US RTD Market Trends: Premiumization Fuels Value Growth
RTD Market’s Dynamic Shift: From Volume to Value
According to the latest data from IWSR Drinks Market Analysis, the US Ready-to-Drink (RTD) market’s era of explosive volume growth has plateaued. However, its value soared by 6% last year, hitting $18.2 billion, propelled by inflation and a trend towards premium products.
The forecast for the category is a modest compound annual growth rate (CAGR) of 1% from 2022 to 2027, with the value projected to climb sharply by 16%, reaching $21.1 billion by the end of this period.
This growth trajectory is partly due to a market division, with malt-based seltzers on the decline, losing ground to spirit-based hard seltzers, pre-mixed cocktails, and flavored alcoholic beverages (FABs).
“The US RTD sector is witnessing a shift from volume to value,” states Marten Lodewijks, consulting director for the Americas at IWSR. “As serving costs increase, consumers are increasingly favoring potent cocktails and spirit-infused hard seltzers, reflecting a taste for upscale quality.”
“RTD cocktails are gaining a reputation for premium sophistication, which in turn fuels the demand for spirit-infused offerings. Conversely, the hard seltzer segment has hit a saturation point, unlikely to replicate the peak consumption of 2021. The dip is largely a result of consumer fatigue, an oversaturated market, a return to normalcy post-pandemic, and a general reduction in alcohol consumption.”
Despite the downturn in hard seltzers, RTDs are carving out a larger slice of the total beverage alcohol (TBA) market in the US. From a 2.7% market share in 2018, RTDs are anticipated to command nearly 8% by 2027.
“RTDs are poised to cannibalize servings from beer and wine, particularly at outdoor events, dinner parties, and recreational activities where they were traditionally favored,” Lodewijks adds. “Furthermore, while RTD cocktail consumption is set to encroach on the spirits’ market share, spirits will still see robust performance in on-trade venues compared to RTDs.”
RTDs also experienced the steepest price hike among all alcohol categories, with an increase of over 6%, as observed by the IWSR.
The market is responding with an influx of RTD cocktails and long drinks, eclipsing hard seltzer launches, representing over 60% of new offerings in the first half of 2023.
While vodka remains the top choice for RTD bases, agave spirits, particularly Tequila, are gaining momentum, with 41% of consumers (a rise from 35% in 2022) preferring it, and 60% among Gen Z drinkers (aged 21+).
This inclination towards agave spirits is reflective of the broader spirits market, where agave-based spirits volumes increased by 12% in 2022 and are projected to continue growing at a CAGR of 11% from 2022 to 2027.
Retail continues to dominate the RTD sales channel, accounting for 88% of purchases. However, the on-trade sector is also gaining traction, with 39% of consumers buying RTDs there in 2023, up from 35% the previous year. Notably, Gen Z consumers are the most frequent RTD buyers in on-trade settings.
The IWSR has recently adjusted its volume growth predictions for the RTD category, projecting a 12% increase from 2022 to 2027 across ten key markets, with the US and Japan predicted to remain the largest in terms of RTD volume.
