Behind the RTD Boom: Ready-to-Drink Cocktails See Sizeable Growth As Drinking Habits Change

For some time now, the analytic mantra ‘drinking less, but drinking better’ has been the chant du jour for both industry experts and companies. The movement, led by Millenials and Gen Z, suggests that consumers are going out less and opting for low-abv or premium spirits and that they’re also drinking fewer drinks throughout the evening.

There has been ample evidence of this move, as the premium spirits segment has posted growth while other categories, beer for example, are in decline. But others might argue that consumers aren’t drinking less or better, just other stuff.

“Consumers are not necessarily drinking less, but they are drinking differently,” says Troy Gorczyca, brand director of Malibu. “Gen Z is conscious about what they’re drinking, and it is opening up new consumption occasions.”

Ready-to-drink prepared cocktails are benefitting from this movement. According to a recent Mintel report on RTD Alcoholic Beverages U.S. (November 2019), “one in five drinkers is reducing their alcohol consumption, however, RTDs were the only alcohol segment to experience an increase in consumption over a 2018 measure.”

Nielsen reports the RTD prepared cocktails category grew a considerable 83 percent in the off-premise to $105.37 million for the 52 weeks ending Dec. 28, 2019.

“We’ve been tracking a move toward ‘healthier’ drinking and this trend will continue into 2020,” says Danny Brager, senior vice president, Beverage Alcohol, Nielsen. “Younger generations are leading this shift, and it will affect drinking quantities and preferences.”

Brager is forecasting even more of a favorable environment for these products, in fact. “Throughout 2020, expect to see growth in lower ABV ready-to-drink cocktails,” he says. “Ready-to-drink cocktails—across beer, wine and spirits—will boom.”

That’s a departure. For decades, the RTD category has gotten a bad rap due to perceptions around poor quality and taste issues. In recent years, however, this has begun to shift: big brands have revamped their offerings and newcomers have joined the playing field, raising the stakes with innovative products. The quality stakes have been raised as well, as many of the newer brands are moving on from a malt base and deploying actual spirits in the mix.

Malibu re-launched its RTD pre-mixed cocktail range in June 2019 with new packaging and has new products in the pipeline. “We have seen a heightened interest in convenience in both the spirit-based RTD cans and in malt-based beverages,” notes Gorczyca. “We have some great offerings in this category and are looking to launch new products in the future. Watch the RTD space in the coming years as Gen Z continues to influence the products the brands develop and launch.”

Andrew Rodbell, co-founder of Post Meridiem (Atlanta, Ga.), and a former Coca-Cola employee, launched his company selling premium RTD cocktails in May 2019. “We make recognizable cocktails with real ingredients at the right proportions and real strength,” he says simply.

The range of cocktails includes a Double Old Fashioned, a Lemongrass Vodka Gimlet, The 1944 Mai Tai, The Hemingway Daiquiri and The Real Lime Juice Margarita. All are made with real ingredients: real spirits, real bitters, real juices. Rodbell stresses that nothing is manufactured or synthetic giving these full-strength products authentic taste.

“We feel like we are elevating the ready to drink pre-mixed spirits category with authenticity,” Rodbell says. “We list all of the ingredients on the can and those real ingredients are the taste difference. It’s as close as you can get to a bar made cocktail in a portable format.” The range is available in 100ml cans and retails for about $4.99.

Another newcomer to the market that is looking to elevate the RTD offering is Drnxmyth (Los Angeles, Calif.) This company is turning ready-to-drink into ready-to-mix with its twist and shake method to create on-the-spot fresh cocktails.

Drnxmyth cocktails come in a patented dual-chamber bottle that is designed to keep the spirits, tinctures and liqueurs separate from the cold-pressed juices. Consumers only have to twist the bottom of the bottle and shake to make their cocktail in 30 seconds.

“A lot is happening right now [with RTDs] and we believe there’s more room for innovation,” says Drnxmyth CEO Lawrence Cisneros. “People are looking for options that have less alcohol, less calories and there is a trend toward easier drinking, and also cocktails that taste as they should—balanced. Innovation seems to be growing the market rather than taking from existing players and we are seeing a demand for better recipes and better ingredients that haven’t been chemically treated or heated or changed… that’s what we’re about.”

Having worked with mixologists, Drnxmyth’s portfolio includes five cocktails: Rum Punch, Bourbon Sour, Eastside (gin, cucumber puree, lime juice, cane sugar and mint-infused water) and Ginger Drop (ginger-infused vodka, lemon juice, fresh finger, cane sugar and grapefruit peel essence). Each bottle makes two100ml cocktails for a retail price of about $9.99.

While innovation is helping drive the category, research shows that hard seltzers have been a driving force in opening it up as a format that consumers will accept.

According to Mintel, hard seltzers can be credited for increased RTD adoption and sales, “with 59 percent of hard seltzer drinkers increasing their consumption in the past year. Flavor variety and a slightly higher perception of health among these products play roles here,” the report says.

Big players, such as Smirnoff, have certainly recognized this and are continuing to invest in their offerings.

“Leaning into our expertise in flavor and innovation and continuing to build on the success of our Smirnoff Ice Red, White and Berry and Smirnoff Red, White and Berry Spirit, both of which performed extremely well, we’re excited to roll out Smirnoff Seltzer Red White & Berry Hard Seltzer this spring,” reveals Krista Kiisk, brand director, Smirnoff, vodka and flavored malt beverages at Diageo.

Smaller players like Southern Tier Distilling Co. (Lakewood, N.Y.) are expanding their portfolios to get a piece of the pie. The distillery has a range of small batch spirits as well as RTD pre-mixed spirits including four vodka seltzer flavors and four canned cocktails—Vodka Soda, Bourbon Smash, Gin & Tonic and Vodka Madras.

“Southern Tier Distilling Company’s reason for being in the canned cocktail space is to bring elevated, mixologist-inspired flavors and ingredients and real craft-distilled spirits into a space that often lacks authenticity,” says founder Phin DeMink. “So when consumers reach for our products, they’re definitely trading up.”

In a category that is seemingly becoming saturated, players believe there is still room for innovation.

Post Meridiem’s Rodbell agrees that a boom is on the horizon. He says: “I think RTD pre-mixed spirits is on the verge of a boom. Look at the leading indicators: Premium is outpacing other segments across all of alcohol; Millenials are craving authenticity, there is even health consciousness that is seeping its way into the alcohol industry; and RTD consumption in the U.S. lags Europe and Asia. There is always room for innovation. That’s why I built Post Meridiem. Spiked Seltzers are an interesting transition vehicle—they are taking consumers away from beer and getting people closer to spirits. I think there is share to be stolen.”