RTDs to hit $21.1bn in US

The ready-to-drink (RTD) category in the US is expected to reach US$21.1 billion in value by 2027, led by spirit-based hard seltzers and pre-mixed cocktails.

Data from IWSR Drinks Market Analysis revealed that the US RTD market was flat last year, marking the end of a period of ‘rapid’ volume growth.

However, it rose in value by 6% last year to reach US$18.2bn, driven by inflation and premiumisation.

The IWSR said the category in the US is predicted to post a compound annual growth rate (CAGR) of 1% between 2022 and 2027. Value is predicted to rise fastest, growing by 16% to US$21.1bn by 2027.

The IWSR said this expectation is due to a ‘bifurcation in the market, where malt-based seltzers are in decline, ceding volume to spirit-based hard seltzers, ready-to-drink cocktails and FABs [flavoured alcoholic beverages].

“Volume is down but value is growing in the US RTD market,” said Marten Lodewijks, consulting director – Americas, IWSR.

“The price per serve of RTDs is rising, with high-strength cocktails and spirit-based hard seltzers viewed as higher-quality trade-ups, driven by demand for premium ingredients.

“RTD cocktails have become more premium and sophisticated, which is driving growth in spirit-based products.

“Meanwhile, the hard seltzer market has reached saturation point, and consumption will not see the highs of 2021 again. The declines are largely attributable to consumer fatigue, product overload, life getting back to normal after the pandemic and people consuming less alcohol in general.”

Despite the hard seltzer decline, the RTD category is increasing its share of the total beverage alcohol (TBA) market in the US. In 2018, RTDs’ share of TBA stood at 2.7%; by 2027, it is expected to reach 7.9%.

“RTDs are expected to take share of servings from beer and wine as they are increasingly consumed at outdoor events and concerts, dinner parties and during other recreational activities traditionally dominated by beer and wine,” notes Lodewijks.

“Rising RTD cocktail consumption is likely to take quite a bit of share from spirits, but spirits’ share of TBA servings will increase as the category’s performance remains much stronger than that of RTDs in the on-trade.”

RTDs also saw the largest annual price increase of all alcohol categories, rising by just over 6%, the IWSR noted.

New RTD cocktails and long drinks are hitting the market at almost three times the rate of hard seltzers, accounting for more than 60% of the category’s launches in the first half of 2023.

While vodka remains the most popular base for RTDs, agave spirits are also rising fast with 41% of consumers naming Tequila as their favourite RTD base (up from 35% in 2022). Among Generation Z consumers (aged 21 and above), the figure sits at 60%.

The IWSR believes this trend is also mirrored in the spirits sector with volumes of agave-based spirits growing by 12% in 2022. The category is forecast to grow by 11% in volume (CAGR 2022-2027).

Retail remains the leading channel for RTDs – accounting for 88% of recent consumer purchases – however, the on-trade is also growing, with 39% of consumers buying RTDs in the channel in 2023, up from 35% a year ago.

Gen Z consumers buy RTDs in the on-trade more than any other age group, the analyst noted.

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

The US and Japan will remain the largest RTD volume markets over the next five years, the IWSR said in its RTDs Strategic Study 2023.