In early April at Lisa’s Liquor Barn in Penfield, New York, general manager Lee Ann Reisenberger was eagerly anticipating the arrival of Delola RTD cocktails. Another spirits-based RTD entering the fray isn’t something new or particularly exciting, but Delola has a differentiator: The brand creator is superstar entertainer Jennifer Lopez, and Delola Spritz is her first release from The House of Delola LLC. “Any brand with star celebrity on the package seems to be big,” says Reisenberger. “I can guarantee people will be asking for it.”
There is also a lot of buzz surrounding SunnyD Vodka Seltzer, a boozy version of what was a childhood favorite sugary juice drink for many U.S. consumers. New RTD brands containing other recognizable mixers—Coca Cola, Fresca, and others—are also making waves in her store. “Fresca Mixed is doing really well and Jack Daniels and Coca-Cola is too; with Coke on the label it really helps,” Reisenberger says.
Such recognizable brands can help differentiate a newer RTD from the fray of hundreds of brands vying for attention from retailers and, in some cases, restaurateurs and bar owners as well. Ready-to-drink cocktails are on fire throughout the
U.S., with consumer enthusiasm eclipsed only by the enthusiasm shown by producers to get new products into the marketplace. Will Moore, chain general manager for the Indianapolis-based Crown Liquors stores, calls the latest influx of brands a “SKU-pocalypse” and likens the frenzy to the similar surge that happened with craft beer several years ago, although RTDs started from a smaller base.
In fact, of 35 leading brands tracked by Impact Databank, only ten had measurable volume as recently as 2017. The majority found their footing in 2020 and 2021, and 2022 brought significant growth for most brands. Together, the leading 35 brands combined for a 59.4% increase to 37.5 million 9-liter cases in 2022, according to Impact Databank.
Within the broader RTD sector, it’s the spirits-based entrants, rather than malt-based drinks, that are resonating best with U.S. consumers. “The market is poised to continue growing—right now the RTD market is valued at $209.77 million,” says Don Deubler, CEO of Atomic Brands, which owns the Monaco brand. “The main difference is that now consumers are more discerning and knowledgeable about the sub categories within the RTDs. While seltzers have slowed down, full flavor spirit-based RTDs are gaining share in front of flavored malt beverages and seltzers.”
Malt-based RTDs still have the lion’s share of volume—Impact Databank estimates malt-based RTDs have nearly 90% market share by volume and roughly 80% by value—but spirits-based RTDs are growing much faster. “This is driven by a clear consumer preference, education, and premiumization,” Deubler says.
Hard seltzer giant White Claw acknowledged the shift to more spirits-based demand this year with the launch of White Claw Vodka Soda ($10 a 4-pack of 12-ounce cans) in Pineapple, Peach, Wild Cherry, and Watermelon flavors. The White Claw move to a spirits base was one of several in the industry as consumer demands shift.
According to Sean Eckhardt, senior vice president and managing director of sales at Bacardi North America, spirits-based RTDs show no sign of slowing down. “The reason spirit-based cocktails have thrived so much is we’ve been able to put fantastic pre-made cocktails with real spirits into a can,” he says. “It’s an opportunity for people to get cocktails that maybe they don’t even know how to make in a great, convenient way.” Bacardi uses established spirits brands to promote RTD offshoots, including Bacardi Real Rum Cocktails ($13 a 4-pack of 12-ounce cans) and Cazadores Tequila canned cocktails ($14).
For Beam Suntory, the spirit-based On The Rocks ($24 a 750-ml.) has given the company a strong growth vehicle in the ready-to-enjoy cocktails sector. The brand, which launched in 2020, depleted 672,000 cases in 2022. “Consumers are clearly eager for a premium, bar-quality cocktail that they can get outside a bar,” says Beam Suntory managing director for U.S. RTDs Heather Boyd. “One flavor that exceeded our expectations was the Manhattan. Made with Basil Hayden as its base, the OTR Manhattan started as a limited time offering, but ultimately became a permanent SKU based on the demand.”
