The Race to Rule RTD

The ready-to-drink market is expanding at a breakneck pace. But will the trend stick?

Nineteen years ago, Budweiser debuted its “Whassup” ad campaign, featuring a spot in Super Bowl XXXIV that flooded the screens of 130 million viewers. The nonchalance of the concept—bored guys slurring greetings into phones—seemed a casual assurance of mainstream beer’s dominance in America.

The commercials from 2019’s Big Game told a different story, one that hinted at the seismic shifts beverage companies are navigating as beer sales, mired in a five-year downward slump, continue to sag. Of the eight ads Anheuser-Busch InBev purchased, one eschewed beer altogether. Featuring two entrepreneurial mermaids, the commercial pushed Bon & Viv’s Spiked Seltzer, a rebranding of SpikedSeltzer, created by beer industry alum Nick Shields in 2012 and purchased by AB InBev in 2016.

One of the biggest public platforms yet for the burgeoning hard seltzer market, the commercial was a nationally televised peek at the snowballing phenomenon of the ready-to-drink (RTD) market. Comprising a variety of premixed boozy beverages, the RTD category, largely dormant since the 1980s, has sparked an arms race as beverage corporations rush to acquire hard seltzers or launch canned or bottled cocktails. At least 40 new RTD products have launched in the last three years.

Distinct from commercial flavored malt beverages like Mike’s Hard Lemonade, these new RTDs seem poised to attract a younger generation of drinkers that grew up with Whole Foods and craft beer, and have helped drive demand for low- and no-alcohol drinks. Less inclined to categorize themselves conventionally as “wine drinkers” or “beer drinkers,” this type of consumer is open to products with crossover appeal. “More people are choosing their beverage repertoire on occasion or emotional headspace,” says Chelsea Phillips, vice president of AB InBev’s Beyond Beer portfolio. It helps that price points aren’t much higher than what you’d pay for a craft beer, let alone a craft cocktail.

When you factor in the category’s cool-casual appeal with investment from corporate conglomerates, RTDs begin to look a lot like the athleisure of the drinks world. Blending the colorful, effervescent charm of La Croix with the cachet of craft cocktails and the portability of beer, these on-trend products have the potential to cement their position on retail shelves and menus—or fizzle out like the hard sodas of yore. But so far, the numbers are hopeful.

In February, AB InBev purchased Cutwater Spirits, a company whose line of 14 canned cocktails saw 356 percent growth in sales over the previous year. That month the beer giant also rolled out new ads for its canned Ritas Spritz line (descended from the Lime-a-Rita, though technically these new products have no concrete relation to a Margarita), which includes flavors like white peach rosé. This spring MillerCoors is launching its Cape Line Sparkling Cocktails, advertised as gluten-free and low-calorie. Gordon’s Gin (owned by Diageo) made waves in the U.K. with its RTD Pink Gin and Tonic, while Reed’s Ginger Beer recently unveiled a canned mule cocktail. Southern Tier Distilling parlayed its craft spirits into three canned cocktails, including a Bourbon Smash. According to global drinks analyst IWSR, sales of ready-to-drinks rose 6.1 percent in the past year. Some products are seeing triple-digit growth.

Preceding these commercial brands was a wave of entrepreneurs acting independently, unaware that their collective efforts amounted to a movement that would shake the industry firmament. Jordan Salcito, the director of wine special projects at Momofuku, wanted something cold and refreshing that was not beer at warm-weather events like a baseball game. She had nostalgic memories of the neon-colored wine coolers of the 1980s but knew that any rebirth of the category would require emphasis on high-quality ingredients and sustainability.

The explosion of popularity around the Aperol Spritz, and Salcito’s earlier success creating a modern-day wine cooler from Finger Lakes riesling at Booker and Dax, led to Ramona, an organic wine spritz dosed with ruby red grapefruit juice. “This was for those more traditional beer moments that for me were also spritz moments,” says Salcito. Sales were up 618 percent last year, and Citi Field recently announced that Ramona would be available at every bar in the stadium, neatly rounding the circle of Salcito’s original intention. The company has launched a second lemon flavor, with a third to follow.

