As the ready-to-drink category shows signs of maturing, its share of total beverage alcohol (TBA) in its top 10 markets is forecast to keep growing, according to beverage alcohol data and intelligence company, IWSR.
In its RTDs Strategic Study 2024 report, IWSR said RTD volumes grew by two per cent in the top 10 – Canada, the US, Mexico, Brazil, South Africa, the UK, Germany, China, Japan and Australia. Australia was the only market to not register a gain, having a 1 per cent drop, but Mexico and Germany had the strongest gains with eight and four per cent growth respectively.
IWSR head of RTD insights, Susie Goldspink, said it capped a “buoyant” five-year period, with the US, Canada, Mexico, China and Germany all registering double-digit CAGR gains (2019-23).
Growth has slowed in the past year as many markets reach maturity and TBA growth slows.
“Despite the slowdown in growth, RTDs are continuing to gain share of TBA – a trend that we expect to continue throughout the forecast period, and particularly in the more established markets of Japan, the US, Australia and Canada,” Goldspink said.
IWSR forecasts all top 10 markets will register CAGR volume gains between 2023-28, “spearheaded” by Brazil (+6%), Australia (+3.5%), Germany (+3.5%), the US (+3%) and Canada (+3%).
The RTD category’s chief growth engines are focused on the US, where hard tea, FABs, and cocktails/long drinks will be the biggest volume drivers in the coming years, the report said.
“As this occurs, RTD consumption is impacting other categories, so companies need to join or invest in the RTD market to combat this. The UK, Japan, Brazil and Australia all report a decline in spirits consumption because of people drinking more RTDs, with other markets reporting a similar reduction in beer.
“Building brand awareness and loyalty is necessary to remain competitive – as innovation slows and the category becomes more established, connecting with the consumer is becoming increasingly important.
“But local is still paramount: despite the isolated successes of a few international products, RTD brands enjoy success through local propositions and flavour appeal. Brand owners would do well not to deter consumers by offering them an international proposition that lacks local nuance,” Goldspink said.
Recruitment resurgent
This year saw the turnaround of declining levels of recruitment, with more consumers entering the category driving some cautious volume growth and TBA share.
This was particularly pronounced in the UK (where 19 per cent of RTD consumers were new to the category), Germany (18%), Canada (18%) and the US (17%). Across all top 10 markets, the proportion of new entrants was 16 per cent, a notable increase compared to 2023, the report found.
Frequency and Intensity
Markets with younger LDA consumers have seen an increase in the frequency of RTD consumption while the intensity of consumption – the number of RTDs consumed per occasion – stayed stable.
IWSR COO Consumer Research, Richard Halstead, said there were “marked differences” in consumption patterns across countries.
“Older consumer bases, such as those in Germany, Canada, the UK and the US, are more likely to drink less per occasion, while – perhaps unsurprisingly – markets with a larger younger consumer base see higher consumption intensity,” Halstead said.
Influence of flavour vs brand
Flavour is still the most important factor in consumers’ choice, the more they engage with the category the less influence it holds. In 2022, IWSR said, 57 per cent of consumer said it was a cue to purchase – that fell to 49 per cent by 2024.
But brand is also becoming a less significant cue, falling to 29 per cent in 2024. IWSR said this reflected the fact that brand loyalty is lower in more fragmented markets, and also that products with a branded spirit base are underperforming versus RTDs with an unbranded spirit base. Generally speaking, RTD brands are strong locally, rather than universally, it said.
Consumer confusion about alcohol bases
Spirit and wine bases are driving category growth, with malt-based RTDs continuing to decline. Wine-based products performed well over the last 12 months, the report said.
BUT IWSR research found consumers are often confused about the base of RTD products: for example, most buyers (54 per cent) associate the hard seltzer segment with spirits, when most products (83 per cent) are in fact malt based.
At the same time, traditionally malt-based categories, such as hard seltzers and hard teas, are undergoing a switch to spirit-based products, premiumising the offering and trying to alleviate malt-based RTDs’ structural decline.
“A new innovation race in spirit-based hard seltzer products has taken over from the previous malt-based battle,” Goldspink said. “But the establishment of this easy-to-drink, lower-ABV, spirit-based category, and the proliferation of me-too products, runs the risk of overwhelming consumers once again.”
Innovation efficiency
IWSR said that as it matures, the RTD category is becoming less reliant on innovation to drive growth, and experimentation among consumers is also slowing down – reflecting both a diminishing appetite for new flavours and cost-conscious consumers unwilling to take a risk on an unfamiliar product.
In 2021, there were more than 3300 RTD product launches; in the first half of 2024, there were less than 1000.
“While the pace of innovation has tailed off, volumes continue to grow as we see less reliance on innovation to drive performance, and consumers wanting to minimise risk on new products they do not know,” Goldspink said.
“At the same time, effective flavour options and variety packs are helping to sustain growth in many markets, especially among younger consumers – and innovation remains key to engaging with this age cohort.”
