The ready-to-drink (RTD) sector of the alcohol beverage industry has been the one to watch in recent years. When White Claw hit the market in 2016 and connected with a global audience, the door for other RTD alcohol brands was blown wide open. Since then, more hard seltzer brands have emerged and the space has expanded to include canned cocktails, port-and-tonics, and even non-alcoholic beverages. These drinks are capturing an increasingly large share of the beverage alcohol market, which makes it important for those in the industry to learn as much as possible about the RTD category.
RTD Alcohol Defined
As mentioned, RTD stands for ready-to-drink, which means that drinks are premixed and ready for consumption. They are a convenient option that allows consumers to enjoy alcoholic beverages or pre-made cocktails at home or on-the-go. Typically, these drinks have lower alcohol content than spirits and some beers.
The Different Types of RTDs
Essentially, RTDs can be divided into three different categories:
1. Malt-based
This includes hard seltzers, hard kombucha and hard tea that all begin with malt-based alcohol.
2. Spirits-based
In this category, you will find ready-to-drink cocktails, shooters and seltzers that are spiked with spirits. For example, Cutwater Spirits has a Lime Margarita made with tequila as the base spirit.
3. Wine-based
The last category includes canned wine and wine cocktails that come in tetra packaging.
RTD Alcohol Market Size
In 2021, the RTD market size was $783.8 million. Experts expect that the market will continue to grow at a compound annual growth rate (CAGR) of 13.4%. That would mean that the market could reach $2.43 billion by 2030.
When it comes to the popularity of the different categories of RTDs, hard seltzers come in first accounting for 43% of sales. Flavored malt beverages are in second place holding 37% of the market share followed by spirits-based products at 10.5%, and wine-based RTDs at 8.9%.
Recently, however, there have been some shifts within the RTD alcohol market. Hard seltzers had a meteoric rise at first, but spirits-based seltzers are quickly presenting some real competition. Spirits-based seltzers, in particular vodka-based products, have grown by 55% from this same period in 2021.
On the other hand, the growth of wine-based drinks is showing signs of slowing. However, the wine-based RTD category still managed to grow by 23.3% over the course of a year. These products have a big advantage over wine bottles, which aren’t as portable or convenient for on-the-go situations.
ABV for RTD Products
Spirits and wine-based RTDs offer consumers ABVs of 10.1% and above as products in this range tend to be pre-mixed cocktails. However, many new brands are angling their products as being better or healthier for consumers. For this reason, most malt-based products have an ABV that falls in the 4.1% to 5% range. Even as more high ABV products hit the market, there is also a trend that is seeing significant growth in products that offer a lower ABV of less than 4%. It appears that producers are trying to offer customers a full range of options, which is helping to drive the market.
Why Are RTD Cocktails Popular?
A variety of different factors converged to make recent years the right moment for RTD cocktails. First, an at-home cocktail culture has been emerging and spirits RTDs make it easy and less intimidating to mix drinks for guests. RTDs are just plain convenient and as the variety and quality of RTDs has increased, so has the popularity of these drinks. Because this type of beverage speaks directly to the current needs and desires of consumers, it is safe to say that RTDs will continue to be a bright spot in the market.
Meeting the Needs of Health Conscious Consumers
Wine coolers and malt-based beverages like Smirnoff Ice have been around for years, but today’s consumers don’t want sugary drinks that are full of artificial sweeteners and colors. Instead, the modern consumer is looking for clean products that are low in sugar and calories.
What really set the RTD market on fire was the introduction of hard seltzers. They effectively provided a “healthier” alternative to market standard by providing a lighter drink with minimal sugar and carbs. Hard seltzers were also able to capitalize on the recent popularity of sparkling waters by offering a spiked version.
Higher Quality Products Hitting the Market
RTDs have also made cocktails more accessible to consumers who may want to experiment with cocktails without having to invest in spirits and mixers and learn recipes. Even with all these advantages, consumer demand probably would have waned if brands hadn’t also stepped up with higher quality beverages.
The RTD market has benefited from premiumization, which is a trend throughout all sectors of the beverage industry. Essentially, customers gravitate towards products that market themselves as premium and high-quality.
For example, consumers who enjoyed the healthier hard seltzers became interested in more premium products with sophisticated flavors. High Noon, a spirit-based RTD brand, is one company that has successfully filled this space.
