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Why RTDs are the world’s fastest growing spirits category

As Diageo launches a new look for Australia’s first premix, UDL, it seems fitting that drinks companies around the world are finally taking the RTDs category seriously.

It took them a long time to catch up. UDL first hit the market in 1965 and Aussies have been enamoured with RTDs ever since. The rest of the world, not so much.

As the Sydney Morning Herald noted back in 2005: “While sales of RTDs are flat or in free-fall in markets around the world, in Australia they are booming. No other market has dark spirits-based RTDs such as those in Australia, nor is there a proliferation of drinks in cans.”

While that growth slowed when the government introduced the controversial “alcopops tax”, over the past five years, the industry has slowly fought back from heavy tax burdens by focusing on innovation to engage consumers. Its determination has finally paid off, with $1billion category booming again.

The world finally catches on to RTDs

The rest of the world also has a very different attitude to the appeal and potential of RTDs in 2021. Canned cocktails are now the fastest-growing alcohol beverage category in the US market according to the IWSR

IWSR notes: “RTD innovation has been driven by consumer-centric, as opposed to product-centric, trends, allowing the category to expand its appeal and gain a robust relevance in a variety of consumption occasions. Principally, brands have capitalised on the health and wellness movement by creating iterations that are low in sugar and alcohol, and contain natural or organic ingredients.”

bombay sapphire rtd

Bacardi president and global chief marketing officer John Burke told Forbes the trend will continue as COVID restrictions ease: “We expect outdoor socialising to be big as the world begins to open-up again and as such, the appreciation for premium is also trickling into other drinks categories, particularly in the ready-to-drink (RTD) space. This is the fastest-growing spirits category, and we see a real opportunity here with our brands.”

Burke said he believes the opportunity for RTDs made with premium spirits will be particularly strong.

“Drinking less but drinking better is a long-term trend that has been shaping the spirits industry for the last 10 years, but it has been amplified and accelerated by the pandemic as people looked to trade up as a way of treating themselves.

“Health and wellness have been trending for some time. Now, self-care has accelerated exponentially. For us this means the acceleration of no-alcohol and lower-alcohol cocktails. Or for some consumers who choose to drink less frequently, they are choosing to drink better drinks and are trading up to higher quality experiences.”

The Australian RTD boom

Last week, Campari Group reported its organic sales were up 22.6%, driven by the double-digit growth of brands such as Wild Turkey RTDs. Last month, Brown-Forman reported Jack Daniel’s RTD sales were up 34% in Australia; while in January, Diageo said its Australian RTD sales in the six months to December 31, 2020 grew 30%, with Bundaberg, Smirnoff Spiked Seltzers and Gordon’s Pink Gin among the big performers. 

LMG’s National Merchandise Manager for Beer, Spirits and RTDs, Scot Hayman, told Drinks Digest that RTD dollar sales for the group were up +40.2% over the 12 months to March 2021 compared to the previous year.

“What we have witnessed with RTDs is a layered effect driving growth,” he said. “Pre-COVID, the RTD category was still growing predominately driven by NPD and the emergence of various ‘better for you’ options, in particular, no-sugar variants. When COVID hit, these underlying growth factors accelerated, as more shoppers bought into RTDs because they saw them as a perfect convenient solution for the increased number of at-home consumption occasions.

“Interestingly, we’ve found that an increasing number of male shoppers have been rediscovering and engaging with the RTD category, particularly with vodka and bourbon.”

All RTD segments for LMG have recorded significant growth in the 12 months to March 2021, with the strongest growth drivers being vodka (+72.3%), bourbon (+32.6%).

World Premix Awards

We also make some of the world’s best premixes, with Australia scoring a swag of medals at the 2021 World Premix Awards.

Premium canned cocktails brand Curatif was the frontrunner, with six medals, including two World’s Best Awards. The Melbourne based start-up took out the top gong in the Classic and Contemporary cocktail award categories, winning the World’s Best Classic Cocktail for its Tequila Tromba Margarita and World’s Best Contemporary Cocktail for its Black Pearl Toreador.

