Where is the ready-to-drink category going?

Over the past few years, the ready-to-drink (RTD) space has had its ups and downs. At one point, the category was one to watch: products like White Claw completely captured a world of drinkers and sold SKUs at a rapid pace. From there, the category opened up, expanding from hard seltzers and canned cocktails to niche products like non-alcoholic spritzers and port tonics.

But the category is losing momentum. Too many brands, too many products – last year the hard seltzers started to fizz.

So where are we now?

NielsenIQ unveiled some interesting insights into the RTD space in the analytics firm’s mid-year report.

First, it’s important to note that the category is no longer for malt-based drinks like White Claw. RTD can be separated into three categories. The first is malt-based: hard seltzers and other beverages, including hard tea and hard kombucha, that require a malt-based alcohol base. Then come the products based on spirits: ready-to-drink cocktails, seltzers with a spirits peak or shooters. The third category is based on wine: wines in cans and wine cocktails in tetra packs.

More than $4.8 billion has been spent on RTD in office space sales since the start of the year: an increase of $63.6 million over the previous year. While hard seltzer is slowing down, the broader RTD category certainly isn’t.

Spirits-based RTDs – which still dominate a small segment but are growing rapidly – ​​are seeing new sales highs. And people don’t opt ​​for high-octane drinks with their hair down on their chests. Growth is largely driven by low ABV offerings, reaching $5 ABV or less.

“Ready-to-drink beverages remain popular, especially during the summer and during key holiday weekends,” says Jon Berg, vice president of Beverage Alcohol Thought Leadership, NielsenIQ. “Spirits-based RTDs have seen particularly impressive growth, and this trend is set to continue. Consumers appreciate the simplicity of the product, and RTD spirits take the intimidation out of making a drink for themselves or their guests. While spirit cocktails are so successful in the market, wine cocktails like sangrias, mimosas, spritzers and bellinis could find more success as the boundaries between different drink categories – spirits, wine and beer – continue to fade.

Let’s dig into the categories.

Hard seltzers account for 43% of RTD dollar sales, although that won’t last long – the category is down 10% since last year. While sales depreciate, some flavors remain strong, namely “margarita”, “punch” and “ranch water” showing “significant sales”.

Unfortunately, the category is bullish for newcomers – five brands control 87% of sales, leaving little room for new faces.

In comparison, flavored malt drinks occupy 37% of the market share, spirits 10.5% and wines 8.9%.

As hard seltzers recalibrate their steps, spirit-based seltzers are finding their stride — the category is up 55% from last year. The main driver of this growth is spirits-based seltzers. (Specifically? Vodka.)

But remember that the RTD space in spirits is relatively new. Nearly hundreds of new brands have appeared in two years, so it’s understandable that growth is keeping pace with these entrants. Similarly, innovation flourishes in the category. While hard seltzers feel confined to one formula – seltzer, flavoring, neutral grain liquor – spirit-based RTDs can play around with flavors and ingredients. There are bottled martinis, amaro spritzes, and canned ranch water. Spirits-based RTD innovations continue to outnumber malt and wine-based RTDs

What’s going on with the wine? RTD wines are the smallest category, and it is down slightly from the previous year. That said, wine-based cocktails are seeing growth, registering a jump of 23.3% compared to last year. Unsurprisingly, wine bottles are hardly portable, and the smaller-sized options offer portability and convenience.

Other takeaways from the report include a 5.5% decrease in online ready-to-drink orders, which is understandable as IRL consumption is coming back.

Considering what sets a can apart, the highest priority went to product quality, while brand reputation and flavor range came second. Notably, men are twice as likely to be influenced by can design as women consumers.

So what’s the next step? Innovation will continue as spirit-based RDTs and products such as hard teas, sodas, coffees and kombuchas will continue to find their way into their market. Overall, it’s a new category that finds its place, so it’s largely anyone’s game.