A shift to premiumization, functionality drive growth of next generation ready-to-drink beverages
Once predominantly focused on the younger market and value offerings, the ‘ready-to-drink’ (or ‘RTD’) category has reinvited itself into a trendier category offering premium products that taste better, add functionality to the diet and are carefully packaged for that perfect Instagram look. And it’s booming as a result.
RTDs are single-use beverages that are packaged ready for immediate consumption upon purchase. They first enjoyed notable success in the 1990s and early 2000s, offering approachable – but often highly sweetened – flavours to consumers who saw traditional spirits and mixers as unapproachable.
However, the past few years has seen the category shake off its association with low-grade or party drinks and emerge as better-for-you, craft, super premium, and offering a sophisticated array of flavour profiles. The market for RTDs has expanded from its being just a seltzer dominated category and is now broader than ever, ranging from iced coffees and teas to kefir yoghurt drinks to canned wines and cocktails.
In this article, we’ll review the evolution of the RTD beverages and the trends that are driving growth of the category in 2022 and beyond.
Interest in health and wellness drives innovation
The main selling points for ready to drink beverages was its interesting packaging. An increasingly health-conscious consumer has however made manufacturers realize that it’s more important to focus on the innovation of the beverage itself, leading to the rise of functional RTD beverages.
According to Frost and Sullivan research, functional drinks represent the fastest growing functional market. Research from Mintel has found that, in the RTD category, consumers mainly seek choices that include antioxidants (47%), promote brain health (40%), are anti-inflammatory (35%) or have probiotics (30%).
The response from the market has been a release of a variety of new ‘fusion’ beverages that are both ready-to-drink and claim to have health-related functional benefits, such as cannabis-infused iced teas and collagen waters. RTD probiotic beverages have also become immensely popular as they allow health-conscious consumers a quick and easy way to potentially improve their gut health. Global Market Insights Inc. claims that by 2023 the global market for probiotic ingredients is expected to reach US$64 billion.
There has also been an increase in brands providing healthy and convenient solutions for consumers who may even be too busy to prepare snacks or meals, by releasing RTD products that can be consumed either as a ‘snack’ or meal replacement. Products such as RTD smoothies are a simple way for shoppers to ensure they are getting key nutrients from fruit. UK brand Earlybirds took this further by creating a ‘snacking beverage’ range; providing a high-fibre, plant-based drink for time-poor, health-conscious consumers.
Energy drinks are a common example of drinks with functionality and have always been a strong driver of the RTD market. They were and still remain the go to option whenever consumers are looking for caffeine-enhanced beverages that offer an additional buzz. The Covid-19 pandemic among other factors has made consumers conscious of what they put into their bodies and this has forced the category to start redefining itself. Whilst we previously saw energy drinks mainly containing the ingredients of sugar and caffeine, brands are now steering towards more natural functional ingredients.
Beverage giant Coca-Cola is one of those leading the paradigm shift in this category, having launched its first energy drink with naturally-derived caffeine, guarana extracts and B vitamins. Similarly, Radnor Hills has unveiled a new line of natural energy drinks, boosted with seven B vitamins and natural caffeine, designed to give consumers more energy without the sugar crash. More recently, PepsiCo energy drink called Baya which contains caffeine naturally found in coffee fruit as well as the antioxidant vitamin C for immune support. Research and Markets notes that the addition of healthy ingredients into energy drinks is giving the sub-category a new impetus for growth. The market research firm now predicts that energy drinks sub-segment will garner a revenue of US$91.17 billion by 2028 and witness dominant growth during the forecast period.
Premiumization helps shake off “low-grade” tag
When RTD beverages first came to the market, they were mostly sugary, made of unnatural ingredients and relegated to the bottom shelf. Their main selling point was convenience and attractive packaging. But convenience alone is no longer enough for today’s consumers.
This has compelled manufacturers to produce higher quality, better tasting products largely comprised of natural ingredients. “People love the convenience, but want better quality from their RTDs,” says Brent Albertson, CEO of Zing Zang, which makes mixers and a new RTD line. “Everybody remembers those ‘90s-era RTDs, but it’s a whole new world now for RTDs.” Christopher Wirth, cofounder of Volley, a new, 100% blue agave tequila-based seltzer brand notes that using natural flavors is very important for RTD products. “We use organic juice, sparkling water and high-quality tequila. We use no artificial flavors, no artificial ingredients. We found the highest-quality tequila that we could afford to put into our RTDs. We’re obsessive with our ingredient quality and transparency.”
There has been a stigma that RTD beverages especially canned cocktails are low-grade or party drinks. This kept a majority of consumers from trying these products.
Vice President of global marketing for Bombay Sapphire, Natasha Curtin however notes production of better quality RTDs has completely turned the old stereotypes on its head, propelling the category into one of the top growth sectors in the alcohol industry.
The category’s renaissance has attracted premium well-established brands particularly in the alcohol sector. Over the last two years, premium brands such as Absolut, Ketel One, Bombay Sapphire, and Jameson have all entered the canned RTD space. Some of the most noticeable new product launches in the space include Jameson Ginger & Lime, Smirnoff Raspberry Crush and Lemonade premix can, and Constellation Brands’ Next Round Cocktails.
The entry of premium alcoholic brands recognizable to most consumers has further toned down the low-grade stigma that had dogged RTD beverages for years, further stimulating growth. As more consumers taste RTD beverages, they have come to realise that because a cocktail isn’t being shaken in front of you, doesn’t mean the ingredients and craftsmanship isn’t present in the final product. “The future of premiumization in the category will revolve around this experience — not just great tasting cocktails, but also bringing the level of variety, known and loved brands, and personalized experience consumers might expect on-premise,” explains Nathaniel Davis, CEO of Drinkworks.