But Beam Suntory remains keen on malt-based RTDs as well, with Boyd noting that people are less focused on the base and more focused on the flavor of the product. “Our perspective is that to win in RTD, you need to have both spirits- and malt-based drinks,” she says. “The benefit to this approach is that it extends our reach and allows us to leverage brand affinity as we introduce new ways to enjoy our products.” As an example, she points to Jim Beam Kentucky Coolers ($20 a 12-pack of 12-ounce cans), which are made as part of a strategic venture with Boston Beer Co. and allow Beam Suntory to extend Jim Beam into new expressions and flavors and reach new consumers. “Using a malt base also allows our brands to show up in places that spirits can’t, such as in convenience and grocery stores in states that don’t allow spirits sales there,” Boyd adds.
Most leading pre-packaged cocktails registered growth in 2022, many at double-digit rates. High above the fray is Spirit of Gallo’s High Noon ($16 an 8-pack of 12-ounce cans) which, at 16.4 million cases in 2022—a staggering 85.6% gain from 2021—is the undisputed category leader. The brand launched in 2019 and quickly grabbed market share, becoming the category’s leading brand in just two years. Despite having locked up its massive market share with the flagship vodka-based High Noon Hard Seltzer, which is available in a range of more than ten flavors, the brand is pushing ahead with new innovation. Earlier this year the company launched High Noon Tequila Seltzer ($19) to capitalize on the agave spirit’s popularity.
Despite Tequila’s popularity, No.-2 Jose Cuervo Margaritas ($18 a 1.75-liter) has not seen the success of other, more recently released RTDs. Though the brand got an initial boost when the popularity of RTDs first surged a couple of years ago, the Proximo Spirits-owned brand has been eclipsed, and last year fell 9% to 2.75 million cases, according to Impact Databank.
Cutwater ($13 a 4-pack of 12-ounce cans), a spirits-based RTD from Anheuser-Busch In-Bev (A-B InBev), appears poised to take the No.-2 position if current growth rates continue. The No.-3 RTD brand advanced 36% to reach 2.65 million cases last year. Group vice president of marketing for A-B InBev’s Beyond Beer unit Monica Mody says the company is committed to offering consumers a variety of options. “We want to make sure we’re delivering top quality products in the categories our consumers are searching,” she says.
At No.-4, Monaco ($17 a 4-pack of 12-ounce cans) registered similar dynamic growth in 2022, advancing 33.6% to 2.55 million cases. Core flavors include Lime Crush and Citrus Rush. In August 2022, Atomic Brands launched Monaco Hard Lemonades, which are vodka based.
Crowding The Shelves
The Monaco line extension is not unusual. The RTD category, more than full-strength bottled spirits, relies heavily on new expressions to keep consumers engaged. “There is this constant need for innovation,” Bacardi’s Eckhardt says. “Plus, consumers’ tastes change, their behaviors change, and it seems to be that in this space it’s happening pretty quickly.”
Hannah Venhoff, vice president for Deep Eddy vodka at Heaven Hill Brands, emphasizes that the urge to innovate needs to be tempered with balance. “There’s a question of how to remain relevant in this continuously changing and evolving category,” she says. “At Deep Eddy, we believe there’s so much credibility in our base, so we want to stay true to who we are. For innovation, I think we’ll continue to work to remain relevant, but I don’t expect you’ll see from us more than one new item each year.”
The innovation isn’t only in the liquid. At Pernod Ricard USA, vice president of RTD and convenience Natalie Accari acknowledges that researchers are “constantly in the lab developing new liquids.” But the right cocktail must be contained in the right package, she maintains. “Along with great cocktails, the correct formats are going to be really important growth drivers for us,” she says. Whether aggressive or measured, whether in liquid or in package, the innovation from existing brands and entries from new competitors is creating significant challenges in stores, and eventual shakeout is inevitable.
José B. Chao, president and CEO of Coppa Cocktails USA, which offers a variety of ready-to-drink cocktails in glass 750-ml. bottles ($18), says the competition is intense, and brands need to differentiate themselves off-premise. “Retailers are extremely supportive because we’re supporting them: we’re investing heavily in in-store tastings again this year, earning gold medals at competitions, and conducting public relations campaigns all year to drive consumer interest,” Chao says.
