RTD products are on track to become the world’s most dominant alcohol category according to new forecasts from IWSR Drinks Market Analysis. In the US, where the hard seltzer subcategory of RTDs grew by +130% in 2020, RTD volume is already larger than the total spirits category, and by the end of this year, RTD volume consumption will be larger than that of wine.
The RTD category posted double-digit global growth in 2020 (+26.4%) – the only beverage alcohol category to grow during the COVID crisis and one that resonated with consumers across all demographics, driven by the trend for convenience, refreshment and flavour.
IWSR projects that RTD volumes will increase by +26.6% in 2021, and +10.2% CAGR 2021-2025, driven by growth in the US (with 44% share of global RTD volume in 2020), Japan (22% share), Australia, Canada, and China.
“In many global markets, COVID-19 accelerated the impact and growth of key industry drivers, such as the development of ecommerce, premiumisation, the rise of the ‘home premise,’ moderation, and the need for convenience in product formats,” said Mark Meek, CEO of IWSR.
“These are the trends that will also underpin the industry’s resilience as it pivots to meet consumers where they are in the years to come. Additionally, across many markets, some segments of the population now have significantly more disposable income than they did in 2019, some of which will be spent on beverage alcohol products.”
Another pre-COVID trend that will continue to accelerate beverage alcohol recovery is product premiumisation. Though the economic impact of COVID-19 has led to restricted spending for some, alcohol is an affordable luxury for those willing to spend. IWSR forecasts that premium-and-above wine and spirits will increase by +25.6% in total volume 2020-2025 (compared to +0.8% volume growth over the same period for brands in lower price tiers.)
The top performing spirits
IWSR’s analysis of the outlook of the global beverage alcohol market also shows tequila will overtake rum to become the third-largest spirits category in the US. The global tequila category grew by +9.6% in 2020, driven especially by gains in the US (the world’s largest tequila market) where tequila is now the third-largest spirits category in the country (behind vodka and
Also, thanks in large part to the success of tequila, consumer awareness and interest in mezcal has lifted that category to a projected +8.8% volume CAGR 2021-2025. Agave-based spirits overall are expected to grow +4.7% CAGR 2021-2025.
Whisky sub-categories have been more impacted by COVID-19, but show long-term resilience. Global whisky experienced a -10.7% volume decline in 2020, but the category is forecasted to rebound +5.5% this year, and post +4.2% volume CAGR 2021-2025, bolstered by growth in the US and India.
Whiskeys are among the fastest-growing sub-categories of spirits, with Irish whiskey volume projected to increase +7.9% CAGR 2021-2025, aided by the return of the on-trade and strength of new entrants; Japanese whisky at +6.0%, US whiskey +5.1%, with growth mainly coming from both of their respective home markets.
Most of the growth for Scotch whisky, forecasted at +3.8% CAGR 2021-2025, will come from delayed recovery in the key market of India and eventual revival of global travel retail, especially for premium Scotch.
Gin is forecasted to increase +4.5% CAGR 2021-2025, driven notably by Brazil, South Africa, and Russia, and also by brands priced premium-and-above (with this segment projected to grow +11.4% CAGR 2021-2025).
Global vodka volume was flat last year and is expected to remain so through to 2025. In Russia, the top global market for vodka, consumers are trading down from premium vodka as a result of the impact of COVID-19, however in the US (the second-largest market for the category), vodka is projected to grow +1.1% CAGR 2021-2025. In total, spirits are expected to grow +0.6% globally this year, and +0.8% CAGR 2021-2025.
COVID wine & beer consumption
Many consumers in key markets chose still wine as their go-to drink at home during COVID-19.
Though wine consumption has been in decline, consumers in markets such as the UK, Australia, Brazil, Canada, and the US have lifted wine to a global volume growth of +1.7% this year, and +0.4% CAGR 2021-2025.
In Brazil alone, still wine grew by +28% in 2020, driven by a rise in higher-quality imports and increasingly accessible prices. Conversely, imported wine in China has experienced a steep decline which will contribute to an expected -7.7% decrease in wine volume in the country 2021-2025.
Beer was the most exposed category during lockdown, losing -7.1% volume globally in 2020. However, beer volume is forecasted to grow by +2.5% this year and +1.2% CAGR 2021-2025. Except for the US, where RTD competition has considerably impacted beer sales, all of the top-10 global beer markets (by volume) are projected to show growth into 2025.
Absolut turns to RTD innovation for growth
Fredrik Syrén, Director Global Channel Marketing, Brand Advocacy and RTD’s at Absolut said RTD innovation has become a key consideration for the vodka brand.
“The market has exploded in several parts of the world in the last couple of years,” he said. “Much of this development stems from a strong US-based trend which can be summarized as “better for me”. You want to enjoy a drink, but not get too many calories. You want something lighter than a beer to feel less full. This has led to the strong growth of the hard seltzers segment.
“Another trend that has also helped to popularise RTD’s is that it has become much more premium. Now there are high-quality cocktails in a can that taste perfect and that you just drink from the can or pour and serve. We have, for example, launched a range of Absolut cocktails and Kahlúa has its popular Espresso Martini. Malibu has the classic Pina Colada cocktail and some other refreshing offers.
“In terms of age, one might be inclined to generalize a bit and say that RTD’s mainly appeal to younger target groups. But older target groups are also starting to open up to the convenience of ready-mixed cocktails. One explanation for this may be that younger generations aren’t mainly looking for the effects of alcohol. For example, we see a clear trend that nightclubs are no longer as important as bars when it comes to consumption. The pandemic has also accelerated this shift. Today you hang out more at home and then it is convenient to have a variety pack in the fridge so you can serve perfectly chilled drinks to your guests without having to worry about mixing it right or having all the ingredients available. We also see that this trend continues after the pandemic.
“The development differs between markets. The US is both the largest market and also have the highest growth with over 40% growth last year. Next to the US, Japan is the largest market, but with a much stronger presence of domestic brands. In Europe, we’ve been a bit slow to embrace RTDs, but as there are more and more premium and ‘better for me’ alternatives, the market is showing a strong momentum now as well.”