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RTDs to outperform alcohol market by 2025

The ready-to-drink (RTD) category is expected to increase its market share to 8% of the total alcohol sector by 2025 across 10 key markets, according to IWSR Drinks Market Analysis.

Many producers across beer, wine and spirits are launching RTDs

The predicted increase is up from a 4% market share in 2020, the IWSR RTD Strategic Study revealed.

The IWSR noted that RTD volumes have been increasing faster than any other major drinks category since 2018, and are predicted to ‘significantly’ surpass the total alcohol market by 2025.

The report covered 10 focus markets (Australia, Brazil, Canada, China, Germany, Japan, Mexico, South Africa, UK, and US) which together make up more than 85% of all RTD volumes worldwide.

IWSR forecasts an approximate compound annual growth rate (CAGR) rise of 15% in the five years to 2025 for RTDs in these markets. This is compared to an approximate 1% CAGR growth for total beverage alcohol during the same five-year period.

“RTDs are still growing at higher rates than spirits, wine, and beer, signalling a major shift in consumer interest in this category across all demographics,” said Brandy Rand, chief operating officer of the Americas at IWSR Drinks Market Analysis.

“But it’s important to note that RTDs aren’t only stealing share from beer, they’re also attracting spirits consumers in markets such as Australia and the UK, and cider drinkers in South Africa. We’re also seeing a significant premiumisation trend in RTDs as more and more new brands enter the space.”

Furthermore, the IWSR believes that hard seltzers will represent half of all global RTD volumes by 2025 (up from 30% share in 2020), led by consumer demand for flavourful ‘better-for-you’ drinks.

Across all 10 markets, hard seltzers are predicted to rise in volume by a CAGR of 26% from 2020 to 2025.

High-growth markets

While most hard seltzer development will come from the US, the IWSR has also highlighted rapid growth markets such as Canada (up 50% CAGR 2020-2025), the UK (up 90%), China (up 84%), and Australia (up 24%).

Rand explained: “It’s important to remember that it took a few years for hard seltzers to catch on in America, and we’re still in early days in this category outside the US.”

The RTD sector in countries such as Brazil, China, Japan, and South Africa is driven by flavoured malt beverages (FMB), the IWSR said, with the subcategory poised to grow by 7% CAGR from 2020 to 2025.

Meanwhile, the cocktails/long drinks subcategory is projected to increase by almost 9% CAGR 2020-2025 and is favoured in countries such as Australia, Germany, Canada, and Mexico.

The IWSR found that 56% of RTD drinkers claimed that a new flavour is the most important factor in forming a premium image, followed by being connected to a known brand, and innovative packaging.

The IWSR discovered strong consumer demand for spirit-based RTDs in most markets as a result of their higher quality. However, the IWSR said malt-based products are gaining share due to the rise of hard seltzers.

Rand noted that many drinks producers have entered the RTD sector in recent years.

She said: “Many well-known brands, from water to energy drinks to coffee, have recently crossed over into alcoholic RTDs, leading to a number of strategic partnerships between soft drinks, beer, and spirits companies in order to successfully leverage distribution across multiple outlets.”

The RTD sector is now bigger in volume than the total spirits category in the US, and is expected to overtake wine this year, according to findings by the IWSR earlier this year.

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