Convenience Meets Mixology: Unveiling the Latest Trends in Ready-to-Drink Cocktails
The ready-to-drink (RTD) cocktail industry is expanding as market demand rises, boasting a 104% growth rate over the past two years. In the previous five years, the segment has grown to 12% of the U.S. alcohol sales volume and now outsizes the country's wine market.
Market researchers anticipate steady growth over the next several years. The estimated value of the American RTD alcohol market is expected to hit $40 billion by 2027. Numerous changes are in store as the market continues maturing.
RTD Cocktail Trends
Several trends are emerging that are influencing consumer behavior and the future of the RTD cocktail industry.
Innovation and Investment Continue Despite Challenges
RTD crafters continue introducing options to the market despite their challenges amid inflation, supply chain disruptions and changing consumer preferences. For example, Molson Coors will debut a non-carbonated spiked refresher early in 2024, resulting from a collaboration with Gen Z customers.
The profitability opportunities for breweries and distilleries remain strong even as prices rise for two primary reasons. First, tax incentives provided in 2020 under the Craft Beverage Modernization Act have become permanent. Secondly, rising inflation has led American consumers to dine out less often, with 67% saying they've cut back. These increases came on the COVID-19 pandemic's heels, which had already curbed restaurant and bar visits. RTD cocktails and drinks bridged the gap for many and continue to do so.
Well-known non-alcoholic beverage manufacturers are also investing in the RTD market through collaboration with established spirit manufacturers. For example, Coca-Cola teamed up with Jack Daniel's to lower their entry barriers and capitalize on brand recognition. The familiar “Jack and Coke” became available as an RTD in America in late spring 2023.
Health and Wellness Are Driving Change
Consumers' transition toward “better-for-you” (BFY) choices extends to their RTD alcohol consumption. This trend has led to more light and reduced-calorie RTD options, plus more availability of low alcohol-by-volume choices.
Functional RTDs like Masq Fusion's hard teas and Kombucha Cocktails' hard kombucha are also gaining traction, especially among younger consumers. With high popularity among millennials — now the largest generation group — experts predict an outlook of 23.5% compound annual market growth for hard kombucha between 2022 and 2030.
Additionally, consumers are consistently reaching for beverages without artificial sweeteners, and their alcoholic RTDs are no exception. Innovative craft beverage brands like Blue Norther are capitalizing on this trend by turning to all-natural sweeteners instead.
RTD manufacturers are also responding to the renewed focus on health by creating unique botanical-based flavors offering potential extra health benefits. Innovative combinations like rosemary and ginger, cucumber and thyme, and lemon and turmeric blended with natural juices capture consumers' attention and fulfill their desire for a refreshing, indulgent BFY experience.
RTD Spirits Are Leading the Way
While traditional hard seltzers still capture the market majority with 43.4% of RTD alcoholic beverage sales, RTD spirits are quickly gaining ground. The RTD cocktails market experienced a 325% growth rate in the U.S. between 2011 and 2021, with 68 new drinks hitting the market in 2021. Among currently available bases, vodka is consumers' favorite at almost 50% of sales, with tequila taking the second spot at nearly 33%.
Gen Z Represents a Great Unknown
Gen Z — those following millennials — is generally defined as those born between 1997 and 2012. This generation accounts for 20.88% of the U.S. population and is its most diverse. Yet, its oldest members are just 26 years old, and over half are under age 21.
Some studies dub Gen Z “sober curious," indicating that 40% of those surveyed moderate intake by choosing low- or no-alcohol beverages. Additional research found respondents between 21 and 24 reported they consume alcohol daily or weekly. The seemingly contradictory findings make one point undoubtedly clear — it's challenging to define an entire generation's attitudes about alcohol when most of them have yet to reach the country's legal drinking age.
Another conclusion that becomes evident is that this generation will substantially impact the future of the RTD industry as they gain more purchasing power. Beverage brand owners and manufacturers have already begun to accept and adjust to this fact. Emerging trends in the space intended to appeal to Gen Z include:
- More spirit-based, low- and no-alcohol RTD choices
- RTDs that offer a drinking “experience”
- A focus on transparency, diversity and sustainability
- Non-carbonated spiked RTDs
Premiumization Maintains Its Hold
The growth of craft spirits, beers and imported alcohols proves that premium offerings resonate with consumers. While high-caliber wines have enjoyed a place on shelves for years, smaller distilleries and breweries have traditionally had to fight the industry's major players for real estate.
Premiumization — associated with high-quality ingredients, small-batch and artisanal techniques, innovative flavors, eye-catching packaging and clever names — set these brands apart and sparked their growth. Almost one-quarter of Americans spent $50 or more on a single premium alcohol purchase in 2021, and that number grew to 33% in 2022. Experts say premiumization is here to stay and predict these options to capture 13% of the market by 2024.
Convenience Continues to Influence Purchases
A primary part of an RTD's appeal is its convenience — consumers can now enjoy traditional cocktails easily. As regulations begin to align, distribution is becoming less fragmented.
More distributors are moving to a “total beverage distribution” model, offering all forms of drinks from one vendor. RTDs are readily available at convenience stores in states where their sales are legal. These changes are crucial for RTD manufacturers since more channels support more sales.
Connect With a BevSource RTD Expert for Guidance
BevSource is a market-leading partner in comprehensive beverage development and production solutions. We leverage our decades of combined experience and industry expertise to offer meaningful insights and guidance on the market's complexities. Our team has a proven process and track record of success in getting drinks to market faster, scaling manufacturing and optimizing sourcing with less risk.
Find out more about how collaborating with us can help you unlock your RTD's potential by contacting a beverage expert today.