younger consumers who might otherwise be intimidated by traditional wine offerings.
Spirits
In the spirits category, RTDs are driving significant changes. Without RTDs, spirits sales trends appear flat to declining. However, spirits-based RTDs are thriving and are bolstered by retail distribution and fluctuating local laws.
The rise of premiumization and consumer moderation trends offers spirits brands opportunities to innovate with high-quality, unique products. The flavor explosion within RTDs, from classic cocktails to seasonal twists, appeals to consumers seeking diverse taste experiences, helping RTDs capture market share from traditional spirits.
The success of spirits-based RTDs highlights the importance of flavor and convenience in driving consumer preferences. By offering ready-to-drink versions of popular cocktails, brands can tap into the growing demand for high-quality, convenient beverages.
The Future of RTDs
The future of RTDs is promising. It’s brimming with potential for continued fragmentation and growth within the bev-alc industry. As consumers increasingly seek products that match their usage occasions and taste preferences, extended loyalty may be challenging to secure.
However, this also opens up new avenues for innovation and market expansion. Retailers and brands must balance pricing and volume growth, ensuring that RTDs remain attractive and accessible while navigating rising costs.
Ultimately, RTDs are not just a trend, but a transformative force reshaping the landscape of beverage alcohol, creating new opportunities and challenges. By staying attuned to consumer preferences and market dynamics, brands can harness the full potential of this burgeoning mega category.
As the industry evolves, those who can innovate and adapt quickly will be best positioned to succeed in the dynamic RTD market.