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Ready For Action

Posted on  | June 23, 2014   Bookmark and Share
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The allure of cocktails that are as easy to make as opening a bottle unites the RTD category.

Cocktails have historically been about craft, creativity and cool. They have never been easy or inexpensive. Or very portable. But playing off America’s timeless love affair with the six-pack—not to mention a cultural embrace of convenience—pre-mixed, ready-to-drink (RTD) cocktails are vying for trade and public attention.

According to DISCUS, sales of RTD cocktails in the value category, which account for just over 1% of the spirits market, were up almost 6% in 2013. Despite the modest volume, the category has a major visual impact thanks to a strong brand presence—Kahlúa, Jack Daniel’s, Skinnygirl, Malibu, Bacardi and Smirnoff, to name a few.

For retailers looking to get a cut of this action, it is all about stocking, timing and knowing your customer. Jim Dean, liquor buyer and store manager of Hazel’s Beverage World in Boulder, CO, shares that RTDs are not a big part of business in his current store, but that when he was at a Denver store, RTDs sold better. To handle low sales, Dean discontinues what’s not selling and gives new flavors a chance; as he says, “Who knows what the next flavor is?”

For Andrew Howard, store manager of Spirits Unlimited in Lakewood, NJ, stocking is key. “In the summer,” he says, “I reset my Margarita section as a seasonal aisle, giving six feet of shelving to summer beers, ready-mix Mudslides and malt alternatives. In the winter, I’ll put the Mudslides up at the register for impulse buys.” Howard also notes that Thursday, Friday and Saturday see the strongest sales of RTDs; and in the winter, sales go down “by about a third.”

WHAT’S NEW COUNTS

One solid growth area within RTD, according to retailers we spoke with, is innovation. Pernod Ricard’s Malibu is arguably the category pace setter, offering about 20 rum-based drinks. Most Malibu RTDs are 1L combinations of rum and a flavored liqueur, such as mango or passion fruit, and weigh in at 21% ABV. Last summer, Blue Hawaiian and Piña Colada Light joined Cosmo and Rum Punch in the 1.75L Malibu cocktail pouches. (The pouches themselves were also retooled for easier portability, staying cool longer and preventing leakage.) Malibu Rum Sparkler launched earlier this year, in original and Peach; this combo of Malibu rum, coconut water and carbonation checks in at 11% alcohol.

Bacardi has also blazed the RTD path with a variety of rum-driven cocktails, both classic and contemporary. Interestingly, Bacardi introduced coconut water as an ingredient in 2010 with the Bacardi Classic Cocktail Piña Colada, reprised in a Light version in 2012. Bacardi’s latest RTD release is last year’s Strawberry Daiquiri Light.

Skinnygirl cocktails, created by Bethenny Frankel of Real Housewives and now a nationwide force under Beam Suntory, deserves credit for upscaling the entire RTD market, and bringing image into focus. Skinnygirl is not just selling a party, but a sort of urbane sophistication. Skinnygirl’s contribution to the innovation parade has been new flavors and Skinnyminis; these four-packs are billed as “the perfect accessory for a day at the beach or a picnic out with friends.”

And make no doubt: the core appeal of Skinnygirl remains its orientation as low-calorie. Howard confirms: “People are reading the labels now, and looking for low-sugar, gluten-free alternatives.” But RTD buyers are hard to pin down; he also says that four-packed 50ml shots, such as DeKuyper’s Sex on the Beach, are selling fast.

RAISING THE QUALITY BAR?

From Brett Pontoni’s perspective as the specialty spirits buyer for the Chicago-based Binnys chain, “The newest thing in the category is volume, not innovation. Most of the big companies are saying, ‘me, too’ and getting in the game.” With so much similar product sitting on the shelves, sales aren’t growing, says Pontoni, particularly in winter.

On the other hand, he sees premiumization as a growth area. At Binnys, this trend has been led by a Chicago native, mixologist Charles Joly, and his Crafthouse all-natural, low-calorie, artisanal bottles (10-15% ABV) augmented by chic Prohibition-era design. Pontoni says that Crafthouse buyers actually skew male, and he has seen repeat purchases (at SRP $19.99/750ml) since launching in July 2013.

Another sign that convenience is ready-to-upscale: designer shots. Targeting a young, hip consumer, LIQS has introduced “the world’s first super premium cocktail shot,” in flavors like Kamikaze, Cucumber & Lime, and Lychee & Grapefruit. Made with premium vodka or tequila, each is 45-55 proof, with 100% natural extracts.” The 50ml shots ($9.99/three-pack)—packaged to show off the party-ready colors—just launched in FL and has already added MA and TX.

Meanwhile, Independent Distillers USA—makers of Twisted Shotz—have flipped their model by adding a line of Ready-To-Drink cocktails. The line of 1L bottles features four of the top five cocktail flavors (Margarita, Mojito, Hurricane, Cosmopolitan) and clocks in at 14% ABV, which means that are can be served in beer and wine-licensed accounts as well as retail outlets (SRP $9.99 -$11.99).

READY TO EXPAND

While the appearance of small start-ups is one sign of growth in the RTD category, so is innovation among the big players, where Sauza and Cuervo continue to tap into the strongest RTD cocktail expression: Margarita.

Sauza’s Sparkling Margarita (SRP $12.99) launched in 2013 with a trio of flavors: Original Lime, Wild Berry and Mango Peach. At just under 10% ABV, they stylistically are fruity, not overtly sweet and with tequila notes evident.

Watermelon is the latest Sparkling Margarita. Gary Ross, senior brand director of tequilas at Beam Suntory, notes that like the original trio of flavors, watermelon resonated with Sauza consumers, and captured the spirit of the traditional margarita paired with a unique twist of flavor. Sauza has high hopes for the brand. “When Sauza Sparkling Margarita launched in spring 2013, it was not intended to replicate anything, but rather to revolutionize the category, bringing the first ready-to-serve sparkling margarita to mass market,” Ross asserts.

Meanwhile, Jose Cuervo is similarly testing the elasticity of the core Margarita expression via their new Teagarita ($12.99/750ml; also in 1.75L and 200ml cans). A Proximo spokesperson explains, “The American consumer is really embracing the taste and flavor of iced tea. As the experts in margaritas, we blended our classic margarita with the refreshing taste of iced tea to create a drink that is perfect for more everyday and casual occasions.”


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