RTD growth slows as category matures

The ready-to-drink (RTD) category saw volumes rise by 2% last year, led by Mexico and Germany.

IWSR has released its RTDs Strategic Study 2024, which looked at the performance of the category in 10 key markets – Canada, the US, Mexico, Brazil, South Africa, the UK, Germany, China, Japan and Australia.

In 2023, the RTD sector saw the most growth in Mexico, up by 8%, and Germany, which rose by 4%. Looking across all 10 markets, only Australia was in decline (down by 1%) last year.

IWSR said the category has seen its compound annual growth rate (CAGR) rise by double digits over the past five years in the US, Canada, Mexico, China and Germany.

All of the top 10 markets are forecast to register CAGR volume gains between 2023 and 2028, boosted by Brazil (up by 6%), Australia (up by 3.5%) and Germany (up by 3.5%). The US and Canada are both expected to post a 3% rise over the five-year period.

The IWSR highlighted the States as a key growth driver for the category, where hard tea, flavoured alcoholic beverages (FABs) and cocktails/long drinks will make the biggest volume gains in the coming years.

RTDs were the only major alcohol category to record volume growth in 2023, alongside a 7% rise in value. Both volume and value for the sector are forecast to grow at a CAGR of 3% between 2023 and 2028.

For last year’s RTD study, IWSR halved its volume growth expectation for the category to a CAGR increase of 12% between 2022 and 2027. It was previously predicted to soar by 24% (CAGR 2022 to 2026).

The category’s value rose by 16% CAGR between 2019 and 2023.

RTDs impact other categories

“Despite the slowdown in growth, RTDs are continuing to gain share of TBA [total beverage alcohol] – a trend that we expect to continue throughout the forecast period, and particularly in the more established markets of Japan, the US, Australia and Canada,” said Susie Goldspink, head of RTD insights, IWSR.

“As this occurs, RTD consumption is impacting other categories, so companies need to join or invest in the RTD market in order to combat this. The UK, Japan, Brazil and Australia all report a decline in spirits consumption as a result of people drinking more RTDs, with other markets reporting a similar reduction in beer.”

Malt-based RTDs have continued to decline with spirit and wine versions driving category growth, IWSR said. Consumers are switching from malt-based products, such as hard seltzers and hard teas, to spirit-based RTDs.

“A new innovation race in spirit-based hard seltzer products has taken over from the previous malt-based battle,” Goldspink explained. “But the establishment of this easy-to-drink, lower-ABV, spirit-based category, and the proliferation of me-too products, runs the risk of overwhelming consumers once again.”

Furthermore, the study noted a slowdown in the number of new products joining the category as it matures. In 2021, there were more than 3,300 RTD product launches but in the first half of this year, there were less than 1,000.

Goldspink added: “While the pace of innovation has tailed off, volumes continue to grow as we see less reliance on innovation to drive performance, and consumers wanting to minimise risk on new products they do not know.”