RTD growth forecast slows to 12%

The IWSR has halved its volume growth expectation for the ready-to-drink (RTD) category, which is predicted to rise by 12% between 2022 and 2027 across 10 markets.

According to IWSR Drinks Market Analysis’ RTDs Strategic Study 2023, growth expectations for the sector had halved over the past year to a forecast volume compound annual growth rate (CAGR) of 2% between 2022 and 2027.

Last year, IWSR predicted that the category would grow by 24% in volume from 2022 to 2026.

The analyst attributed the slowdown in growth from previous years due to a decline in hard seltzers in the US.

Excluding hard seltzers, RTD volumes are estimated to grow at a CAGR of 5% over the same period.

The value of the RTD category is predicted to reach US$40 billion by 2027 across 10 key markets.

The IWSR said the sector’s growth would be led by premium-and-above RTD cocktails and long drinks.

The report looked at 10 markets – Australia, Brazil, Canada, China, Germany, Japan, Mexico, South Africa, the UK and the US – which collectively account for 83% of global RTD consumption with a total value of US$33.9bn in 2022.

Seven out of the 10 markets reported double-digit volume growth for premium-plus RTDs in 2022.

The cocktails and long drinks subcategory is expected to increase its share by four percentage points, representing a quarter of the RTD sector’s volume share by 2027.

In comparison, hard seltzers’ share of the category will drop by 11 percentage points.

“Growth is slowing in an increasingly mature global RTD category, but opportunities persist in the cocktails/long drinks space and for premium-plus products that prioritise consumer-forward cues such as RTD base, ABV and flavour,” said Susie Goldspink, head of RTD insights, IWSR.

The pace of new product releases has also slowed, from more than 3,000 in 2021 to around 1,000 in the first half of 2023, the IWSR noted.

“The premiumisation trend is moving in a variety of directions, from premium formats to a shift in ingredients and added functionality – all aspects that offer a point of differentiation to consumers,” Goldspink added.

“Although the pace of innovation has slowed, the effectiveness of new launches has improved, as producers are more strategic and targeted in their product launches.”

Market performance

The US is the biggest market for the category, but its growth rates will drop to 1% in CAGR from 2022 to 2027. Japan is expected to add the most volume going forward.

The two markets will remain the largest RTD volume markets over the next five years, led by the growth of flavoured alcoholic beverages (FABs) in Japan, and cocktails/long drinks, FABs and hard tea in the US.

China is also expected to become a key market, growing by a volume CAGR of 6% over the same period, led by FABs.

Research also showed that consumers are drinking RTDs more often and exploring different subcategories.

In 2021, 24% of RTD consumers were new to the category (defined as having entered it in the past two years); by 2023, that figure had fallen to 13%.

The amount of RTD consumers drinking RTDs more than once a week increased from 39% in 2022 to 43% in 2023, the IWSR found.

Meanwhile, 63% of consumers reported that they drank two or three RTDs on the same occasion – and 58% said they now choose from three or more RTD subcategories.

Nearly a third (32%) of ready-to-drink consumers consider alcoholic strength when selecting a product, and only 29% said brand was important to their choice of RTD.

Alcohol base is now the joint-second most important factor in RTD selection – mentioned by 34% of consumers and especially important in Brazil, Mexico and South Africa.

Spirit-based RTD volumes rose by 5% in 2022, and up to 25% of RTD drinkers are willing to pay more for a spirit-based RTD over a malt-based one. Last year, malt- and wine-based RTDs fell by 4% and 3% respectively.

Vodka remains the most popular RTD spirit base, but the IWSR believes gin’s decline in popularity could push Tequila ahead of it in the rankings.