Insights from Flavorsum
Sales of RTD alcoholic beverages continued to expand in the last year, despite pandemic-related closures of bars and restaurants. International Wine & Spirit Research (IWSR) predicts RTDs will double their market share by 2025, moving to 8 percent of the global alcoholic beverage market (up from 4 percent in 2020). The trend reflects the broadening availability and variety available to a growing audience attracted to the convenience and taste of a RTD alcoholic drink.
A recent survey from Bacardi revealed that more than 40 percent of consumers worldwide plan to drink a RTD adult beverage in 2022.
The category generates stronger appeal in the U.S., where 80 percent of adults plan to explore their RTD alcoholic beverage options at retail or online.
What’s fueling RTD alcoholic beverage growth in North America? And what’s next for a category that pushes the boundaries of the alcoholic beverage landscape? The FlavorSum team recently explored the RTD market and consumer dynamics in North America. Here are notable insights about opportunities bubbling up for producers.
‘Craft’ is a Frequent Positioning in RTD Alcoholic Beverage Innovation
About 2 out of 10 RTD Alcoholic Beverages launched in North America in the last year carried a ‘craft’ claim, according to Mintel’s Global New Products Database (GNPD). Is ‘craft’ a compelling point of difference for RTDs?
The claim carries some weight with consumers who link the term ‘craft’ with ideas like independent ownership, small batches, higher-quality ingredients, care with distilling or brewing, and unique flavours. But skepticism (and lawsuits) about the ‘craft’ terminology can dilute the value of the positioning.
Savvy consumers are reading labels to find out the distilling location of RTD spirit-based beverages. ‘Bottled by’ or ‘produced by’ on a drink positioned as ‘craft’ can create suspicions that a brand is using the term as a marketing gimmick. Checking craft guidelines from the American Craft Spirits Association, the American Distilling Institute, or Canada’s Craft Distillery Policy can help producers deliver a craft beverage that meets expectations.
RTDs can Answer the Call for Healthier Alcoholic Beverages
Healthier alcoholic RTDs have a market: about one in three Americans between the ages of 22 and 44 surveyed by Mintel say they’re interested. In response, RTD innovators are increasingly highlighting their launches’ reduced sugars, carbs, and calories. Sugar-free and reduced-sugar claims are rising, represented in 20 percent of launches last year, up from 3 percent in 2018. Low carb callouts occurred on 3 percent of launches, with low-calorie claims showing up on 4 percent. Even if not explicitly labeled as ‘low calorie,’ RTDs often promote calorie counts on the front of the RTD can or bottle. And Innova Market Insights indicate that many RTD launches across the North American landscape target 100 calories or less.
Interest in Sustainability can Affect RTD Brand Choice
Growing concern about how caring for the Earth affects the climate and environment prompts consumers to seek out more sustainable options in all purchasing decisions. In a 2021 Mintel survey, 65% of adults in Canada say that food and drink products’ impact on the environment is increasingly influencing their purchasing decisions. And a study by IBM and the National Retail Federation showed that 7 in 10 North American consumers agree that sustainability or eco-friendliness is an important brand attribute.
Two ways that alcoholic drinks brands are innovating to align with interest in sustainability include:
- recyclable packaging
- organic ingredients
For packaging, most RTD alcoholic beverage producers in North America continue to turn to cans or beverages. Mintel’s GNPD shows more than 97 percent of new RTD products introduced in the last 3 years launched in traditional packaging. But some recent innovations use bags-in-boxes or flexible pouches to differentiate from competitors and promote a more sustainable carbon footprint.
Although few organic RTDs are available in retail and tracked by Mintel, some organic brands are launching through e-commerce. Retail launches peaked in 2020 when almost 10 brands introduced organic RTDs. Some producers focused on organic ingredients are placing lower priority on other RTD health attributes, delivering higher ABVs, calories, and sugar content.
