Cocktail burgeon drives evolution of the spirit-based RTD segment in the US: IWSR

US – Increasing investment in RTD cocktails, the fastest-growing RTD segment, is contributing to the premiumization of the overall RTD market, as well as the evolution of the spirit-based RTD segment in the US, a new report from IWSR reveals.

Adam Rogers, North America research director at IWSR explains that the spirits and cocktail culture are extremely popular right now, and with consumers wanting more convenience, there is a clear opportunity for brands to fill the gap for high-quality canned and bottled cocktails.

He adds that many well-known brands have leveraged the opportunity to add another convenience-based consumption occasion to their portfolio while raising overall brand awareness.

Brandy Rand, chief strategy officer, IWSR states: “Alcohol under indexes in flavor options compared with other consumer packaged goods (CPG) categories.”

RTD cocktails help to fill that gap by offering more choice and variety, while still meeting the convenience needs of today’s consumers. This is also reflected in findings from our consumer research: flavor is the number one reason people choose RTDs.”

Furthermore, the interest in RTD cocktails has prompted a shift from malt- to spirit-based RTD offerings, according to the global alcohol market research firm.

Favorable tax rates mean that malt-based products in the category still account for the bulk of volumes, but their share by the end of 2022 is expected to slip below 90%, while spirit-based products will likely climb from 5% to 7%.

In a fast-growing market, that represents a notable uplift and in 2021 equated to 14 million extras 9-liter cases, the figure is expected to accelerate further by the end of 2022, the report notes.

 

IWSR consumer data shows that drinkers in the US perceive these spirit-based products to be more premium and this is borne out in the higher prices these products command on the shelves.

The alcohol market research firm adds that brands have consequently started to use their choice of spirit base as a point of difference to indicate quality with a number of premium spirit brands crossing over to RTDs, contributing to the premiumization of the overall category as well.

In the spirit space, Vodka overtook tequila as the leading RTD spirit base in 2021, bolstered by the fact that around half of the most popular cocktails in the US are vodka based.

In 2019, Vodka-based RTDs which also offer a trade-up alternative to malt-based hard seltzers, had a share of just over a fifth of the spirit-based RTD segment, by 2020 this had surged to more than a third, and this is projected to reach approximately 50% by the end of 2022.

Just as Tequila is also an important ingredient in some of the most recognized cocktails, IWSR is expecting the erosion of tequila’s share of spirit-based RTDs to slow due to growth (17%) in volume consumption of tequila in the US in 2021, strengthened by increased celebrity investment.

In addition, Vodka and tequila’s dominance within the RTD category also relies on the fact that they are relatively more mixable than other spirit bases, such as whisky, which makes up just over 5% of spirit-based RTDs.

With this constant innovation and consumer demand for drinking “less, but better”, is underpinning the evolution of the RTD category in the US, which will allow new entrants who carve a niche for themselves in the market.

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