RTDs Are Poised to Take Over

The country spent much of the 15 months in quarantine. Being cooped up at home changed consumer spending habits, and the preference for ready-to-drink (RTD) cocktails and hard seltzer has created permanent behavior.

No one could have foreseen toilet paper becoming the hottest product in stores nationwide. But TP wasn’t the only item flying off shelves in record numbers. Canned RTD Beyond Beer alternatives dominated the beverage alcohol market while consumers opted for easy ways to enjoy quality drinks at home. 

The category skyrocketed as consumers stocked their refrigerators with hard seltzers and premixed canned cocktails. Now, with lock-downs coming to an end and people emerging from their homes, quarantine habits are being tossed aside in favor of a pre-pandemic sense of normalcy.

Toilet paper has returned to being an as-needed household item and pandemic essentials (such as gallons of bleach) are no longer…essential. However, consumers have taken at least one quarantine habit and made it part of their new normal. As the world opens back up, RTD beverages continue to reign. 

RTD Consumption will Pass Wine in 2021

According to IWSR data, the RTD category grew an impressive 62.3% by volume last year. Hard seltzers led the pack, growing an astonishing 130% in the same time frame. RTDs have already surpassed total spirits in volume and are projected to surpass wine by the end of the year. The RTD category experienced bigger gains in consumption than any other alcohol beverage category last year. 

Hard seltzers alone make up more than half of the US RTD category. The seltzer market grew by $3.8 billion this year and is projected to reach $11 billion by 2027. Flavored alcohol beverages make up the second largest segment in the category followed by RTD cocktails.

“Though the cocktail/long drink sub-category is still comparatively small by volume, the segment grew +52.7% in 2020 with canned cocktail growth spurred by on-premise closures and the on-premise pivot to ‘drinks to go,’ as well as more at-home consumption and outdoor socialization,” stated Brand Rand, COO of the Americas for IWSR.

Tax Relief Would Help Spirit-based RTDs

The IWSR reported that spirit-based cocktails are on the rise. RTD cocktails containing real spirits such as High Noon, which is made with real vodka, as well as Proof Point and Cutwater Spirits, both canned cocktail lines crafted with a variety of spirits, have struggled against higher rates of taxes in the US than the popular malt-based RTD beverages.

Taxing companies more for real spirits means a higher price point is passed along to customers. However, many states are actively working towards changing that legislation and reducing taxes on spirit-based beverages, a move that the IWSR believes will help foster continued growth of the RTD industry as a whole. 

Bar of the Future

The RTD craze was certainly accelerated by pandemic regulations but as bars and restaurants open back up the category continues to gain unprecedented traction in on-premise locations. Venues have only been open a few months and even the largest beverage companies are already struggling to meet on-premise demand. 

The inability to produce and deliver enough RTD beverages to bars and restaurants has resulted in a dip in sales. Analysts attribute the lag in sales to venues simply not being able to stock the RTD products they need, leaving eager consumers to drink whatever is available. 

“We believe the decline in regular consumers is driven by the gradual reopening of on-premise channels where hard seltzer is currently under-indexed vs. beer, wines and spirits,” a Market Watch analyst explained. Analysts expect the on-premise RTD category to regain momentum as soon as venues are properly stocked.

Plenty of Room to Grow

The IWSR is betting on a bright future for Beyond Beer and RTD categories. Analysts project RTDs will expand to a 22% volume share of total US beverage alcohol in less than 5 years. 

Analysts aren’t the only ones banking on RTDs. Many of the major alcohol beverage companies are investing in expanding their production capabilities to keep up with consumer demand for hard seltzers and canned cocktails. 

White Claw, which currently controls almost half of the hard seltzer market, just invested heavily in two new production facilities. The Mark Anthony Brewing company opened a $250 million facility in Glendale, Arizona last summer and it is currently preparing to open a massive $400 million flagship facility in Columbia, South Carolina. 

In February Anheuser-Busch announced plans to invest a whopping $1 billion towards expanding US seltzer production over the next two years. AB InBev is home to Bud Light Seltzer, Michelob Ultra Seltzer and Bon V!V, among others. 

Last year Molson Coors invested millions of dollars into growing its hard seltzer output capabilities in the US by 400%. The investment included expanding its Fort Worth, TX facility. The brewer also recently announced plans to invest $100 million into its Canadian seltzer portfolio and production. Molson Coors plans to boost seltzer output in Canada by 300%.

The company owns Coors Seltzer as well as Vizzy. Molson Coors also produces, markets and distributes Topo Chico Hard Seltzer for the Coca-Cola Company as part of a distribution agreement. 

Analysts, alcohol beverage companies and fans all agree, RTD beverages officially have a seat at the table.