Labour’s Diane Abbott was castigated for drinking an RTD on the train. But turns out, she’s at the helm of a new wave of drinking

When Labour’s shadow home secretary Diane Abbott cracked open a cool can of pre-mixed M&S Mojito on the London Overground back in April, who could have imagined the media frenzy it would whip up?

Many of her sterner colleagues from across the House of Commons were quick to decry the politician’s take-home tipple (it was, technically, illegal - open alcohol has been banned on TfL since 2008). Still, the response from the public was more good-humoured. Maybe because Brits, much like the member of parliament for Hackney North and Stoke Newington, are smashing RTDs like it’s no one’s business.

Labour may be struggling to push through a political revolution, but the RTD uprising is well and truly taking off.

Admittedly RTD fixtures are still small compared with the amount of supermarket shelf space taken up by beer, wine and cider. The £5.6m gain made by RTDs this year is tiny relative to the whopping £155m added in spirits, the fastest-growing category in alcohol [Kantar 52 w/e 14 July 2019].

But RTDs are, in percentage terms at least, growing faster than wine, beer and cider. Their potential is such that suppliers from across the drinks industry are rushing to get involved.

“In percentage terms at least, RTDs are growing faster than wine, beer and cider”

NPD spans from the likes of Concha y Toro, which has launched a ‘wine spritz’ brand called O’jos, to Kopparberg, which has launched a spin-off pink gin in a tin. Even beer brands are getting in on the act: Peroni, for instance, put its posh Italian lager into sleek ‘slimline’ 330ml cans earlier this year.

For those who get it right, the rewards are plentiful. Gordon’s Premium Pink in a tin has racked up just shy of £20m in the year since its launch [Nielsen 52 w/e 20 April 2019]. The brand’s standard RTD is worth £37.4m.

So why are RTDs selling so well? What sets the successful canned contenders apart from the crowd? And what does the future hold?

Few would have predicted the sudden love for RTDs. “There was a period of time when Hooch and Two Dogs and Smirnoff Ice came along and the whole thing exploded,” says Pernod Ricard UK commercial director Chris Ellis. “If you were to go back and ask me what would happen, I would never have said RTDs would re-emerge.”

How things change. The revival has been fuelled by a fundamental change in the offering, says drinks strategy and marketing consultant Neil Anderson. “When RTDs exploded 15 or so years ago, those products were really sickly and very sugary,” he says.

Today’s RTD could not be more different. “The key point from a consumer point of view is all about refreshment,” says Anderson. “There have been countless studies that show this is what people are after most, as well as healthier and lighter alcohol products - most canned RTDs are about 4% to 5.5%.”

As he suggests, cans are the real winner in today’s environment. Pre-mixed cocktails - essentially, cocktails in a tin - are responsible for the entirety of the growth in RTDs, with sales up 11% to £84.4m. “All of this is even more remarkable when you consider these products sell best in warm weather, as popular additions to picnics and barbecues, and this growth has been achieved against last year’s record-breaking heatwave,” says Kantar consumer specialist Amy Clark.

 

Kantar: sales performance in RTDs

Sales performance of RTDs  
  Value (£m) % growth
Pre-Mix 84.5 11.7
Traditional RTD 47.6 -2.3
RTS Cocktail 25.5 -3.5
     
Source: Kantar 52 w/e 14 July 2019    
     
Average price changes this year  
  Average Price (per litre) % growth
Pre-Mix 5.13 -3.4
Traditional RTD 4.28 4.1
Cocktails 4.85 5.0
  • Spirits racked up the biggest gain in booze. This is thanks to brands “adding value through giving consumers an element of experience”, says Kantar analyst Amy Clark.
  • “Focus on the perfect serve and the quality of ingredients has meant that mixology of spirits is now just as key to the occasion, with brands like Aperol making the most of this trend,” she adds.
  • Average spirits prices also rose by 2.9% per litre. That’s symptomatic of a wider trend in the category. Despite total value growth of 2.3% (£297m), Brits actually bought slightly less (1.7%) in volume terms. This is largely thanks to average prices rising 4% year on year.
  • That’s worked out well for wine, which is on the up after years of little growth. The category has added £133m to sales – although volumes were flat at 0%.
  • The beer category, facing hugely tough comparables after last year’s scorching summer and the World Cup, couldn’t maintain growth – value sales fell £5.8m (0.2%). Sparkling wines suffered similarly, with value down £1.7m (0.2%).
 

