Does the RTD sector need more regulations?

The ready-to-drink (RTD) market is breathing new life into the ’90s alcopop trend, but with the category’s mounting success comes calls for more regulations.

*This feature was originally published in the April 2020 issue of The Spirits Business

In practically every supermarket in the 1990s there was a large section of the alcohol aisle that shone neon bright. These bottles of sweet, quaffable, fantastically coloured liquid were emblematic of mainstream drinking culture – particularly in the UK and Australia – before the onset of the cocktail craze in the mid‐ noughties. With flavours resembling those of soft drinks, such beverages were commonly referred to as ‘alcopops’.

Bacardi Breezer, WKD, Two Dogs, Reef, Hooch – these were the drinks favoured by young adults who wanted to drink, but not necessarily taste, alcohol. Moral panic quickly ensued after research claimed to link alcopops with excessive and underage drinking; a number of retailers and bars pulled bottles from their shelves, while in the UK alcopops were hit with a 40% tax hike overnight.

A couple of years into the 21st century, consumption of alcopops fell dramatically as the category’s core demographic matured and sought more sophisticated products. But flavoured, pre‐bottled beverages are experiencing a second wind under the broader, more diverse ‘ready‐to‐drink’ (RTD) label. “The category has gone from a place of sugary liquids to something that’s genuinely interesting and a real hotbed for trial,” says Christian Sarginson, brand controller at VK and Hooch owner Global Brands, which has a raft of newer RTD brands in its portfolio, including Sister’s Soda, Crooked and Shake Baby Shake.

Today’s RTD category is wide, encompassing pre‐mixed cocktails, spirits and mixers, and new innovations such as hard kombuchas, as well as the more traditional ‘alcopop’ beverages. And there’s no doubt about the meteoric rise of hard seltzers in the US.

According to data from IWSR Drinks Market Analysis, in 2018 the global RTD category was up 5% by volume compared to 2017, and is expected to grow by 23% between 2019 and 2023. The US and Japan are the biggest RTD markets, with a combined 60% market share. In the Americas, RTDs are forecast to grow by about 52% over the next five years. “The success and growth of this category is driven by several factors, including consumer demand for convenience, portable packaging, refreshment and flavour,” says Brandy Rand, chief operating officer, Americas, at IWSR.

Furthermore, while alcopops were previously derided as a blight on public health, some modern RTDs are aligning with the ‘better for you’ movement. For example, a number of them are now low‐calorie, low‐ ABV, and focus on natural ingredients.

Nineties nostalgia: VK

BRAND JOURNEY

According to Jean‐Christophe Coutures, chairman and CEO of Chivas Brothers, RTDs continue to play a key role in spirits recruitment. Using Australia as an example, he says: “We do know that some consumers get into the world of spirits with RTDs, and after that they move to more established brands. There is a very strong link between the RTD they were drinking and their preferred brand when they get older. If you can get them in their early 20s, then you can bring them through the journey of the brand. It is in that context that we launch RTDs for Jameson and Absolut.”

The big players have launched RTD line extensions for many of their spirits brands, but, according to IWSR’s Rand, smaller producers are helping the category to become more premium. “One of the most notable shifts towards premiumisation is the entry of the new brands into the space,” she says. “In the US, for example, craft distilleries are launching spirit‐based RTDs made with their own signature spirits, often with the addition of localised ingredients or botanicals, creating more herbaceous and complex pre‐mixed options.”

RTDs have also responded to cocktail culture, producing sophisticated pre‐mixed products that make service behind the bar and hosting at home fast and resource‐free. Cantails is one such brand: its pre‐mixed cocktails have been designed to be chilled and shaken in their can containers before being served. “As on‐trade cocktail culture has developed it has left the RTD category behind – and it is only just starting to catch up,” says Myles Donneky, co‐founder of Cantails.

Newness is driving the category forward, but this in turn has led to renewed interest in the drinks that started it all. Trends are, after all, cyclical, and like 1990s’ phenomena Dr Martens, the Spice Girls and dungarees, alcopops are finding a new league of millennial fans. “We’re seeing, certainly on our brands, the traditional RTDs also performing well,” says Sarginson. “There’s definitely an element of more people going down the RTD aisle and therefore picking up some of the more traditional ones as well.”

