Innovation Investigation: What’s Happening with Premium RTD Cocktails

by | Dec 7, 2023

RTD cocktails are a well-known growth driver for alcoholic beverage brands. International Wine & Spirit Research (IWSR) anticipates total RTD volume will increase +3% through 2027, outpacing the alcohol category’s forecasted growth of 1%.

But as the RTD sector matures and growth slows from the meteoric 20% CAGR between 2018 and 2021, global innovation is also softening. IWSR reports that around 1,000 RTDs launched in the first half of 2023, a significant drop from the 2021 peak of 3,000 new products.

RTD cocktails are becoming more premium to support brand goals and meet buyer expectations. The evolution to premium options like spirit-based cocktails, hard teas, and FABs spurred growth of +14% between 2021 and 2022, almost offsetting hard seltzer’s 10% volume decline. Implementing a premium strategy continues to represent an opportunity for growth in 2024. Before outlining the available paths that you can take to reach premiumization for your brand, let’s examine the dynamics underlying the success of premium RTDs.

What’s Driving the Rising Interest In Premium RTD Cocktails

Premiumization adds relevant value that people will invest in, such as increased focus on flavor, ingredients, and packaging. Brands implementing a premium strategy will support the enhanced product characteristics with messaging and distribution.

Tactics for building premiumization

Over recent years, demand for premium expanded across the food and beverage landscape. The movement helps people get an improved experience through nutrition, taste, or a combination of both. Premiumization also helps brands realize more market value.

 

BRAND CREATIVITY LEADS THE RTD COCKTAILS MOVEMENT

The shift from hard seltzers into RTD cocktails began in 2017 as spirit brands, startups, and bartenders created spirit-based, canned drinks. The motivation: deliver conveniently formatted versions of high-end cocktails. The initially positive response is still going strong, especially in the US.

Standout Statistics:

  • 49% of American RTD drinkers purchased a cocktail option in 2023, up from 44% in 2022 (Mintel).
  • Consumption is higher among young Millennials, 25-34, with 60% reporting purchase of RTD Cocktails.
  • 31% of Americans agree RTD cocktails are a good replacement for homemade cocktails.

Bartenders continue influencing RTD cocktail innovation, bringing new ideas to startups or collaborating with larger brands.

 

SPIRIT-BASED RTDS HELP BRANDS DELIVER AFFORDABLE QUALITY

IWSR reports that while the 2023 global consumption of premium spirits is still trending higher than 2019 (by +11% in H1), volume gains diminished to +1% between H1 2022 and 2023. The trend reflects people responding to inflationary pressures by trading down to lower-priced spirits.

Standout Statistics:

  • 37% of Americans aged 21 or older are concerned about their finances, with 14% elevating their concern to worry (Mintel).
  • 49% of US spirits drinkers sometimes buy different brands even though they have favorites (Mintel).
  • 19% of American spirit drinkers are drinking fewer  spirits in 2023, and among those drinking less, 40% cite saving money as the reason.

RTD cocktails made with premium spirits can help flagship brands mitigate softening loyalty by giving drinkers an affordable option for experiencing quality from a trusted source.

Launch Tactics to Deliver Premium RTD Cocktails

If you’ve decided to launch premium RTD cocktails, you can deliver a memorable experience using a variety of formulation tactics. Here are several ideas to consider as you frame your development plan.

BRANDED SPIRITS

Familiar and trusted brands help mitigate skepticism that the cocktail won’t meet expectations and offer an affordable way to enjoy higher-quality spirits.

Standout Statistics:

  • According to a recent Mintel survey, 34% of American RTD buyers will try a cocktail made by a brand they like, and 31% are willing to spend more for premium ingredients.
  • Premium spirits represented 40% of RTD launches in the 52 weeks ending November 2023, up from 16% of activity for the same time in 2019 (Mintel GNPD).

HIGHER ABV

While most spirit based RTDs deliver ABVs between 5% and 7%, some brands are increasing the alcohol volume to meet the evolving needs of buyers. Findings from the 2023 International Wine & Spirit Research (IWSR) Drinks Market Analysis revealed that one in three RTD buyers consider alcohol strength when making a purchase.

 

The Glenlivet New Manhattan Spirit Drink, US, October 2023

A 375ml pack, made with the Glenlivet single malt Scotch whisky and natural flavorings. High-quality, 40% ABV cocktail to freshly mix in the moment, perfect for sharing.

