RTD: READY TO RULE

Ready to rule

RTDs represent an incredibly popular drinks segment, with many brands and new products entering the space. Caoimhe Hanrahan-Lawrence explores this vibrant category.

The diverse and growing RTD category is expected to hit US$40b globally by 2027, according to the IWSR. While the rate of growth has slowed in recent years as the category consolidates, consumers are still being drawn to the category due to its broad appeal for the modern consumer. RTDs offer convenience, innovative flavours, and appeal to current drinks trends, such as the better-foryou movement, flavour nostalgia, and the desire to buy local.

RTDs are particularly popular among legal drinking age (LDA) Gen Z and millennial consumers, according to Belinda Sieben, Communications Manager, Australian Vintage Limited (AVL).

“RTDs fit with younger consumers’ lifestyles, are easy to consume, easy to moderate, and easy to share. It’s the perfect match. RTDs are bought based on occasion, promising the perfect drink for the Australian lifestyle, whether that be outdoors, at a music festival or just catching up with friends,” she said.

Among these younger adult consumers, RTDs are frequently consumed in social settings. As such, festivals are key exposure events, and brands such as Archie Rose and AVL are joining as drinks partners with entertainment companies, exposing more consumers to their products.

Despite the focus on LDA Gen Z and millennial drinkers, the interest in RTDs is evident across multiple age groups. There is, however, a generational difference as to where new RTD drinkers are coming from, as Susie Goldspink, Head of RTD Insights, IWSR, explained.

“IWSR consumer data suggests RTDs are primarily stealing share from beer, but there are interesting differences in age groups, with the LDA Gen Z cohort most likely to replace spirits with RTDs, and boomers most likely to replace wine,” she said.

Automatic appeal

As the name suggests, ready-to-drink products offer convenience, which is particularly appealing for consumers looking to purchase for social gatherings.

According to Alex Bottomley, co-Founder and Director, Ampersand Projects, this is particularly true for canned long drink style RTDs.

“Products are generally purchased to be consumed on a single and immediate occasion,” he said.

However, convenience means different things for different styles of RTDs, such as bottled cocktails, as Trevor Hannam, Head of Sales, Archie Rose told National Liquor News

“While both our ranges can be enjoyed for any occasion, the cans are perfect for parties, picnics and festivals, while bottled cocktails are perfect to drink in the comfort of your own home, or to take to a dinner party or house party, taking the pressure off mixing your own cocktails,” he said.

Gemma El Kazzi, co-Founder of bottled cocktail business The Skandi Selection, expressed a similar view.

“People reach for a canned RTD for a quick and easy drink, whereas bottled cocktails like ours are somewhere in the middle. It’s still quick and easy, but you need to pour it in a glass, and you need to dress it to have that cocktail feel about it,” she said.

Additionally, RTD consumers seek out new and engaging options, with the IWSR reporting taste innovation as the main reason for drinkers switching to RTD from other categories. According to Zoe Wendland, Marketing Director, Fellr, this has been supported by new product development in the category.

Australian drinkers have always had a preference for vodka RTDs and as the RTD category continues to outperform other categories, it’s the vodka-based products that are leading the way. The neutral nature of the spirit leads to greater refreshment and less harsh drinks which appeals to the RTD drinker’s palate.

-Alex Bottomley, co-Founder and Director, Ampersand Projects

“There’s a growing preference for premium and innovative RTDs, driven by consumers’ desire for what’s hot, and quality and unique flavour experiences,” she said.

Interestingly, one area of flavour innovation has been in nostalgic flavours, with many RTD releases reflecting flavours from the childhood of LDA Gen Z and millennial consumers.

Refreshment is particularly important for RTD consumers, which has led to growth in lemon flavoured RTDs, as Jorge Rosas, Category Manager RTD, Beam Suntory, remarked.