Homing in on cocktail culture

Ready-to-serve cocktails in a bottle, meanwhile, are down £911k. And ‘traditional’ RTDs - such as the aforementioned Hooch and Smirnoff Ice - are down £1.1m or 2.3%.

That’s because the new wave of RTDs have homed in on something their predecessors didn’t: cocktail culture. Brits’ persistent love of more elaborate serves is filtering through from the on-trade to the off-trade. RTDs represent arguably the most consistent - if not the most affordable - way to recreate the bar experience at home.

“Just as importantly, though,” adds Hi-Spirits marketing manager Poppy Croft, “the places and occasions where consumers engage with mixed drinks are multiplying. Festivals, street food outlets and pop-ups all lend themselves to the format, as do informal get-togethers in parks and on beaches. Consumers are looking for more premium serves, whatever the occasion, and producers have responded with relevant RTDs.”

“The places and occasions consumers engage with mixed drinks are multiplying”

Shoppers are even demanding more premium fare on an everyday level. Hannah Dawson, GB off-trade head of customer category at Diageo, says the likes of Deliveroo have elevated expectations of dining (or drinking) at home. “Convenience and experience are not mutually exclusive, and individuals no longer want to sacrifice the quality of their drinks at home,” she explains.

Plus, the new-style RTDs have a further point in their favour: the ‘Blue Planet effect’. Cans have become the aspiring ­environmentalist’s format-du-jour. They are recyclable and lighter than bottles, giving them a lower carbon footprint in terms of transportation.

And the rise of craft beer has given the format a cool factor that was long missing, Anderson adds. He points to brands like Beavertown and BrewDog, whose “exciting packaging” showed shoppers booze didn’t have to rely on age-old cues and “stuffy” images to make a sale.

Essentially, Anderson says the RTD boom represents a “perfect storm” of consumer trends converging, rather than any concerted effort to grow RTDs by the drinks trade.

Suppliers have been able to respond quickly to that demand. That’s because RTDs take a shorter time to bring to market than other drinks, says Global Brands chairman Steve Perez. “The market is really accessible for small to medium-sized enterprises like us, and because of social media you don’t need to spend on massive advertising campaigns.”

He points to the success of Global Brands’ All Shook Up cocktails, which have already racked up £3.7m since the brand’s launch with one SKU, Passion Fruit Martini, in May 2018 [Nielsen 52 w/e 10 August 2019].

All Shook Up has since extended its range with new flavours and 2.25l bag-in-box cocktails. Its most recent can, the surreally-named ‘Llamartini’, rolled out this month with an eye to capitalising on “social media’s current infatuation with llamas”.

The social media point is particularly relevant to this market. Some RTD brands are so confident of social media and word of mouth they are ditching traditional marketing altogether.

Take Sincerely Sabella, the canned blood orange spritz quietly launched by ZX Ventures (AB InBev’s innovation wing) in collaboration with design agency Robot Food in July.

“RTDs are a massive opportunity for brands to re-engage with younger shoppers”

ZX opted to get the drink - essentially a canned competitor to Aperol - onto the market fast. It was tested among actual consumers, sidestepping “months of old-school product and brand testing”, according to Robot Food founder Simon Forster.

With an rsp of £2.70 per can, launches like this are fast premiumising the category. So it’s not just the obvious brands that are keen to seize on the opportunity. The retailers are smashing it: value sales of own-label RTDs have grown a stonking 16.4% - that’s the fastest growth in own-label in any category of booze this year. (Let’s not forget that in the days after Diane Abbott’s #Mojitogate, M&S reportedly completely sold out of the talked-about cocktail.)

There’s also plenty of activity among brands that doesn’t obviously fall into the RTD arena. Especially wine brands, whose sector - despite growing a healthy 2.7% to £5,014m this year - faces higher duty costs and a struggle to recruit new shoppers.

“Wine has really struggled with declining penetration,” says Anderson. “I believe [RTDs] are a massive opportunity for brands to re-engage with younger shoppers.”

