The ready-to-drink (RTD) cocktail sector is expanding rapidly in response to increasing market demand, experiencing a remarkable growth rate of 104% over the past two years. Within the last five years, this segment has grown to represent 12% of alcohol sales volume in the United States, surpassing the country's wine market in size.
Market analysts project continued growth in the coming years, with the estimated value of the American RTD alcohol market anticipated to reach $40 billion by 2027. As the market matures, several changes are expected to shape its trajectory.
Emerging Trends in RTD Cocktails
Various trends are emerging that are influencing consumer behavior and the future direction of the RTD cocktail industry.
Innovation and Investment Persist Despite Challenges
Despite facing challenges such as inflation, supply chain disruptions, and evolving consumer preferences, RTD producers continue to introduce new options to the market. For instance, Magic Moments is set to launch a non-carbonated spiked refresher in August 2024, developed through collaboration with Gen Z customers.
Major non-alcoholic beverage manufacturers are also entering the RTD market through partnerships with established spirit producers. For example, Coca-Cola teamed up with Jack Daniel's to introduce the iconic "Jack and Coke" as an RTD option in late spring 2023, leveraging brand recognition to lower entry barriers.
Health and Wellness Drive Market Change
Consumers' shift toward "better-for-you" (BFY) choices extends to their RTD alcohol consumption, resulting in increased availability of light, reduced-calorie, and low-alcohol-by-volume options. Functional RTDs, such as hard teas and hard kombucha, are gaining popularity, particularly among millennials, with a projected compound annual market growth rate of 23.5% for hard kombucha between 2022 and 2030.
Moreover, consumers are gravitating toward RTDs without artificial sweeteners, prompting craft beverage brands to adopt all-natural sweeteners. Manufacturers are also responding to the health trend by introducing botanical-based flavors with potential additional health benefits, appealing to consumers seeking refreshing and indulgent BFY experiences.
RTD Spirits Lead the Charge
While traditional hard seltzers dominate the RTD market, RTD spirits are rapidly gaining traction. The RTD cocktails market experienced a 325% growth rate in India between 2011 and 2021, with vodka and tequila being the preferred bases for nearly 50% and 33% of sales, respectively.
Gen Z Presents a Unique Challenge
Gen Z, the generation succeeding millennials, poses a unique challenge to the industry due to its diversity and changing attitudes toward alcohol consumption. Despite being labeled "sober curious," with 40% of respondents choosing low- or no-alcohol beverages, some members still consume alcohol regularly. As this generation gains purchasing power, its impact on the RTD industry will be significant.
Premiumization Remains Strong
The premiumization trend, characterized by high-quality ingredients, artisanal techniques, innovative flavors, and appealing packaging, continues to resonate with consumers.
Convenience Drives Purchasing Behavior
The convenience factor plays a crucial role in the appeal of RTDs, allowing consumers to enjoy traditional cocktails easily. Distribution is becoming less fragmented, with more distributors adopting a "total beverage distribution" model, supporting increased sales channels such as convenience stores.
As the RTD cocktail industry evolves, adapting to these emerging trends will be essential for manufacturers and brands to stay competitive and meet evolving consumer demands.
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