Healthy halo catches up with RTD alcoholic beverages
Alcoholic beverages are normally not associated with any health claims. RTD alcoholic beverages however find themselves in a unique position whereby their growth coincides with consumer demands for healthier choice.
Consumers are making active decisions to reduce the amount of alcohol they are consuming, making RTD alcoholic beverages, which normally have low alcohol volumes an attractive option for them. The trend is however going beyond low alcohol volumes to incorporation of ingredients that are considered to have a healthy halo effect. “Consumers are looking more now for what’s in products, what they’re putting into their bodies,” says Christopher Wirth, cofounder of Volley, a new, 100% blue agave tequila-based seltzer brand. Volley’s initial flavor lineup includes Zesty Lime, Spicy Ginger, Sharp Grapefruit and Tropical Mango.
Canned RTD beverages offer a more sustainable and convenient alternative to glass wine bottles, as cans have three times more post-consumer recyled material than glass bottles.
IWSR notes that consumers’ aversion to wheat, barley and gluten has motivated producers to look for alternative alcohol sources, and in some cases, move away from malt entirely. Fermented cane sugar is fulfilling this niche for many products, offering a gluten-free base for their RTDs. Crook & Marker, launched by the founder of Bai Antioxidant Beverages is an example of pioneers in the use of novel ingredients. The better-for-you spiked seltzer is made with ‘organic BaseBrew alcohol’ brewed from cassava root and ancient grains including quinoa, amaranth and millet.
As more people move towards low alcoholic beverage, IWSR notes that a significant group still want to enjoy RTD beverages with high alcohol content. “High strength seltzers are now emerging as a new sub-category, with notable releases announced from both Pabst and Four Loko of 8% and 14% ABV respectively,” IWSR said.
Sleek cans still a major selling point
Bright, eye-catching colours, simple designs and slender cans have been the major selling points for beverages in the RTD category. This trend is expected to continue, albeit at a more accelerated pace, as the visual nature of social media drives consumers into picking products that are visually appealing in a way that is suitable for being photographed for posting on social media.
“Due to the portable nature of the category, Instagram-friendly design is key,” IWSR notes. “If drinks makers get the design of their brands right, they’re much more likely to be photographed by consumers in aspirational and brand-aligned settings.” At this age when consumption is endorsement, especially among millennial consumers, brands that are visually appealing for social media are certainly going to have an edge over their peers.
An advantage that RTD beverages have always had is that from the word go, they have always been packaged in cans, which are more sustainable compared ton plastics or glass. “Canned RTD Beverages offer a more sustainable and convenient alternative to glass wine bottles, as cans have three times more post-consumer recycled material than glass bottles,” emphasized Allie Griswold, co-founder of Mayne & Co. Concern for sustainability as well as the need for a convenient and sleek look only mean that cans will continue being the dominant packaging for this category.
While cans continue to dominate this category, RTD beverage makers have started exploring alternative packaging for a number of reasons including product differentiation and shelf stabilization. High West Distillery recently unveiled two new RTDs in glass bottles: a Manhattan and Old Fashioned, both barrel-finished. Explaining the shift from cans High West Master Distiller Brendan Coyle said: “From a quality perspective, we don’t think there’s a lot lost by canning cocktails, but from a perception perspective, we do think something can be lost in terms of buyers viewing what is a high-end product.” Another brand driving the shift away from cans is BeatBox Beverages which has a wine-based punch that is packaged in carton packaging.
Taking a share of on-premise sales
RTD beverages, cocktails in particular, gained traction this year partly because consumers could not drink their favorite bartender’s cocktails. Nielsen reported that the Covid-affected period saw an increase of 86.8 percent year-over-year growth for all RTD cocktails, opposed to 21.5 percent pre-Covid.
One would think that as consumers head back to bars, the RTD beverage fad could lose its fizz. Although designed for the on-the-go consumers, manufacturers are pushing this category into bars. Texas Speciality Beverage in a report notes that customers are more likely to look for RTD beverages even when they visit their favorite bars and restaurants. After all, they are already used to the size and innovative mixes of the products, which are usually not available in the regular packaging or glass servings. Additionally, some customers “simply find the smaller can packaging of RTD beverages to be safer for consumption in general.”
Data from BackBar, a software solutions company for bars, back the claim that RTD beverages are indeed finding their place in on-premise consumption. The company noted that among users of its software, prepared cocktails now make up 19.1% of products classified as ready-to-drink beverages. In 2019, prepared cocktails accounted for just over 14% of ready-to-drink inventory in Backbar. The software company further revealed that seltzer brands have seen growing success in the on-premise space, mostly thanks to strong gains by White Claw and Truly Hard Seltzers and trend is expected to continue as more RTD brands find their ways to drinking premises.
A category on the rise
RTD beverages will continue to gain market share, drawing in consumers who typically buy beer or wine. On-the-go consumers in almost all areas of the beverage industry are also expected to continue to be drawn in this category as it evolves to offer every form of refreshment from RTD coffee and tea for breakfast to snack and meal replacement beverages.
U.S. sales for the alcoholic RTD category is expected to reach US$146 billion by 2030, an increase of about 20% annually, According to a recent study by FactMR. Globally, the RTDs alcohol market size which was valued at US$ 32.94 Billion in 2021, is expected to reach US$85.5 Billion in 2030, at a compounded annual growth rate of 11.2% from 2022 to 2030, according to, according to InsightAce Analytic.
To succeed in this category, RTD brands must strive to meet consumer demand by featuring more sophisticated flavors, healthier ingredients, and various alcohols. The brands that succeed will have upped their marketing and design game as well.
This feature appeared in the March/April 2022 issue of Food Business Africa. You can read this and the entire magazine HERE