 

Kantar: alcoholic beverage performance

Alcoholic Beverage performance by sector  
  Value (£m) % growth
Wine 5014.8 2.7
Spirits 4018.2 4.0
Beer+Lager 2414.0 -0.2
Cider 849.1 3.0
Sparkling Wine 812.1 -0.2
Fortified Wine 191.9 -7.1
     
 Source: Kantar 52 w/e 14 July 2019    
Brands vs Own Label  
  Value (£m) % growth
Brands 9709.3 2.3
Own Label 3767.2 2
     
Retailer performance  
  Category value share % growth
Tesco 27.4 2.4
Asda 14.4 2.2
Sainsbury’s 14.3 -0.3
Morrison’s 11.3 1.7
Aldi 6.3 9.6
Lidl 5 12
 

The spritz effect

This doesn’t necessarily mean just pouring wine into cans - although this year saw some big names do just that, like Barefoot (which launched its two best-selling SKUs into 250ml cans in April), as well as startups like The Uncommon and Nice. More will follow: Barefoot called its duo “just the start” of a major push into the format. Even Aldi has created a duo of canned sparkling wines.

Still, argues Anderson, the products with the greatest potential for success are those creating new takes on wine which more effectively tie in with the trends. “You’re going to see a lot more fusion-based products - spritz drinks are the obvious ones.”

Concha y Toro, the South American wine giant behind Casillero del Diablo, certainly agrees. Its first foray into cans, O’jos -Spanish for ‘eyes’ - rolled out in May. That includes two spritzes: Chardonnay and Rosé & Raspberry.

“We conducted a full usage and attitude study which was very expensive, starting two years ago and taking a very wide view of the market to see where wine is underplaying,” says Concha y Toro senior customer marketing manager Preety Johl. 

Move over, Aperol – here are six alternative spritzes

“We identified an occasion where consumers are drinking five or more drinks over an extended period of time, but they are wanting lighter and more refreshing drinks. [Shoppers] are just not choosing wines for this occasion - the spritz element helps it feel more refreshing.”

There is just one threat to this party: price. A coming change to the law around how duty is collected on diluted alcoholic drinks could throw the category’s current pricing hierarchies out of the window. As of April 2020, it will be illegal to pay duty on the pure alcohol in a drink before diluting it to add volume - which is how many RTDs are made. There isn’t much room for suppliers to absorb extra costs, either. “The RTD category is actually very low margin,” says Ellis. “For spirits suppliers it would actually be much better for consumers to be buying a bottle of spirits and mixing their own drinks.”

Global Brands’ Perez believes the “deeply unfair” law will bring about a price shift. Still, he remains hopeful it will not drive too many consumers away as “we have been surprised at the price elasticity of some of the brands”. Plus, Perez says, the law has spurred a boom in innovation because suppliers have been forced to think outside traditional lines when developing new drinks.

Making waves with seltzer

Which brings us neatly to the latest new format storming the scene: hard seltzer. There are growing signs that the US craze is headed for the UK. US smash hit White Claw is likely to land on these shores after its owner, Mark Anthony Brands, applied to register the trademark here earlier this year. And a smattering of startups such as Bodega Bay are already making waves.

That could spell bad news for Britain’s booming beer trade. Across the Atlantic, hard seltzers - essentially boozy sparkling waters - have stolen significant share from beers by offering a lower-calorie yet equally boozy option. They have proved particularly popular among younger shoppers entering the market for the first time.

“There are growing signs that the US craze for hard seltzers is headed for the UK”

Still, that needn’t be the case here. Anderson believes the sheer variety of RTDs hitting shelves means the industry “needs to think about looking at it as a total canned category”, encompassing not just 250ml but all canned drinks, including beer. “These products all cross similar consumers and occasions, so taking a macro approach to the total category, splitting by sub category, then by consumers and occasions, will you get a better grip on what is going on, [seeing] where the gaps and the opportunities are.”

Plus, the beer category is in pretty healthy shape. Value sales have fallen marginally by 0.2%, but that’s in comparison with 2018, one of the best years for beer on record thanks to the World Cup and the sizzling hot summer.

The message? From RTDs to craft beer and wine, Britain’s booze sector is in fighting shape. Which certainly warrants a toast. Pass us a mojito, Jezza…

Hard seltzers: seven “spiked” sparkling water brands making waves in the US

 

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