Spirit-based RTDs on the Rise
RTD innovation starts with choosing the alcohol base. Sugar, malt, and grain neutral spirits form the base for the majority of RTD beverages. But more than 35 percent of North American RTD launches had wine or spirit bases last year, up from 16 percent in 2019. Wine, vodka, and gin represented the top 3 choices, accounting for almost 60 percent of the new product activity, followed by whiskey, rum, tequila, and brandy.
The increased use of spirit bases reflects a trend toward cocktail-inspired RTDs. Last year, 27 percent of RTDs launched used a cocktail positioning in the product name, like Gin & Tonic, Margarita, or Mojito, often available in multiple flavours.
The choice of alcohol base has implications for a producer’s business model beyond taste and marketing potential. Formulators considering neutral alcohols, spirits, or wine bases for their brand need a distilling license and a processing facility with appropriate equipment and ventilation because vapor by-products are explosive.
Additional considerations when selecting a RTD base are taxes and distribution opportunities. RTD alcoholic beverages made with a spirit or wine usually face a higher tax rate than sugar or malt and have narrower distribution channels (usually wine or liquor stores).
Flavours and More (Complex) Flavours Keep Consumers Trying RTD Alcoholic Beverages
According to Mintel’s GNPD, North American producers launched more than 200 flavours of RTD alcoholic drinks last year. Brands continue to feature singular, core flavours like lime, lemon, mango, raspberry, and strawberry, but these 5 flavours accounted for less than 15 percent of new products.
Flavour combinations such as mango-passionfruit, cherry-acai, or lemon-lime are more common and the direction most manufacturers turn to for innovation. Bases like vodka, gin, and grain-neutral spirits provide versatile palettes for a wide range of flavours. The challenge? Finding the combinations that excite consumers to try a new flavour with the taste that keeps them coming back for another can or bottle.
Fruit (like mango, watermelon, or peach), citrus, and berry profiles have consistently ranked as the top 3 choices for formulators launching single flavours in the past 3 years. Leading flavour combinations introduced since 2019 paired:
- 2 or more citrus fruits
- sweeter fruit blends like mango and peach
- berry and citrus combos such as cranberry with lime
- berry and sweeter fruit pairings like strawberry-guava
Choosing flavour combinations starts with defining brand goals including the target audience and selecting the RTD beverage base. While producers can incorporate flavour through raw ingredients or juices, adding flavour to RTD alcoholic beverages offers several advantages.
When FlavorSum talked with Stephen Rich, Certified Cicerone, Prudhomme Beer Sommelier, and BJCP Certified Beer Judge, he pointed out that flavours:
- Give brewers and distillers more accurate, consistent dosing
- Provide a steady supply and easier customizability of unique tastes (or blends)
- Offer easy, flexible incorporation into the brewing or distillation process
- Minimize safety and contamination risks
- Represent a sustainable ingredient that reduces volume loss in RTDs
Partnering with a flavour house with applications expertise in RTD alcoholic beverages can help producers create an enjoyable taste for consumers.
And for those looking for flavour inspiration, Meghan Buchert, founder of product development consultancy MAD Liquid Innovation, recommends looking at several sources. In a conversation with the FlavorSum team, Buchert noted that the variety of flavour possibilities in RTD alcoholic beverage category is analogous to the ice cream category. Producers can draw on flavours ranging from simply sweet to bright, spicy, nostalgic, or indulgent.
To get a glimpse into the evolution of flavour trends, Buchert suggests looking back at flavours featured at trade events like the Fancy Food Show, hosted annually by the Specialty Food Association. For example, new flavours at the 2015 show included florals and maple, now frequently found in food & beverage launches. 2017 saw ginger and banana make it into the mainstream. And the 2019 show highlighted goldenberries, calamansi, and butterfly pea flower, emerging flavours to consider if your brand story includes trendier tastes.
Hybrids are Expanding the RTD Landscape
Hybrid beverages that combine key features or benefits from multiple drink categories aren’t a new idea. History notes the 17th-century origin of fortified wine, a beverage using distilled spirits (often brandy) as a preservative.