Popular RTD Brands and Suppliers
Some of the most popular RTDs include:
- White Claw Hard Seltzer (Mark Anthony Brands)
- Part Time Rangers (Brown Forman)
- -190°C Strong Zero (Suntory Spirits)
- New Mix (Brown Forman using El Jimador Tequila)
- Jack Daniel’s RTDs and Country Cocktail (Brown Forman)
- Campari Soda (Campari Group)
- Cutwater Spirits (Anheuser-Busch)
- High Noon (E. & J. Gallo)
- TRULY (Boston Beer Company)
- On the Rocks (Beam Suntory)
RTD Alcohol Trends for 2023
While the RTD market is forecasted to remain strong and experience major growth in the coming years, brands continue to innovate and evolve to snag their share of the market. With that in mind, here are some trends you can expect in 2023.
Creative New Flavors
Moving into 2023, producers will continue to prioritize premium ingredients and innovative new flavors. One of the main challenges for RTD cocktails is that they can be perceived as low-quality products. Reducing sugar provides a strong appeal to health- and ingredient-conscious consumers, but producers will have to continue to find ways to address this challenge.
The solution for some brands has been to use creative marketing. Sensient found that labeling products with phrases like “Made with Natural Ingredients,” “Refreshing Flavor,” and “Unique Flavor” were effective in motivating consumers to buy. Many producers are moving towards more herbal, botanical and citrus flavors to create that perception of natural ingredients and health benefits.
New Packaging Options
The convenience of a single can RTD has certainly been a key factor in the success of these products, but that isn’t stopping brands from continuing to innovate when it comes to packaging. You can now find RTD cocktails in everything from ice pops and plastic balls to pouches and beyond. For example, in 2020, the Brookly-based brand St. Agrestis released the “Negroni Fountain,” which packages this classic cocktail in a 1.75 liter bag-in-box. The product was a great success from the start.
Excise Tax Rate on RTDs
With RTDs, products are taxed on the state and federal level and the excise tax rate is based on the ABV and alcohol base. For example, malt-based products are subject to a lower excise tax rate. In addition, they have access to larger distribution channels since there are more retail locations throughout the country that are licensed to sell beer than liquor. Fermented, sugar-based RTDs, are regulated in similar ways and enjoy more freedom when it comes to marketing policies and restrictions. However, tax and marketing regulations aren’t slowing down the growth of wine and spirit-based RTDs. For more details on the specific tax rates according to category, visit the TTB website.
RTD Alcohol Wrapped Up
RTDs have made a real splash in the beverage alcohol industry and all signs point to continued growth in this product category. Essentially, RTD alcohol brands have been able to successfully identify and meet the needs of consumers and these consumers have responded in kind by regularly choosing to drink RTDs. The other good news for consumers is that it appears that RTD alcohol suppliers have no intention of resting on their laurels and we will continue to see innovation well into 2023 and beyond.
FAQs
What is RTD alcohol?
Ready-to-drink beverages are convenient premixed drinks that are ready to open and drink.
What does RTD stand for in the beverage industry?
Ready to drink.
What are the different types of RTDs?
There are three main types of RTDs: malt-based, spirits-based, and wine-based.
What is the RTD alcohol market size?
On a global scale RTDs earned $782.8 million in revenue in 2021. This number is expected to reach $2.43 billion by 2030.
How much alcohol is in an RTD?
Most new brands of RTDs fall within an ABV range of 4.1% to 5.0%. However, there are brands that fall below 4.0% and exceed 10.1%.
Why are RTD cocktails popular?
RTDs provide a convenient, accessible, and affordable way to drink cocktails. These products also speak to a cocktail-at-home culture that has emerged in recent years. It also helps that brands are releasing more premium products with unique and refreshing flavors that reduce carbs and sugar and focus on natural ingredients.
Are hard seltzers RTDs?
Yes, hard seltzers have provided a “healthier” version of malt-based drinks and are considered RTDs.
What are some examples of popular RTDs?
White Claw Hard Seltzer is the most popular followed by Part Time Rangers, and -190oC Strong Zero.
What are some RTD trends for 2023?
In 2023, consumers will see more creative packaging options along with innovative new flavors that focus on citrus, botanical, and herbal flavors.
What is the excise tax rate on RTDs?
RTDs are taxed and regulated differently based on the base alcohol and ABV. For exact tax amounts, you can visit TTB.
