RTDs to become second biggest alcohol category in US

16th June, 2021 by Nicola Carruthers

The ready-to-drink sector is now bigger in volume than the total spirits category in the US, and is expected to overtake wine this year, according to IWSR Drinks Market Analysis.

RTDs

The IWSR expects RTDs to gain 22% volume share of total beverage alcohol in the US by 2025

The RTD category, including hard seltzers, recorded the largest consumption increase in the US last year. The category will be bigger than wine in the US by the end of 2021, the IWSR forecasts.

RTDs soared 62.3% by volume in 2020, led by hard seltzers which skyrocketed by 130%. Hard seltzers represent 56.7% share of the total RTD category in the US, followed by flavoured alcoholic beverages (FABs), which have a 25.9% share, and RTD cocktails/long drinks (6.9%).

The analyst expects RTDs to gain 22% volume share of total beverage alcohol in the US by 2025, up from 9.6% share currently.

“Though the cocktail/long drink subcategory 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 socialisation,” noted Brandy Rand, IWSR’s chief operating officer, Americas.

The IWSR has also noticed the launch of more spirit-based RTDs at higher prices due to taxes in the US, however volumes remain small compared to the malt-based segment.

A number of US states have recently passed or are reviewing laws to lower tax for spirit-based RTDs.

Total alcohol volume grew 2% in the States in 2021, marking the largest gain in the market since 2002.

IWSR expects US alcohol volume to grow by 3.8% in 2021 and rise 5.5% in value.

A moderate growth rate is expected over the next five years as normalisation returns, the IWSR said, with an increase of 0.5% in volume and a rise of 2.8% value CAGR between 2020 and 2025.

Rand said the key driver for alcohol growth in the US is flavour.

Agave spirits surpass rum

Furthermore, the US recorded its largest volume increase for spirits (up 4.6%) since 1990, with value growing by 7.7%.

Agave spirits has overtaken rum as the third-largest spirits category in the US, according to the IWSR. Agave spirits rose by 15.9% in volume last year in the US and is now behind vodka and whisky.

The IWSR also noted strong growth for Cognac and Armagnac, which together posted a 20.1% volume increase. The IWSR predicts that both categories will continue to rise over the next five years.

Furthermore, the growth of whisky is outpacing vodka, the IWSR noted, with whisky expected to be larger than vodka in volume consumption by 2022.

Total whisky volumes grew by 4.9% in the US in 2020, led by Japanese, Indian and US bottlings.

However, the 25% US tariff on single malt Scotch caused the category to drop by 6.1% in volume last year, while on-trade closures due to the pandemic saw Irish whiskey drop by 0.5%. The IWSR said this was the first time the two subcategories posted volume declines in the US.

Non-alcoholic ‘spirits’ are predicted to rise by 31.4% by the end of 2021, from a low base. The IWSR said the growth of the low-and-no category is driven by alcohol-free ‘spirits’ and other products containing mood-enhancing properties.

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