Dulce Vida Tequila RTD cocktails in Tetra Brik® Aseptic cartons, US, May 2023

The 15% ABV cocktail contains real fruit juice, all-natural ingredients, and Dulce Vida Blanco Tequila for a premium, portable cocktail experience, USDA Certified organic.

 

LARGE FORMAT (READY-TO-SERVE)

In a recent blog post, the FlavorSum team investigated the growing appeal of large-format, ready-to-serve cocktails. Data from NielsenIQ for the 52 weeks ending September 2023 shows large formats generate 22% of RTD dollars, contributing more than $400 million to the category. Mintel’s Global New Products Database (GNPD) shows that 18% of North American RTD launches were 700ml or more in the last year, up from 11% in 2019.

 

Ketel One Cocktails – Cosmopolitan US,November 2023

A 750ml pack, made with Ketel One Vodka, triple sec, and real cranberry juice, natural flavors and colors, 20% ABV.

Manhattan N° 3 Canadian Whisky Beverage,Canada, January 2023

A 750ml pack, made with Canadian rye whisky, aged three years, red vermouth, and bitter botanical extracts, 23% ABV.

 

BRANDED MIXERS

Incorporating a branded mixer with a branded spirit is a newer tactic for RTD Cocktails, but one quickly generating buzz among beverage drinkers. Collaborations with ‘famous’ mixers can elevate the quality credentials for lesser-known spirits and attract mixer buyers who want to sample their favorite brand in the RTD cocktail format.

Standout Statistics:

  • 34% of US RTD purchasers agree a ”well-known brand” is an important influencer of their purchase decision (Mintel).
  • More than three in 10 American RTD buyers would pay more for a cocktail made with a branded mixer (Mintel).

 

Vita Coco Spiked with Captain Morgan RTDs, US, February 2023

Brings two popular brands together with tropical flavor profiles, 5% ABV, and a functional twist with a hydrating mixer.

Jack Daniels and Coca-Cola RTD, US, March 2023

Pre-mixed popular cocktail in a 7% ABV format with two notable brands. A zero-sugar formula launched in May 2023.

 

ALCOHOL-FREE

The alcohol-free trend continues to build momentum, and brands offering a no-alc premium RTD cocktail are making news. The sophistication of no-alcohol RTDs is increasing, with some brands focused on packaging technology or botanicals to deliver the complex experience people associate with cocktails.

 

Mocktails Nitro-Charged Alcohol-Free Margarita, US, October 2023

The nitro widget releases bubbles that produce a texture like a shaken cocktail.

Spiritliss Hibiscus Non-Alcoholic Gin & Tonic, Canada, March 2023

A sparkling beverage highlights all the flavors and feel of a real G&T with the fresh flavor and vibrant lilac color of hibiscus.

 

CRAFT SPIRITS

Although familiar spirit brands may have a faster path to acceptance as a premium RTD, smaller craft brands can also get kudos for quality from drinkers. Craft startups can build credentials and differentiate by flagging attributes such as small-batch production, or ingredient characteristics such as “real,” “house-made,” or “organic.”

 

CopperCraft G&T Ole Craft RTD Spirit Assortment

Coppercraft Distillery, US, March 2023

Crafted with the manufacturer’s premium gin, house-made tonic and lime.

Ole Cocktail Co., Multi-pack, Canada, November 2023

Crafted in small batches with real juice, a touch of organic agave nectar, and white tequila distilled in Jalisco, Mexico.

 

FLAVOR INNOVATION

Classic cocktail tastes connect with RTD buyers, with more complex drinks like Mojitos, Manhattans, and Old Fashioneds generating interest. Putting a fresh spin on a known cocktail creates excitement about your brand.

Standout Statistics:

  • Mintel reports almost 600 unique flavor profiles launched in the North American RTD segment in the last five years. The top flavors account for less than 30% of activity as brands strive to differentiate through unique taste combinations.
  • Of the more than 130 flavors introduced in North America in the most recent year ending November 2023, 62 (about 50%) are new combinations to the market (Mintel GNPD). New blends feature tropical flavors like yuzu or lychee with fast-growing flavors including peach, coffee, and black cherry.

Let’s Talk about Premium RTD Cocktails for Your Brand!

As the RTD cocktail category continues to evolve, we’re monitoring emerging trends. Stay tuned for the next episode of FlavorScience that explores how flavors can deliver a bartender-like experience in RTDs and our eBook that shares formulation insights for premium RTD cocktails.

The FlavorSum  team of insights experts, alcoholic applications specialists, and flavorists is ready to support your plan for premium RTD cocktails. Connect with us to discuss your ideas, get formulation support, or collaborate on your next flavor!