Is this the next big thing in RTDs?

Confession: when we heard Diageo had acquired Far West Spirits, which produces Lone River Ranch Water RTDs, our first thought was ranch what?

It turns out Lone River is an RTD drink that takes inspiration from a popular classic Texan “Ranch Water” cocktail. And Ranch Water is poised to be bigger than, well, Texas.

But what is it, exactly? Ranch Water is the tequila version of a highball. It’s traditionally made by mixing a bottle of Topo Chico with a splash of tequila and a squeeze of lime.

Drinks Digest spent a lot of time Googling “what is …” while writing this article … Topo Chico is a hugely popular Mexican sparkling mineral water. It is beloved due to its turbo-charged effervescence. Apparently you can leave a bottle of Topo Chico open all night and it will still be fizzy the next morning. Impressive.

Coca-Cola cannily acquired the US rights to Topo Chico in 2017 for $220 million. Last year, it launched a Topo Chico hard seltzer that went from concept to commercialisation in less than six months during the onset of COVID-19. The range includes three gluten-free flavors – Tangy Lemon Lime, Stawberry Guava and Pineapple Twist.

James Quincey, chairman and CEO of The Coca-Cola Company, spoke about the launch with CNBC’s Jim Cramer last year, noting: “The Topo Chico brand has tremendous relevance and resonance with Millennial consumers. So I think this is going to be a great opportunity for us… it’s very synergistic for the Coke system globally. We’re going to experiment with a number of cities around the world… just one of the many things we’re doing to really focus our portfolio to be very consumer centric and drive those brands that can create scale for us.”

But we digress … Ranch Water’s popularity is sweeping the US. In total, the three ranch water hard seltzer brands tracked by market research firm IRI—Lone River, ShotGun, and Texas Ranch Water Co—sold a combined $7.5 million in grocery, convenience, and liquor stores over the past 52 weeks. Lone River Ranch Water alone amassed about $4 million in those stores during that period.

So it’s little wonder that major drinks companies are scrambling to get a piece of the action. Last month, for example, Heineken announced it was releasing a ranch water hard seltzer under the Dos Equis line this year.

The story behind Lone River Ranch Water

Lone River Ranch Water was founded in 2019 by native Texan Katie Beal Brown. She will retain a minority interest and continue to lead the business on a day to day basis, as Chief Executive Officer of the brand. She will work closely with Diageo North America leadership to build further on Lone River’s success.

Taking inspiration from the Ranch Water cocktail enjoyed by Katie’s family for generations, the brand is inspired by the “spirit of West Texas and its sense of adventure”.

Brown said: “We started Lone River with the dream of giving people a taste of Far West Texas. We are so grateful for the diverse set of communities that have embraced our brand, extending far beyond our small place on the map. We found in Diageo a world-class partner who believes in our vision to bring the spirit of Far West Texas to as many as we can.”

Diageo says the brand brings an authenticity and accessibility that lends itself to days spent outdoors and to enjoying relaxed occasions with family and friends.

The portfolio has three unique offerings:

  • Original: The Original Ranch Water hard seltzer flavoured with organic blue agave nectar and lime juice
  • Spicy: Ranch Water with a kick of the Texas state pepper, jalapeño
  • Rio Red Grapefruit: Ranch Water with a squeeze of Rio Red Grapefruit juice, the Texas state fruit

During COVID-19, the RTDs category has finally started to gain huge momentum in the United States, driven by consumer trends such as interest in lower sugar, lower calorie and gluten free offerings, as well as increased demand for convenient formats that are ideal for casual and at-home occasions.

What the experts think

IWSR has taken a closer look at the ranch water trend in a new report, and asks whether it has the potential to further drive tequila’s popularity, while also leveraging the RTD boom.

It notes: “With the backing of these companies and access to their extensive distribution networks, there is potential for Ranch Water to reach new consumers across the US and perhaps further afield.

“For tequila brands, Ranch Water presents an opportunity to demonstrate relevance and ramp up consumer interest. The serve has diversified the ways in which tequila can be enjoyed, which had previously centred largely on Margarita iterations. The low-calorie/low-sugar nature of Ranch Water also reinforces tequila’s ‘better for me’ image in the minds of consumers.”

Brandy Rand, COO of the Americas at IWSR, adds: “Because tequila is plant-based, many consumers perceive it to be better for them. The spirit is seen to be ‘cleaner’ and lighter – especially blancos – with no added sugar and less adulteration. Tequila has become much more associated with the ‘better for me’ movement.”

Why should Australia care?

Admittedly, “ranch water” isn’t a very Aussie term … but there were doubts that “hard seltzer” would be accepted by Australian consumers.

Those doubts were erased when White Claw – the world’s most successful hard seltzer brand – launched in Australia last year. Its Australian distributor, Lion, struggled to keep up with demand, with the brand delivering $4 million in retail sales value in its first week alone. At one point, Lion even had to fly 4000 cases into the country via Singapore Airlines cargo flights.

Could ranch water be the next big thing in Aussie RTDs? Watch this space …

Categories: News