“The citrus segment is rapidly expanding in Australia’s RTD category, with consumers associating citrus flavours with refreshing drinking experiences. Citrus flavours have rapidly increased in popularity as they are often paired with refreshing spirit bases such as vodka, gin and seltzer,” he said.

Conscious consumption

Many drinks categories have been affected by the betterfor-you trend, but it is particularly evident in RTDs.

“Better-for-you, low calorie drinks continue to lead the way as drinkers seek options that are either no or low sugar, and lower in calories compared to other categories such as beer and wine,” Bottomley said.

Many brands, such as Archie Rose, choose to prominently display their product’s sugar or calorie count on the packaging.

“By offering this transparency on the cans, we’re simply making it easy for consumers to see the choices available in this category and hopefully introducing Archie Rose to a new audience,” Hannam said.

Despite the popularity of better-for-you products, there is also a growing demand for high ABV products.

“Consumers are increasingly looking for value for money, which has continued to drive demand for High ABV RTDs in Australia. Products with an ABV of six per cent or higher have performed strongly over the past few years as it offers good value for money for many shoppers, seeing rapid share gains of brands such as -196 and other brands on the market,” Rosas said.

A spirited bunch

The RTD category is diverse, but spirits-based RTDs undoubtedly dominate, with the IWSR reporting that cocktails and long drinks make up 70 per cent of all RTD products.

White spirits have been popular due to their approachable taste, allowing for greater flavour innovation.

“Australian drinkers have always had a preference for vodka RTDs and as the RTD category continues to outperform other categories, it’s the vodka-based products that are leading the way. The neutral nature of the spirit leads to greater refreshment and less harsh drinks which appeals to the RTD drinker’s palate,” Bottomley said.

While white spirit consumption has been primarily seasonal in the past, this is changing as more consumers enter the category.

“Traditionally, white spirit premixes were mostly consumed in summer and dark spirit premixes in winter, although dark spirit drinkers have always been more inclined to drink it all year round. We’re now noticing white spirit premix drinkers follow suit, with consumers enjoying their drinks in the colder months so it’s not as hugely seasonal as it used to be,” Hannam said.

This said, there are still seasonal changes in RTD consumption. Flavours such as citrus and watermelon dominate sales in summer, as consumers look for refreshing options for outdoor drinking occasions. In addition, larger pack sizes to 10 or 24 cans see strong sales during holiday periods and sporting finals.

While both our ranges can be enjoyed for any occasion, the cans are perfect for parties, picnics and festivals, while bottled cocktails are perfect to drink in the comfort of your own home, or to take to a dinner party or house party, taking the pressure off mixing your own cocktails.

-Trevor Hannam, Head of Sales, Archie Rose

In the future, Sarah Camerlengo, Brand Manager, Vok Beverages, expects to see more interest in dark spirits as these products modernise.

“As the category continues to evolve, I believe we will start to see the dark spirit RTD space expand and grow as the white spirit RTD space continues to become more and more crowded. It is a growth opportunity and a way to recruit new consumers into the RTD category especially for consumers wanting to seek something a little bit different,” she said.

Other spirts may also take hold in the future, according to Michael Newbold, Senior Brand Manager, Vok Beverages.

“If you look at what we’ve seen in markets like the US, I think there are a number of spirit categories primed for domestic expansion in the coming years. Australian Rum and Whisky RTDs are under-developed given the number of established distilleries. Tequila in another massive opportunity for retailers; simple canned options for drinks like Ranch Water and Palomas are a great way to recruit people into the Tequila category,” he said.

Bright and bubbly

One of the hottest RTD segments is the seltzer category, which has seen a massive increase in popularity and consumption in recent years. These beverages are refreshing, and generally tap into the demand for better-for-you products.

As part of the broader spirits based RTD subcategory, there can be some blurring between seltzers and other light spirit RTDs, particularly those made with soda. Flavour innovation is also becoming increasingly important in the seltzer category, just as in other RTD segments.

