Key cocktails, premium products to drive RTD category within the next 5 years, IWSR research finds
GLOBAL – Key cocktails/long drinks sub-category and products that sit within the premium-and-above price bracket will replace hard seltzer as the new drivers of growth in the RTD category between 2022 and 2027, according to IWSR.
The drink market research firm further reports that the RTD category is expected to grow by +12% in volume between 2022 and 2027, hitting US$40bn by 2027 across 10 key markets.
The analysed 10 markets – Australia, Brazil, Canada, China, Germany, Japan, Mexico, South Africa, the UK, and the US – account for 83% of global RTD consumption with a total value of US$33.9bn in 2022.
IWSR observed that growth expectations for RTDs across the 10 key markets have halved over the past year to a forecast volume CAGR of +2% between 2022 and 2027 primarily due to declines in hard seltzers in the US.
Over the same timescale, cocktails/long drinks will see their share of RTD volumes across the key markets grow by 4 percentage points, to command a quarter volume share of the RTD category by 2027.
Suise Goldsprink, Head of RTD insights, IWSR said, “Growth is slowing in an increasingly mature global RTD category, but opportunities persist in the cocktails/long drinks space and for premium-plus products that prioritize consumer-forward cues such as RTD base, ABV, and flavour.”
As the category matures, new product development is evolving, with the pace of innovation slowing from its 2021 peak: in that year, more than 3,000 new RTD products were launched, but in the first half of 2023, that slowed to just over 1,000.
“Although the pace of innovation has slowed, the effectiveness of new launches has improved, as producers are more strategic and targeted in their product launches,” Goldsprink added.
IWSR observed that innovation is increasingly skewing to premium price points, thanks to trends such as spirit-based hard seltzers.
Other trends driving premiumization include using named spirits categories and premium ingredients in RTDs; and enhancing products with functional ingredients.
Seven out of 10 markets covered in the report registered double-digit volume growth for premium-plus RTDs in 2022, suggesting that there is still plenty of headway for growth for higher-priced products.
“The premiumisation trend is moving in a variety of directions, from premium formats to a shift in ingredients and added functionality – all aspects that offer a point of differentiation to consumers,” says Goldspink.
Other report findings
Further, the report noted that While the US is the largest RTD market, Japan is expected to add the most volume going forward as the US sees its growth rates drop to +1% volume CAGR, 2022-2027.
The report also observed that consumers are drinking more frequently, consuming more on the same occasion, and exploring a greater number of sub-categories.
According to IWSR data, the proportion of RTD consumers drinking RTDs more than once a week increased from 39% in 2022 to 43% in 2023.
The shift from lighter to fuller flavours is also gathering pace with IWSR research suggesting that 32% of RTD consumers consider alcoholic strength when selecting a product.
Finally, alcohol base is now the second most important factor in RTD selection – mentioned by 34% of consumers and especially important in Brazil, Mexico and South Africa.
While malt- and wine-based RTDs registered volume declines in 2022, falling by -4% and -3% respectively, spirit-based RTD volumes rose by +5%.
Among spirits, Vodka remains the most popular RTD spirit base, but gin’s decline in popularity opens the way for tequila to move ahead of it in the rankings.