Other Aussie brands that took home medals were Fellr Watermelon, which won Silver in the World’s Best Hard Seltzer category; while in the World’s Best Spirit and Mixer categories Just. Pink Gin & Soda won Gold; Twenty Third Street Distillery Signature Gin & Tonic, Volsk Lemon Lime Vodka Soda, Just Vodka Soda Black and The West Winds Gin Strawberry Basil Gin & Soda were both awarded Silver; and Volsk Berry Vodka Soda, The West Winds Gin & Tonic, Somma Cucumber & Mint Alcoholic Mineral Water, 78 degrees Classic Gin & Tonic, Manly Spirits Gin & Tonic and Lilly Pink Gin & Tonic were all awarded Bronze medals.

The rise of premium RTDs

Diageo recently released its first Johnnie Walker Black RTD to ride the premiumisation wave. While there have been Johnnie Walker Red releases in the past, such as Johnnie & Ginger, this is the first time a Black Label RTD has been approved by the distiller.

The new product comes in two flavour variants: Johnnie & Blood Orange Highball and Johnnie & Lemon Highball. And the drinks world will be eagerly watching to see how they perform in Australia, as they come with a higher ABV than most RTDs – 6.3% – and a premium price tag of RRP $26.99 for a 250ml x 4-pack.

“The ambition for Johnnie Walker Highballs is to level up the category, and the consumer premix drinking experience, by offering a convenient and delicious whisky premix that extends the appeal to new drinkers with a lighter, more refreshing tasting liquid from the world’s leading blended Scotch Whisky,” explained Diageo Australia Marketing Manager Maddy Stockwell.

“Convenient format, refreshing taste and breadth of flavour offerings are what is driving the vibrancy in RTD at the moment. Consumers are looking for lighter, refreshing tasting and easier drinking liquids and premix absolutely delivers on this. We have also seen a big shift in consumption behaviours in the past year with people socialising at home more. Premix lends itself strongly to these fun, lively at-home occasions.”

As for how the market has received the new-look UDL range, Stockwell said: “UDL has become increasingly popular over the past quarter, with sales jumping ahead of total spirits and total pre-mix offerings.”

Campari Group chief executive Bob Kunze-Concewitz told analysts last week that the RTD category has “a lot of legs” globally, especially in the premium segment.

“If I take all of our ready-to-drink expressions together, so if you take the RTDs in Australia, you take SKYY BLUE in Mexico, in Asia you take the Aperol Spritz, the Negroni ready-to-go, they amount to quite a bit. It’s 10% of our sales on a global basis. And they’re really spot-on in terms of the consumer need right now. So, we’re looking at driving them forward.”

“With regards to the Aperol Spritz, we’ve been very cautious in the past, and we’re only introducing it this year in those markets, large markets such as Germany or Australia, where Aperol and the Aperol Spritz are already very well established, but we see very good run rates there, as well as for the SKYY RTD potentially in a wider geographic footprint in the years to come.

“Clearly, consumers are reacting very positively to this. We’re not looking at going crazy on line extensions across our brand, it’s very selective, and we’ll keep the ones we are. And we will not have a plethora of line extensions or, let’s say, RTD versions. But what we have currently we think has a lot of legs. And we will leverage them in a way that we also build brand equity.”

As for seltzers …

While IWSR predicted in 2019 that hard seltzer sales in the US would more than triple to 281million nine-litre cases by 2023, it recently revised those estimates.

Speaking to The Spirits Business in March this year, Brandy Rand, chief operating officer of the Americas at IWSR Drinks Market Analysis, said: “The category will far surpass this by 2021. The rapid growth outpaced expectation, accelerated by COVID and also buoyed by continued new product innovation, not only from big brands, but domestic craft players.”

The world’s biggest selling seltzer is White Claw. In Australia, White Claw now accounts for one in five seltzer sales.

According to IRI, after less than 18 months in the Australian market, the hard seltzer category has grown locally to a retail sales value of $37 million.

Last quarter alone the seltzer category was worth $40million – at current trajectory, the category will be worth $150million in the next 12 months.

It seems the sky is the limit for spirits in a can in the RTD revolution.

Sales boom for new-look UDL

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