Looking to meet demand for convenience and selection, spirits-based premixed cocktails are often neatly stacked near cash registers of beverage alcohol retailers. This strategy is paying off as spirits-based RTD sales revenue grew nearly 40% in 2020 to $489 million, according to the Distilled Spirits Council (DISCUS). The segment is expected to eclipse $500 million this year and heading toward the $1 billion club. Retailers could have sold more, but supply couldn’t meet high demand. “There is a huge growth potential for spirits-based RTDs,” says David Ozgo, chief economist at DISCUS. “It’s driven by consumers’ demand for variety and convenience–two converging factors leading to massive opportunity.”
Consumer spending on spirits in the on-premise dropped from $49 billion in 2019 to $29 billion in 2020, according to Ozgo. Distillers responded with RTDs. “They say necessity is the mother of invention; opportunity is also the mother of invention,” Ozgo says. “A lot of distillers took the opportunity to put products on the market that were not only convenient but also unique in their flavor profiles and attractive to the consumer.”
In Miami, sales of spirits-based RTDs have been gaining steam. “It’s a category that has really picked for me,” says Andrew Mendez, vice president of operations at the four-unit Mendez Fuel convenience store chain in Miami. “Everybody wants to get into that game. Every week my wholesale representatives are trying to sell me a new RTD.”
Popular spirits-based RTDs at Mendez Fuel stores include High Noon ($3 a 12-ounce can or $10.79 a four-pack) and Cutwater ($3 a 12-ounce can or $11.79 a four-pack). “I had High Noon a year or two ago, and they didn’t do great,” Mendez recalls. “Right when the pandemic hit, High Noon started picking up. The new flavors also really helped.”
Sales of premixed cocktails at Mendez Fuel got a boost when the stores started selling single cans last year in addition to four-packs. “I tried to sell them by four-packs, but they weren’t taking off,” Mendez says. “I made a little section in an open-air cooler where I broke them down into singles, and people started grabbing two different flavors at a time. My margins are better selling them as singles.”
The single cans allow customers to sample and experiment. “I started to realize how much it worked with the brand Two Chicks ($3.79 a 12-ounce can), which is mainly women buying it,” Mendez says. “They tried them as singles, and now they are committed to buying four-packs ($15).”
In Minnesota, the 11 Haskell’s stores saw the RTD segment increase 15% to 20%. Top-selling spirits-based brands include Jose Cuervo Gold Margaritas ($11 a 750-ml.) and Daily’s ($2.19 a 10-ounce pouch), but the segment is changing. “You are seeing movement away from the sweet stuff, and people are migrating more toward brown spirits-based RTDs,” Haskell’s president Ted Farrell says. “When you see brown spirits move into that realm, it says something.”
RTDs accounted for 2.6% of overall spirits volume in 2020 but 17.3% of category growth, according to DISCUS. “From the consumer standpoint, we have convenience, but we also have multiple flavor profiles,” Ozgo says. “You get the variety that people demand. Premixed cocktails are growing rapidly, but it’s a well-defined market. The rapid growth is in the single-serve RTDs.”
Legislators are taking notice as well—about a dozen states are considering legislation primarily focused on reducing taxation and increasing access to spirits-based RTDs. Moreover, premixed cocktails are selling no matter the weather or time of year. “RTDs are here to stay,” Mendez says. “They are going to be a thing from now on.”