Hard seltzers led the soaring ready-to-drink (RTD) category in 2020, followed by flavored alcoholic beverages (FABs) and RTD pre-mixed cocktails/long drinks. Even as retail and delivery sales of this category soared during the COVID-19 pandemic, the Provi 2021 Pulse Quarterly Review noted that “on-premise activity was significantly scaled back, if open at all, so the majority of RTD growth we observed (as well as the changing consumer dynamic) was unfolding within the off-premise.”
That leaves the field wide open for RTD growth in an on-premise recovery. What will it take to drive on-premise RTD demand, and is that even a realistic goal?
On-Premise RTD Experience: What Will It Take to Take Off?
The diverse on-premise segment is moving beyond recovery and towards growth, with different approaches in play across the spectrum. Could RTD be a part of any of those journeys?
RTD could play well in several on-premise spaces. There won’t be one trend with this versatile category, rather it will be shaped by several forces, with several specifically on the operator side. On-premise RTD adoption faces some hurdles.
Operator Roadblocks to On-Premise RTD Growth
The beverage industry has had a chance to see if the RTD demand carries over to an on-premise recovery, but the answer remains still uncertain. There are just too many variables when it comes to timing and consumer preference. Even convenience becomes on-premise competition. Why go to a bar when you can have a nice RTD cocktail at home (some might think)? Several challenges in particular may hold back RTD on-premise growth.
RTD Taxes Create Headaches for Operators
Higher U.S. taxes on the RTD category give on-premise operators cause for concern and result in higher prices on spirit-based RTDs to cover the costs. Some states have these laws under review and could lower taxes for spirit-based RTDs. Such tax laws also discourage craft distilleries who see spirits-based RTDs as too cost-prohibitive.
Will Storage Hold Back On-premise RTD Growth?
Storage space is already at a premium in many on-premise venues. The idea of adding RTD stock will stress some operators over how to manage more inventory. Shelf life and the type of storage needed, such as refrigeration, could also be factors.
Space needed to store supplies of RTDs could be more than the space taken by the bottles and ingredients used to create a similar in-bar experience. The ease of use for operators, including storage, could temper enthusiasm for building an on-premise RTD market.
Ingredient shelf stabilization will also be a concern. When RTD products compete against high-end, bartender-quality cocktails, ingredients must be fresh. This has been harder for some drink recipes, such as those using citrus ingredients. Enthusiastic innovation in the RTD sector could come up with packaging solutions, but for now, physical storage of RTD products has the potential for on-premise challenges.
Choose Wisely: The Burden of Brands
The abundance of RTDs is also a curse for brand-overloaded beverage managers. Just as it’s difficult to keep up with the universe of portable craft beers, so too in the ballooning RTD space. It takes time and education to pick the right RTDs to offer.
“There's so much innovation that it becomes challenging,” said Tom Fox, partner at CM Profit Group and a recent speaker at Questex’s 2022 Vibe Conference for the on-premise beverage community. “There’s no need for the operator to offer too wide of a variety, but you want to cover the different spirit categories: vodka, tequila, bourbon, etc.”
Digital marketplaces like Provi help operators tap into the zeitgeist of RTD. With fresh flavor and taste combinations constantly rolling out, operators appreciate any tools that keep them abreast of a busy category.
RTD: Too Convenient for Its Own Good?
Convenience has been a recognized driver (but not the only one) of booming RTD sales. Consumers often pay for convenience, and that includes pleasure-based purchases like RTDs. “I think most consumers would prefer an actual cocktail – but RTDs are very high in quality and if that's all that's available, consumers will be content to consume an RTD,” said Fox.
Will convenience be a factor at all in driving demand for on-premise sales? Seems like an unlikely motivation in many scenarios. Convenience might not be top-of-mind for consumers seeking a “special occasion” drink for a celebration. However, poolside at a luxury hotel or on a cruise might be the perfect combination of convenience and class.
When Convenience Matters for On-Premise Operators
RTD convenience might appeal to some on-premise operators, too. Fox noted that “Most operators would prefer to serve a cocktail, as profits are much higher than a RTD – but with labor issues and wanting to service patrons quickly, many operators will trade off profit for convenience.”
The Premium Experience Path to On-Premise RTD Growth
Some have called this category an “exploratory brand” for consumers, and that could extend to on-premise consumption. Exclusivity, unique inventory and perhaps private label packaging could entice on-premise consumers.
“I do think there will be a lot of pickup for RTDs at upscale on-premise. You can walk around with a canned cocktail at pool areas, country clubs and hotels,” said Rocco Venneri, founder of RTD brand Cool Cat. Their premium gluten-free spritzer, described as “an elevated beverage experience,” comes from Napa-sourced pinot grigio and cane sugar.
As more RTDs move into the premium category, buyer emotion around them may put these high-end RTDs in the “special treat” category, not home consumption. Premiumization as an on-premise driver might have some pull, but whether it will become a major RTD sales driver remains to be seen.
RTD Is ‘Undeniable’
Overall, the RTD category is truly “undeniable,” according to Provi. In a recent statement, Provi said: “The RTD category, including spirit-based hard seltzer brands like High Noon, has shown exceptional growth in the past year, with bold fruit flavors like black cherry, pineapple, mango and watermelon taking the lead. Of the hard seltzers, White Claw, High Noon and TRULY continue to dominate.”
Carro Ford is a successful marketer, researcher and writer/reporter based near Lexington, Ky. She's worked in numerous industries and is also the author of The Smartass Marketer's Handbook: A Guide to B2B Marketing with Attitude.
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