Research in Focus - RTDs & High-Strength Premixes: A Growing & Increasingly Sophisticated Category
The RTDs/high-strength premixes category registered the second strongest total volume growth of all alcoholic drinks categories globally in 2011. New launches and category extensions led to the repositioning of RTDs as a healthier and more socially responsible category, expanding its consumer base and growing in both volume and value terms as a result. Euromonitor International’s latest global briefing looks to identify and contextualise these shifts, decipher their implications for the evolving category and point to the direction RTDs/high-strength premixes will take in response. Yoanna Ilieva, Alcoholic Drinks Analyst at Euromonitor International, investigates.
Cocooning, hectic lifestyles and greater interest from a younger audience have been the driving forces behind the rise of RTDs. Belt tightening has proved to be a blessing in disguise by providing RTDs with an opportunity to better emulate the out-of-home drinking experience for consumers at home or on-the-go. Mature Western markets are embracing more sophisticated offerings in order to dissociate themselves from binge-drinking claims, while product innovation will retain momentum, led by healthier and lower ABV variants.
On the other hand, the category’s appeal in emerging markets will continue to focus on relative affordability, which might be used as a point of entry to introduce new drinkers to companies’ relevant spirits brands, creating opportunities to build brand loyalty while providing an introductory crash course for less sophisticated palates.
The RTDs/high-strength premixes category is country-specific; even geographical proximity does not translate into commonalities in the leading brands and/or similarities in the dominant product types. RTDs is one of the least homogeneous categories in alcoholic drinks, with one of the three types (malt, wine or spirit-based) tending to dominate in different markets, reflecting local tastes, customs and tax regimes.
The top markets are very different in profile and ratio between the subcategories and, while this is an obstacle to capitalising on economies of scale for the global companies, it allows room for local producers to demonstrate creativity and understanding of the market.
Growth is being driven predominantly by premium and economy variants at the expense of standard offerings, reflecting increasing economic inequality. Income polarisation is further resulting in an increasing split between the economy and premium segments. This trend is piling the pressure on standard offerings, while the lower and higher ends are witnessing gains in direct correlation to a specific market’s economic health. While sales are booming for the lowest priced and private label products in economically unstable Spain and emerging Russia, in Australia and the UK premium offerings are thriving. As value-for-money gains traction, so too do RTDs at higher price points, which have become affordable indulgences.
Another major cornerstone of RTDs’ journey of reinvention was the gradual development beyond its main demographic of young females and the redirection of marketing efforts towards a wider, older and more male-oriented demographic, which is willing to pay extra.#
While volume sales in 2011 merely recovered to their 2006 levels, value sales declined slightly in constant terms, although this was a result of the launches of large multipacks in key markets catering for these new demographics, rather than trading down. Nevertheless, this expansion of the customer base should not forsake the original young female target audience' as the number of women consuming alcoholic drinks is consistently rising - and so are their disposable incomes - particularly in the emerging world.
RTDs have altered not only who they are catering for, but also where they are consumed. Despite the fact that their original concept was as an 'at-home' drink, driven particularly by recessionary thrift, on-trade sales volumes recovered in line with the off-trade after 2009, demonstrating a shift from the category’s original purpose. The launch of special 'club' editions, variants distributed only in the on-trade, and even RTDs on tap, demonstrates the category’s new functionality and transformation from ready-to-drink to ready-to-serve. This will provide a multitude of opportunities for the category as the on-trade offers new and exciting ways for positioning and promotions.
The category is about to take a dramatic turn, in line with the currently emerging trend of serving RTDs in the on-trade, demanding new formats which will allow simultaneously for higher liquid volumes, functionality and better visibility. Packaging will be further affected by the strive towards a reduced carbon footprint. Organic ingredients and local sourcing are also gradually becoming crucial to RTD growth. In the developed world, the increasing use of packaging that facilitates product use is apparent, with growing numbers of pouches, bag-in-box and dispensing systems.
The category is also searching for added value through the introduction of functional ingredients, such as vitamins and dietary supplements. As awareness of health and wellness issues is increasing, government initiatives and peer pressure are helping to promote low-ABV and low-calorie RTDs made from natural ingredients.
New launches suggest a trend that is the reverse of RTDs’ initial purpose as a category offering a “cheap-and-cheerful” alternative to the on-site cocktail experience into premium, even health-boosting drinks and, in order to justify higher mark-ups, certain parts of the category may actually become functional drinks.
The recession turned out to be a blessing in disguise for RTDs, which saw recovering sales on the back of price-sensitivity, at-home consumption and a renewed focus on convenience. This resurgent demand led to investment in research and development, while shifting the focus to a more socially responsible and sustainable path for growth, including healthier ingredients, using greener packaging and catering for a wider audience.
The timing is right and, if RTDs can continue to capitalise on high margins and a lack of overtly restrictive production regulations, further growth is on the cards.
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