RTD growth in US driven by spirits

Spirits-based RTDs are forecast to grow by a compound annual growth rate (CAGR) of 6% in the US from 2023 to 2028, IWSR Drinks Market Analysis has revealed.

Using its US Navigator, IWSR found vodka and Tequila-based ready-to-drink (RTD) variants will lead the way for spirits-based RTD growth in the US, due to being the categories with more availability in their soda offerings.

Vodka surpassed Tequila as the leading RTD spirit base three years ago, with its versatility and approachable flavour profile cited as the cause.

Gin is also coming up as a favoured RTD spirit base, which is driven by legal-drinking-age (LDA) Gen Z consumers, IWSR noted.

Vodka is still the preferred spirit across demographics for RTDs, but gin could present an opportunity for brands, as gin-based RTDs hold just 5% of total RTD market share in the US, IWSR also highlighted.

It was also shown that spirits-based RTDs have grown across all US states since 2019. The 10 with largest percentage increases for 2024 (measured from January to August) are Wyoming, Colorado, Virginia, Tennessee, New York, Florida, Arizona, Indiana, New Jersey and Wisconsin. These states all grew ‘well above’ 15% compared with the same period last year.

IWSR pointed out that the hard seltzer volume decline has been offset by the growth of hard teas, flavoured alcoholic beverages (FABs), cocktails and long drinks – the latter of which to a ‘slightly lesser extent’.

Confusion between malt-based and spirits-based RTDs could also be hindering growth. Marten Lodewijks, president of the US division at IWSR, said “many consumers mistake the base of RTD products, and brands should take this into consideration when they make their packaging and branding decisions”.

Lodewijks continued: “Consumers generally assume the alcohol in their RTDs comes from a spirit; educating them on this can have both benefits and risks depending on a brand’s broader portfolio.”

The new, younger, and often male, consumers buying RTDs (and buying RTDs in the on-trade) could also sway the styles and flavours that perform well, the research showed.

Handbrake on innovation

While RTDs still have a high rate of innovation – new cocktail/long drink products account for more than a third of recent innovations – an overall slowdown in brands innovating has been beneficial to the category.

Lodewijks said this reduced rate combined with continued category volume growth is a “great sign for the industry.”

He explained: “While RTDs will remain an innovation-driven category, the proliferation of brands and variants in 2021/22 created consumer confusion and saturation that ultimately only benefitted a few players.

“The more focused innovation approach, with brands relying more on a few core SKUs, gives consumers an anchor around which to explore the category while not being overwhelmed by choice ‘risk’ — the risk that they don’t like what they’ve bought.”

A trend listed was crossover products that tap into existing brand awareness, such as the partnership between Ocean Spray cranberry juice and Absolut Vodka.

Furthermore, another ‘bright spot’ IWSR noted for spirits-based RTDS was a change in pack sizes. IWSR observed that the shift towards 355ml cans has given consumers more convenience, and the share held by these packs has rocketed up to 69% from 7% five years ago.

This was driven by high demand for single serves, Lodewijks said: “The emergence of single-serve canned RTDs has allowed brands to gain ground in venues/locations where glass bottles are typically not allowed, such as sports venues, concerts and beaches.”

According to IWSR’s RTDs Strategic Study 2024 report, overall RTD growth has slowed as the category continues to mature. Nevertheless, the category is predicted to be worth US$21.1 billion in sales by 2027.

Across spirits as a whole, the US is facing a year of ‘significant headwinds’ in 2025.

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