“Its not stuffy, it’s fun,” says Josh Rosenstein, the creator of LA-based Hoxie, one of the first spritzers to land on the market. A chef by trade, Rosenstein used to concoct wine spritzers while working on the line, splashing together fruit scraps, cooking wine and soda water in a deli cup for an à la minute pick-me-up. When composed versions of these spritzers went like hotcakes at a private dinner party, Rosenstein realized tastes were changing, and with an investor’s help he started the company, which debuted 800 cases in 2015; this year, he projects numbers could get up to 6,000 or 7,000 cases—minuscule compared with conglomerates, but growing year over year.

Rosenstein has maintained a focus on fresh, non-artificial ingredients, with a base made from the catawba grape. “There’s variation from can to can,” he says. “Every batch is a little different. I blend each tank by hand.” It’s another example of how craft RTDs often sit between conventional categories, marrying the organic variation of wine with the unpretentious chuggability of beer. Similarly, Brooklyn-based amaro company St. Agrestis launched a bottled Negroni on the coattails of the bitter cocktail’s ascent.

Perhaps it’s no surprise, then, that the concept appealed to Empirical Spirits, the experimental Copenhagen-based distillery that produces “freeform spirits” that liberally intermix flavors and fermentation techniques. Its first canned RTD, Minor Threat, was created on a whim at the suggestion of R&D team member Chris Stewart, a former bartender who devised the recipe. Three weeks later, they blended the juice of 600 pomelos with Szechuan pepper and their Helena base spirit, which is made from barley koji, pilsner malt and Belgian saison yeast. They used a neighboring brewpub’s facilities for carbonation and brought down a mobile canning unit from Sweden. Within a month of conception, Empirical’s 1,500 cans of Minor Threat RTD had sold out.

For Empirical Spirits chief operations officer Ian Moore, the can itself signifies a looser attitude toward what is fundamentally the same approach the company takes with its high-end spirits. “Bottles convey this idea of sitting down, stroking your chin,” says Moore. “A can is a bit more like having a barbecue.” Empirical has already released a second Minor Threat that sells for $11, blending milk oolong tea, toasted birch and green gooseberry. All 2,800 cans sold out.

Innovative RTDs have flared up only to burn out before. In the late 1980s, sales of wine coolers plummeted by double digits, felled by excise taxes and associations with juvenile culture. More recently, hard soda had big industry buy-in but failed to galvanize a broad consumer base. However, the strong growth of alcohol-based RTDs in Great Britain and especially in Japan seems to point to a trend with wide relevancy, one that plays nicely with wellness and a market’s growing tolerance for elastic categories. Companies appear to be inclined to play the waiting game and see what sticks. Chelsea Phillips of AB InBev’s Beyond Beer group points out that the company hung onto its low-carb Michelob Ultra, launched in 2002, for well over a decade before it began picking up speed, recently becoming the fastest-growing domestic beer.

For now, RTDs are still a comparatively small segment of the overall market. “Beer, wine and spirits dominate alcohol consumption, leaving RTDs to take their place as an ‘also drink,’” concluded a Mintel report from December 2018. The analysts noted that, categorically, RTDs lack a strong governing identity; they advised “[owning] occasions” (as Aperol has with spritzes) would be a smart move going forward.

It seems likely this is the direction RTD will move in, impinging on spaces and moments typically occupied by beer and wine. Like athleisure, which successfully imported workout clothes into previously unaccommodating spaces, RTDs blur the lines in an arguably populist fashion. “In general it’s just challenging the norm of what people thought was possible,” says Phillips.

For the independent companies, fast initial growth has gone hand in hand with consumers starting to wrap their minds around these products. “So many people used to ask me, what’s a spritz? What’s a spritzer?” says Rosenstein. “As of late I haven’t had to define that as much.” Competition for market domination looms, but for now the abundance of products seems a boon. “I think it’s a rising tide,” says Salcito, expressing surprise that it’s taken so long for the market to open up. “Our consumers are smart and curious,” she continues. “They want to learn the rules for themselves instead of having someone tell them that this is what they need to be drinking right now.”

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