Sarginson adds that such brands hark back to a “simpler time” in the minds of consumers who were the original target audience for alcopops. Nostalgia is therefore a key purchase driver, but some traditional RTDs are evolving with the times, too: last month, Hooch joined the pink drinks bandwagon with the launch of an alcoholic raspberry lemonade. In a press release announcing the launch, Hooch Pink is described as a “pink drink with attitude” and a “degendered take on the trend”.

In the pink: ’90s brand Hooch

SWEET STUFF

The RTD category has evolved almost beyond recognition compared to its ’90s heyday, but the familiar voices of concern remain. In January this year, UK charity Action on Sugar published research showing the “hidden sugar and calories” in RTDs, naming and shaming a number of well‐known brands. The charity urged brands to cut the sugar in their products, and pressed lawmakers to include RTDs in the Soft Drinks Industry Levy.

Holly Gabriel, Action on Sugar’s registered nutritionist, highlights the “loopholes” in public health policies regarding alcoholic drinks, which are currently exempt from some labelling requirements. “We did some public polling and the majority of people believed you should get full nutritional labelling on these drinks at the very least,” she says. “There’s no reason to not be told exactly how much sugar is in there.”

At Global Brands, work has already been done to reformulate recipes and “remove excess sugar”, says Sarginson, who adds that it would be “unfair” to make RTDs pay sugar tax since these products already pay high alcohol duties. “For me, it’s all about allowing people to make that choice,” he says. “Alcohol is not an everyday category – it’s a treat, an indulgence – and therefore people should treat it as such. It’s about being able to make an informed decision.” As such, Sarginson agrees that the industry needs to be more transparent with consumers.

In 2018, EU spirits producers voluntarily pledged to offer ingredient and nutritional details either on or off pack. However, UK campaigners want to make sure consumers have access to this information after Brexit, and that RTDs do not fall through the cracks.

At the end of 2018, government agency Health Canada opened a public consultation into “single‐serve flavoured purified alcoholic beverages” – essentially, sugary pre‐mixed drinks that do not taste much of alcohol. The agency said these beverages could contain as many as four standard alcoholic drinks in a single‐serve container, while their highly flavoured and highly sweetened recipes made it easy for people – particularly young drinkers – to “consume large amounts of alcohol in a very short period of time”.

In 2019, Health Canada adopted new regulations to restrict the amount of alcohol in these drinks, which can now contain only 25.6ml of alcohol (representing 1.5 standard drinks) when they are packaged in containers with a volume of one litre or less.

RTDs respond to cocktail culture

Marketing of RTDs has always been a tricky business due to their popularity among young adults and, in particular, students. Like craft beer, the category has a sense of irreverence, but brands’ use of cartoon imagery and bold colour has led to complaints. Watchdogs have questioned whether these design features appeal to children, or simply reflect an aesthetic that is popular among young adults.

For example, in 2018 industry regulator the Portman Group received a complaint about the HappyDown canned cocktail line, arguing that its cartoon imagery would appeal to children and that its alcohol content was not communicated clearly enough. The watchdog’s independent complaints panel said the design of the cans was “reminiscent of pop art” and so “avoided particular appeal to under‐18s”. However, panellists agreed that the range “did not communicate with absolute clarity its alcoholic content”.

This is something the Portman Group believes RTD makers in general need to be more conscious of, as John Timothy, the group’s chief executive, says: “Whilst the use of fruity flavours, cartoony imagery or bright colours are not problems in and of themselves, producers of such drinks may need to work harder to communicate the alcoholic and mature nature of the product.” Since 2016, The Portman Group has received three complaints relating to RTDs – far fewer compared to the category’s previous era.

RTDs have certainly come a long way, boasting a more diverse and sophisticated offering, but without losing their sense of fun. The breadth of the category means future success will be heavily influenced by local market trends, but – probably to the surprise of ’90s drinkers – RTDs are back in fashion. More than that, they represent one of the best growth opportunities for alcoholic drinks in the coming years. Who would have thought it?