“We believe success lies in embracing the product’s unique selling point and leveraging the blurring of lines with light premix drinks to attract a broader audience of health-conscious consumers looking for refreshing, lower-calorie options without compromising on taste and quality,” Wendland said.

An emerging sector of the RTD category is wine-based RTDs, or spritzers. These products straddle the divide between RTDs and wine, providing convenience and flavour with a wine base, rather than spirits. This is becoming an area of interest of wineries seeking different avenues to appeal to LDA Gen Z and millennial drinkers. Spritzers also appeals to older generations switching wine for RTDs.

“A global trend is ‘what was old is new again’ and we saw there was a job to be done to bring younger LDA consumers into wine and drive more relevance in this category,” Siebsen said.

Aussie angle

In such a crowded market, Australian RTD producers are performing remarkably well, and offer significant benefits to Aussie consumers.

“The role Aussie RTD producers play in the market is similar to the role Aussie spirit makers play, and that’s to provide consumers with options that carry all the benefits of spirits that are locally produced, containing natural, Australian local ingredients, and other sustainability factors such as reduced air miles and freight costs,” Hannam said.

In addition, Australian producers have a better understanding of what Australian consumers like, how they drink, and what they care about.

The citrus segment is rapidly expanding in Australia’s RTD category, with consumers associating citrus flavours with refreshing drinking experiences.

-Jorge Rosas, Category Manager RTD, Beam Suntory

“As an Australian brand, we take pride in developing drinks that cater to the needs, values, and culture of today’s generation of Aussies. We recognise the shift towards refreshing and lighter options in the alcoholic beverage landscape, and we’ve tailored our offerings to meet those preferences,” Wendland said.

For many Australian brands, supporting the local community is an important part of their business values, which can increase consumer identification with the brand.

“Championing culture and community is at the heart of our marketing ethos. Our commitment to supporting creative communities has resonated with consumers and will continue to be a part of how we show up in their world,” Wendland added.

Of course, Australian consumers are still influenced by international trends, as we have seen with the rising popularity of seltzer following US trends, and the introduction of Japanese brands to the Australian market.

The Australian appetite for RTDs is evident, and there are many different reasons for consumers to engage with the category. By understanding the trends influencing RTD consumption and staying on top of the diverse styles, retailers can make the most of this growing market.

Brands branching out

According to the IWSR, more than half of consumers are influenced to purchase an RTD if it is made by a well-known spirits, beer, or soft drink brand. This effect has certainly been noticeable by Archie Rose.

“When it comes to our RTDs, the goal was really to ensure our awardwinning spirits could deliver a much higher quality canned drink to more Australians, which helps the consumer to expect more from an RTD which are typically high in sugar and artificial ingredients. Diversifying in this way allows us to reach a new audience through the accessibility of this range,” Hannam said.

However, Newbold thinks that this trend is less pronounced among dedicated RTD consumers.

“Brands with established credentials in spirits will always have a level of advantage stepping into the RTD space but I think what we’re seeing from consumers is a real intent to explore the category and actively seek out something new,” he said.

There are also RTD brands bucking the trend and releasing spirits, such as Ampersand Projects Vodka & 500mL, a classic vodka that takes its cue from the convenience of RTDs with a smaller bottle size.

Retailer Tips

1. Stock for a diverse range of consumers

“Ensure that different strengths of products are positioned and merchandised together.

“Allocating adequate space in-store for both market-leading products are new innovative products to ensure consumers have a selection to remain engaged in the category,” Bottomley said.

2. Highlight new products

“While RTD drinkers, like all drinkers, have their preferred brands, loyalty isn’t the ultimate deciding factor at the point of purchase. If customers see something new on the shelves that’s in their wheelhouse, their curiosity will usually see them reach for it,” Hannam said.

3. Consider cross-merchandising

“We also know that the consumer isn’t necessarily shopping by category but more by occasion or need, and see many retailers exploring crossmerchandising opportunities, such as placing complementary products together,” Wendland said.