Bar of the Future: RTDs Can Change On-Premise Forever

The ready-to-drink (RTD) cocktail category has flourished during the COVID-19 pandemic, in part due to shut-downs that continue to keep people in their homes and away from bars, restaurants and public events. Hard seltzer’s rise in popularity was already well on its way before the virus hit, and successfully nudged consumers down a path of experimentation, and away from traditional standbys.

The future is still uncertain, but leaders in the alcoholic beverage industry are left to wonder how the rise of RTDs and hard seltzers will change on-premise offerings once dining gets back to full-swing.

What role can RTDs play in the bar of the future?       

To begin to answer that question, let’s first dive into how RTDs have shaken up the alcohol industry over the course of the last year. Ironically, at-home drinking provide insight.  A recent Drizly consumer report documented that the RTD segment grew over 400% in share of sales year-over-year in 2020, and big beer brands are scrambling for a piece of hard seltzer and RTD market share. 

This boom has created an opportunity for RTD startups to get in on big beer money. Chris Graebe of Boardroom Investment Group said his RTD startup company is on one of the fastest sales and expansion tracks he’s ever seen in his career.

“[Big beverage companies] were slow to invest in these new products and allowed startups to lead the way,” Graebe said. “But now, the industry-leading companies are jumping into the game full force, acquiring startups left and right to catch up.”

Another Drizly report found that more than half of respondents surveyed (52%) said that they are making more cocktails at home during the pandemic. So, while people haven’t been able to go out for cocktails, they are certainly still drinking them. RTDs have provided consumers with cocktails and cocktail-like beverages made even more simple — no need for a cabinet full of liquor bottles, short shelf life garnishes and specialized cocktail equipment. “Simple” is a keyword in RTD; the most popular drinks in the category are simple ingredient RTD cocktails, such as takes on vodka-sodas and gin-tonics, according to Drizly. 

Hard seltzers and RTDs are also changing people’s drinking habits, and more consumers are entering the cocktail space and becoming more comfortable with cocktails, thanks to the popularity of hard seltzer.   The overall reception to canned cocktails has been positive, leading to a new reality for the segment.

Emerging RTD Brands are Positioning for an Future that Includes On-Premise

Andrew Rodbell, co-founder of Post Meridiem Spirits explained emerging consumer patterns which he feels have helped generate interest in his full-strength RTD brand.

“I see hard seltzers are clearly cannibalizing beer, meaning consumers are leaving beer to go to hard seltzers. Then, I see them kind of moving from malt-based hard seltzers to more authentic spirit-based hard seltzers,” Rodbell said.

 

“I think it’s an easy jump to go from there to say the consumers who enjoy spirit-based hard seltzers will likely enjoy a spirit-based cocktail, and Post Meridiem will be there to catch those consumers who are on that journey.” -Andrew rodbell, co-founder of post Meridiem

Will the Local Pub have Special Racks for Dispensing Cans?

Let’s get back to the bar of the future. As RTDs continue to grow and penetrate the alcoholic beverage market, restaurant and bar owners are beginning to see multiple reasons for supplanting free-pour.  Bottles and bottle racks could be replaced with can displays. The consumer appeal of the canned cocktail starts with the packaging, so equipment suppliers will have to use creativity and design ingenuity to help the consumer decide.

The bar could then have 4 different bloody marys, margaritas, and old fashioneds. The packaging, unique recipes, nutritional information, quality of ingredients, and ABV will then provide boundaryless options for the guest.

Hotels Could be the Low-Hanging Fruit

Rodbell saw the potential for his RTD products on-premise early on. 

“I used to go to hotel pitches and say you should want ready to drink, and we’re best in class,” Rodbell said.

Now, hotels are reaching out to distributors directly asking for ready to drinks.

“All I have to do is step in and say we’re best in class,” Rodbell said. “It’s a much easier sell.”

Hotels and RTDs seem like a no-brainer collaboration in order to streamline beverage service, especially for hotels that don’t have the resources to maintain internal restaurants and bars with new financial constraints and low occupancy rates brought on by COVID-19. Cutting out extra beverage management means that hotels can focus resources and energy on other aspects of their business, without necessarily compromising the quality of their drink menu. 

“Ready to drinks offer many benefits for on-premise locations,” Rodbell said. “Whether it’s — especially in this modern world — a low touch alternative, [sic] quicker speed of service, easy inventory management, [or] offering the end consumer a big variety.”

The Pandemic Factor

The full impacts of COVID-19 on restaurant and hospitality businesses are still very much up in the air. However, RTDs indeed offer a highly convenient and more sanitary drink option for bars, as fewer ingredients and less prep mean less human contact and a lower chance of spreading germs. Faster speed of service also means less time for customers to stand in lines and crowd around bar areas. 

Just as RTDs are beginning to pique the interest of hotels, restaurants and event venues can also expect to see similar advantages to come from streamlined canned cocktail service. After all, the idea for Post Meridiem began at an event venue. 

“Inspiration came at a moment of frustration,” Rodbell said. “My business partner, Charles, and I were at a concert, and we craved a mai tai, and it inspired a deep dive into ready to drinks.”

Consumers Demanding to Know What’s in their Drink

While bartenders can hammer out vodka-tonics and rum and cokes with relative ease, more complex cocktails like mai tais, mojitos or long islands are simply off the table if part-time bar setups want to do them correctly. Providing premium RTDs can increase cocktail variety at events without having to rely on high sugar pre-made mixers loaded with “natural” flavors.

The premixed cocktail helps consumers regulate their sugar and alcohol intake. Whether it’s a dietary concern, or wanting to be sure you can drive home, the consumer wants to be in charge. A heavy-handed bartender isn’t desired by everyone.

Are you safe to drive after one cocktail and a two-hour wait? What if your bartender did you a favor, and poured closer to a double? Whether seeking bigger tips, a misguided act of kindness, or just plain lack of skill, bartenders’ consistency is a well-known issue.

Many hard seltzer companies are beginning to offer kegged versions of their products, and the opportunity for more cocktails on tap with RTD products is certainly alluring. Draft cocktails were not altogether unheard of before COVID-19 shutdowns, and while we may begin to see isolated adoption of draft cocktails become a norm in bars, the path for RTDs is easier to swallow.

It is certainly an exciting time for canned cocktails, but the future of on-premise is still uncertain, as no one knows just how long shut-downs will persist. RTD companies shouldn’t get too ahead of themselves and make sure to continue maintain inventory for off-premise outlets while they consider the future of on-premise.

Rodbell is excited for what is to come and agreed that other RTD entrepreneurs should look ahead. 

“I’m very optimistic about the on-premise world, and while off-premise is still our bread and butter, we’re excited about new ventures and new partnerships,” Rodbell said.