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Cocktails to drive RTD growth globally

The ready-to-drink (RTD) category is predicted to grow by 24% in volume over the next five years, led by spirit-based cocktails and long drinks, a new report has revealed.

The RTD category will experience more moderate growth as demand for hard seltzers drops

The 2022 IWSR RTD Strategic Study examined the RTD category across 10 markets: Australia, Brazil, Canada, China, Germany, Japan, Mexico, South Africa, the UK and the US. Together, the countries represent more than 85% of all RTD volumes worldwide.

The report noted that value growth will outpace volume growth at 8% compared to a 5% compound annual growth rate (CAGR) from 2022 to 2026. The value of the category is expected to increase by an additional US$11.6 billion over the next five years.

The IWSR expects RTD category volumes across the 10 markets to climb by 24% in volume over the next five years, but growth is predicted to be more moderate than recent years.

The US, the biggest market for the category, is expected to temper, the IWSR said. This is due to hard seltzers, which represent 60% of the RTD segment in the US, with momentum starting to cool in the market.

“Consumers in the US have grown accustomed to the convenience and variety offered by RTDs, which has increasingly led to people trading up to spirit-based cocktails,” said Brandy Rand, chief strategy officer at IWSR Drinks Market Analysis.

“This reflects the overall spirits premiumisation trend in the US and the popularity of bar-made cocktails.

“As a result, hard seltzer volume is now projected to decrease after hitting all-time highs, which will lead to more moderate growth levels across the total RTD category.”

Spirit-based RTDs – particularly vodka-based variants – held 45% category volume share in 2021 across the 10 markets and are driving ‘the lion’s share of innovation’, the IWSR noted.

Spirit-based flavoured alcohol beverages (FAB) launches in 2022 will outstrip those of 2021 by almost 75% at current rates, the IWSR said. This segment covers products like Smirnoff Ice and Bacardi Breezers, according to IWSR’s definition.

RTD cocktails to surpass seltzers

Cocktails/long drinks are predicted to drive the most growth in RTDs globally, with volumes expected to overtake hard seltzers in 2025.

Across the 10 markets, cocktails/long drinks are expected to take 26% of the total RTD category by 2026, compared to 20% for hard seltzers.

“With the RTD category firmly established and competition at an all-time high, brand owners continue to focus on innovative products and brand extensions or partnerships to drive greater awareness and distribution,” Rand added.

“The RTD innovation IWSR is tracking year-on-year clearly shows a rapid pace of product transformation to meet consumer demand.

“There is no single dominant type of RTD globally, which makes the category uniquely positioned to capitalise on local tastes and trends.”

Furthermore, the IWSR believes the category has matured as recruitment of new RTD consumers is at its lowest level in three years.

Premium-priced RTDs have also risen fastest than any other segment over the past two years, albeit on a smaller volume base, with new products increasingly launching at higher prices, the IWSR said.

Across all markets, more than half of consumers are influenced to purchase RTDs made by a well-known spirits, beer or soft drink brand. However, celebrity-backed brands rank lowest in terms of influence.

The IWSR also noted that flavour is the key driver of RTD consumption.

The IWSR has defined seven subcategories of RTD products: cocktails/long drinks (classic cocktails and mixed drinks such as G&Ts), hard seltzers, hard coffees, hard teas, hard kombuchas, wine spritzers/coolers, and FABs (which covers all other RTDs).

A new report found that 86% of US consumers believe spirit-based RTDs should be more widely available, including in bars, convenience stores, and entertainment venues.

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