But hybridization is evolving to keep pace with consumer interests and represents an opportunity for RTD alcoholic beverages. Market intelligence company Innova notes that producers introducing a hybrid can gain market presence by:
- satisfying changing preferences
- broadening product appeal to new audiences
- creating unique experiences that engage consumers
Hybrids within the RTD alcoholic beverage space can be ‘close-in’ innovations such as:
- wine or spirit bases with flavour combinations
- hard lemonade, limeade, and teas in flavour varieties
- no-alcohol options that use alcohol flavour notes to deliver a cocktail-like drink
A newer form of hybridization that’s drawing the attention of RTD formulators is functionality. Consumers are increasingly turning to food and beverages for managing health and are becoming more aware of the ingredients that can help them achieve well-being.
Now, some producers are incorporating elements like probiotics and prebiotics in non-alcoholic RTD adult beverages.
- Immunity is a top concern of consumers, leading some brands in the alcohol space to highlight the immune-boosting benefits of ingredients like vitamin C, B-12, turmeric, or omegas.
- THC, CBD, and cannabis-infused RTD alcoholic beverages are becoming more available in some regions of North America.
- Other purposeful RTD alcoholic beverages recently launched included electrolytes, anti-inflammatory antioxidants, adaptogens like l-theanine, superfoods like jicama, and superfruits such as acerola.
While functionality can boost the appeal of a RTD beverage, the ingredients can also add complexity, cost, and formulation challenges for producers. For example, cannabinoids carry unique, often bitter notes that may require producers to employ a masker, process adjustment, or bitter-balancing flavour profile to deliver a pleasing taste.
RTDs can Fulfill Consumer Desire for Customization and Personalization
Just as brewers develop different beers to whet the appetite, follow a good meal, or fit with late-night sipping, RTD producers can build need-or-occasion-based portfolios. Benefit-based assortments that allow consumers to mix-and-match for different occasions give RTD brands opportunities to build loyalty and market share.
For example, assortments could include:
- a low calorie, low sugar, lower ABV product as a healthier option
- a higher ABV, spirit-based RTD beverage for a cocktail-like experience
- a no-alcohol adult taste profile with a formula that supports relaxation, focus, calmness, or energy
Singularly positioned brands also have a place, especially with an assortment of flavours that transform an idea into a variety of exciting drinks for consumers.
The innovation journey to launch a RTD Alcoholic beverages promises mixology opportunities and challenges for brewers and distillers.
- North American adult beverage drinkers are eager to explore new brands and flavours, but with discernment and high expectations about taste and performance.
- Although formulators may have creative freedom with benchtop RTDs, several regulatory agencies in North America set limits on alcoholic beverage brands:
- The Alcohol and Tobacco Tax and Trade Bureau (TTB) regulates the approval of alcoholic beverages in the U.S.
- The U.S. Food and Drug Administration oversees flavour usage through the Code of Federal Regulations (CFR) – Title 21.
- Health Canada regulates alcohol through the Food and Drugs Act (FDA) and the Food and Drug Regulations (FDR).
- Provisions of the Safe Food for Canadians Act (SFCA) and the Safe Food for Canadians Regulations (SFCR) also apply to alcoholic beverages.
- Provincial liquor boards in Canada also regulate the labeling and sale of alcoholic drinks including RTDs and hard seltzers.
Fortunately, resources and suppliers are available to help navigate the formulation and regulatory complexities of RTD innovation, clearing the path to success for RTD brands.
About FlavorSum
FlavorSum provides the flavour solutions, expertise, responsiveness, and infrastructure that growing food and beverage companies need to accelerate success. Part of our mission is to make flavour sourcing more efficient, effective, and enjoyable. Expertise in flavour development and application support for alcoholic beverages combined with industry-leading production and delivery makes us one of the most responsive North American flavour companies. Partner with FlavorSum to transform your beverage ideas into delicious tastes consumers crave.
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