Venhoff notes that brands are fighting for space on the floor, on the shelves, and in the cold box. “With competition growing, our focus is really leaning in on differentiators for Deep Eddy,” she says.
Brand recognition can also tip the scales. “I think we really benefit because we’ve got well-recognized, nationally known brands that are core to these products,” Eckhardt says. When we say the base is Bacardi Superior rum or Cazadores Tequila, that carries a bit more weight than a product with no brand recognition. We also spend millions of dollars to advertise and talk to consumers in order to learn and innovate. We come in with consumer data that says ‘this is what consumers are asking for and telling us,’ and I think they appreciate that kind of expertise.”
Pernod Ricard USA also approaches retailers armed with consumer insights. “We come to retailers with really compelling category insights to help to push the shelf space out,” says Accari, noting that shelf space devoted to RTDs isn’t being expanded in many stores. “We have conversations with retailers about SKU rationalization on the shelf, while also making sure that our brands are available cold because a large proportion of RTDs are enjoyed immediately after purchase.”
Moore of Crown Liquors acknowledges the problem. “The biggest challenge has been resetting store shelving and floor space to accommodate this relatively new category of product,” he says. At Lisa’s Liquor Barn, Reisenberger is struggling to find a balance, noting that the category is booming but the store is inundated with new brands. For this category in particular the store isn’t seeking to have the broadest assortment possible. “We wait and see what the customers are asking for,” she says. “We don’t feel we have to be the first one to bring them in. We’re waiting to see what’s catching on and what people are asking for.”
Thus far, ready-to-enjoy cocktails have been primarily an off-premise phenomenon, but several producers are upping their efforts to gain on-premise distribution. Pernod-Ricard, for example, made a push with its Jameson RTD cocktails ($15 a 4-pack of 12-ounce cans) ahead of this year’s St. Patrick’s Day celebrations. “We went in…with a special offer for our on-premise operators to make sure that we could continue to really drive trial in the on-premise with our RTDs,” says Accari. “That proved to be extremely successful, providing convenient, consistent serves in the on-premise and really [accelerating] speed of service. That’s what RTDs help deliver for the on-premise.”
Similarly, Boyd says Beam Suntory sees “big opportunities” for their RTD products in bars and restaurants. “Ready-to-enjoy products can lighten the demand on on-site skilled mixologists and can limit the waste of fresh ingredients used to make cocktails,” she says. “They are also great for ensuring a consistent drink every single time.” Boyd says RTDs can’t replace bartenders but they can “supplement their craft.”
RTDs haven’t fully penetrated the on-premise yet, nor are they likely to replace the curated experience a bartender can provide. But RTDs have invaded the fringes and will likely continue to make inroads, Venhoff says. “I think that RTDs growing at the rate they are on-premise is very telling of the longevity of this category,” Venhoff continues. But, she adds, a shakeout seems inevitable. “I think for many brands this will be a blip,” she adds, referencing the entire marketplace, not just the on-premise. “It’s an extremely challenging category to play in from a profit and margin perspective, so some of the smaller players will probably start to taper off in the next couple of years.”
Moore says he is already seeing the shakeout. “High Noon is king right now and other key players seem to be carving out strong supporting roles that should position themselves for solid growth in the coming months or years, but I think you will see less prominent brands—even some from major suppliers—fall off and fade away relatively soon. I think it’s going to be tough for smaller brands to compete. Flavored vodka soda is such a simple thing that it’s hard to imagine the need for too many brands to be stocked at any given retailer.”
That said, the category is poised to remain compelling. “I think the most competition is going to come from innovations and higher-end products, but the base is so small with that part of the category that we’re still a long way from seeing how that is going to play out,” Moore says. “I’ve tasted some premium, very delicious cocktails in cans—some that compare very favorably to drinks I’ve had at craft cocktail bars—and I think those items are where there is still a lot of story left to be told.”