RTD category to hit $40bn by 2027
The RTD category is expected to grow by +12% in volume between 2022 and 2027, hitting $40bn by 2027 across 10 key markets.
This growth will be driven by the key cocktails/long drinks sub-category and products that sit within the premium-and-above price bracket. This outlook marks a slowdown from previous years, primarily due to declines in hard seltzers in the US.
These findings are part of the IWSR RTDs Strategic Study 2023, which analyses trends in 10 markets – Australia, Brazil, Canada, China, Germany, Japan, Mexico, South Africa, the UK and the US – accounting for 83% of global RTD consumption with a total value of US$33.9bn in 2022.
Growth expectations for RTDs across the 10 key markets have halved over the past year to a forecast volume CAGR of +2% between 2022 and 2027. However, excluding hard seltzers, RTD volumes will grow at a CAGR of +5%, 2022 to 2027. Over the same timescale, cocktails/long drinks will see their share of RTD volumes across the key markets grow by 4 percentage points, to command a quarter volume share of the RTD category by 2027, while that of hard seltzers will shrink by 11 percentage points.
“Growth is slowing in an increasingly mature global RTD category, but opportunities persist in the cocktails/long drinks space and for premium-plus products that prioritise consumer-forward cues such as RTD base, ABV and flavour,” remarks Susie Goldspink, Head of RTD Insights, IWSR.
As the category matures, new product development is evolving, with the pace of innovation slowing from its 2021 peak: in that year, more than 3,000 new RTD products were launched, but in the first half of 2023, that slowed to just over 1,000.
Innovation is increasingly skewing to premium price points, thanks to trends such as spirit-based hard seltzers; using named spirits categories and premium ingredients in RTDs; and enhancing products with functional ingredients.
“The premiumisation trend is moving in a variety of directions, from premium formats to a shift in ingredients and added functionality – all aspects that offer a point of differentiation to consumers,” says Goldspink. “Although the pace of innovation has slowed, the effectiveness of new launches has improved, as producers are more strategic and targeted in their product launches.”
Despite the impact of the cost-of-living crisis on consumer incomes, seven out of the 10 markets covered in the report registered double-digit volume growth for premium-plus RTDs in 2022, suggesting that there is still plenty of headway for growth for higher-priced products.