Ready-to-drink (RTD) cocktails typically strike a balance of price, flavor, and convenience — all critical qualities, especially sought after during COVID-19. Nielsen’s latest data shows a 133% in dollar sales from October 2019 to October 2020, according to Danelle Kosmal, Nielsen’s vice president of Beverage Alcohol Practice. While that remains impressive growth in itself, it’s actually demonstrative of long-term trends. “RTD spirit cocktails were up 63% in dollar sales compared to the prior year [October 2018 to October 2019],” says Kosmal. “Growth rates have accelerated during COVID weeks, now up 150% in off-premise channels for the time periods from the first week of March through the week ending October 10, 2020.”
But the RTD category is hugely broad, encompassing single-serving options like Cutwater Spirits’ canned line of 12-oz. premixed cocktails as well as bulk options like 1.75L bottles of Jose Cuervo’s Ready-To-Drink Margaritas. Price points also vary wildly; alcohol delivery platform Drizly offers RTDs from less than $10 all the way to $100 to ensure online shoppers have a large span of costs, flavors, and sizes to choose from.
And there have never been more brands for consumers to choose from. Liz Paquette, head of consumer insights at Drizly, says that year-over-year, “the number of RTD brands for sale on Drizly has almost doubled, growing from 99 to 188 in 2020 year to date compared to 2019.” Thanks to pandemic-related regulation relaxation, restaurants and bars across the country have also recently entered the RTD category, including national chains like the Cheesecake Factory (in certain locations) and local bars like Dante in New York City, who teamed up with F!VE DRINKS CO. to launch Dante-inspired canned cocktails like a Summer Spritz (made with gin, cucumber, lemon, elderflower cordial, and grape juice) and Gin & Tonic. Dante’s canned cocktails are available in four-packs for $13.99, while the Cheesecake Factory in San Diego’s bottled cocktails (each meant for at least two people) run between $20 and $24 for offerings like a mojito, pineapple Moscow mule, and red sangria.
Brands that focus on small-batch, craft-forward options can struggle with competitive pricing against mass-produced RTDs, despite providing the same convenience factor. “A key challenge that we face in our strategy for pricing our Novo Fogo Sparkling Caipirinhas has to do with the fact that they are cocktails made with a real distilled spirit,” says LukeMcKinley, Marketing Director of Novo Fogo Organic Cachaça. “The canned cocktail segment faces a bit of an uphill pricing battle when compared to ferment-based canned drinks, which can be offered at a comparatively lower price because of their cheaper ingredients.” Both volume and varying state tax regulations towards spirits-based cocktails versus ferment-based cocktails also contribute to divergent pricing approaches.
Despite the higher cost associated with craft-forward options, it’s the value of imbibing something seemingly hand-crafted that keeps consumers coming back. The team behind Bulrush, a St. Louis-based restaurant dedicated to zero-waste practices and foraged seasonal ingredients, says they decided to add ready-to-drink cocktails to their to-go program when COVID-19 disrupted operations. “When COVID-19 hit, it impacted several systems,” explains Alyssa Todd, Bulrush’s hospitality manager. “As our customers typically dine with us in groups, we felt batched cocktails would help support families quarantined at home in need of a cocktail,” adding they also provide alcohol-free options as well. Bulrush’s RTD cocktails come in 16-oz. containers with four servings apiece, with ABV ranging from 18% through 26%. Spirits-free options start at $20, while cocktails run $30 or more. At around $8 a serving, “it’s very similar to how you would price an individual cocktail in that you take the base ingredients such as the liquor and modifiers into account,” says Todd.
Restaurants like Bulrush have added RTDs to their menus in droves during the pandemic, but spirits brands like Drake’s Organic Spirits have also gotten in the game due to the surge in demand. “The category is on fire,” says Jim Allen, Drake’s chairman of the board. That’s what led his company to expand into “boxtails,” or boxed cocktails. Besides being more “ecologically sensitive,” cans are harder to come by during COVID thanks to supplier shortages, Allen explains. Plus, with little widespread competition for boxtails in the RTD category, Drake’s has been able to set their own pricing: $19.99 for 1.75 liters in flavors like Mango Punch and Blackcherry Limeade, all running 12% ABV and certified organic, gluten-free, non-GMO, vegan, and kosher. Allen sees the price point as a win for both producer and purchaser. “We think it’s a great introductory price,” he says. “As a consumer, the average price of a bottle of good wine is $18, $19, $20. That’s the sweet spot, and you get a lot more drinking out of this than a bottle of wine.” He anticipates shipping 10,000 – 20,000 cases in the first quarter of 2021, but thanks to non-competitive supply needs like boxes and bladders instead of cans and crowlers, he’s optimistic they can and will scale up production quickly for rising RTD demand.
Large production players like High Noon and Cutwater Spirits are similarly able to leverage large quantities of product in better shelf positions into lower price points. For example, Cutwater’s 4-packs of 12-oz., 12.5% ABV Tequila Lime Margaritas run $13.99, while their Vodka Soda Variety 8-pack costs $24.99. Comparatively, an 8-pack of Siponey’s 7.25% ABV rye whiskey cocktails run $54.99. Of course, Siponey’s cost includes a much longer aging process (four years) and the use of local and sustainably sourced ingredients for the super-premium canned spirit, so it’s far from an apples to apples comparison. That cost-versus-value balancing act reflects the same push-and-pull across the entire alcohol beverage industry: consumers who are invested in supporting craft also tend to expect competitive prices, especially as their supply of selection grows.
According to Kosmal, four of the five largest brands in the RTD category are also the ones driving the most growth. “The top brands across RTD cocktails (in terms of total off premise dollar sales YTD versus a year ago), include High Noon (+599%), Monaco (+71%), Cutwater (+107%), On the Rocks (+485%), and Jose Cuervo (+55%),” she says. Paquette also measures High Noon, On The Rocks, and Cutwater in their top three performing brands on Drizly for October 2020, along with Ranch Rider and Canteen Spirits. Marketing-wise, brands like On The Rocks and Cutwater espouse “mixologist-designed” offerings, appealing to craft-conscious consumers while leaning on global parent companies to meet widespread demand. (On The Rocks is owned by Beam Suntory and Cutwater is owned by AB InBev.)
That usurpation of the already cloudy definition of “craft” by corporate conglomerates is pervasive throughout the entire alcohol industry. But when it comes to RTDs, a wide demographic of potential customers, offering a preconception of craft seems to be a safe bet for marketing teams. Allen calls Drake’s pool of buyers “a pretty broad spectrum,” ranging from younger people just entering legal drinking age who are shopping at convenience stores to women doing their weekly grocery shopping trips and everything in between. “We don’t want to limit it,” says Allen. Studies show that younger Millennials and Generation X drinkers are less brand loyal than their older counterparts, and this growing apathy appears to also extend towards ownership. Basically, if a RTD brand “feels” craft, has a wide range of popular flavors like berry or citrus, provides the same convenience and numerous opportunities for purchase, and offers a ABV-to-price value perception, consumers are likely to respond positively.
“Prior to COVID, two of the leading consumer trends driving alcohol innovation and growth were experience and convenience,” says Kosmal. “We’ve found they continue to be trends throughout COVID. Even while at home, consumers continue to seek convenience and experience in the types of alcohol they are drinking. Ready-to-drink cocktails are perfectly positioned to meet those consumer needs.” As economic uncertainty continues while the cost of luxury items like alcohol remain steady, it’s likely that the RTDs best poised for long-term success will be those who can, even artificially or temporarily, replicate the one-on-one experience of enjoying an expertly mixed cocktail at a bar from the comfort of your own home, for the same (if not lower) price.