Research in Focus - Ready To Drink Finally Comes of Age
The economic downturn has been a catalyst for both recovery and reinvention in the ready-to-drink category, according to a new report from Euromonitor.
To say that the ready-to-drink (RTD) category has had something of a chequered past would not be an unfair statement, even if it is tarring some perfectly trouble-free products with the 'alcopop' brush.
However, while RTDs may have once been characterised as highly sweetened drinks consumed often irresponsibly by younger, and sometimes too young, drinkers, the findings of a new Euromonitor report suggest the category appears to have grown up.
Euromonitor's Passport report, Alcoholic Drinks 2011 Part 2, has good news for all drinks sectors with "consistently improving volume performances" seen across the board during 2011, but marks out the RTD category as "the biggest winner in the context of the post-recessionary 'new normal'".
In fact, the downturn has been a catalyst for a critical evolution in the RTD sector, according to the report. The growth in drinking at home has fostered growth an increase in sales of high-strength premixes, as the "fluorescent concoctions of the past" have given way to cocktails in a can.
"Belt-tightening in many markets has constrained sales opportunities for the vast majority of alcoholic drinks categories, but has proved to be a blessing in disguise for RTDs by providing them with an opportunity to better emulate the out-of-home drinking experience at home or on-the-go," the report states. High-strength pre-mixes have therefore been "in the right place at the right time".
Rather ironically, the global downturn has helped to reverse years of declining sales for the RTD category, says Euromonitor, with the sector undergoing a "fundamental transformation which has radically shaken the category to its core". During a period that has been so tough for consumer goods markets in general, the RTD category has been able to shed "its binge-drinking associations of the past" and "tap into new, more sustainable, consumer audiences".
The growth in off-trade alcohol sales provided a major opportunity for RTDs - globally off-trade accounts for around 78% of the market - though the report states that the on-premise channel has also benefited from rising consumer interest in the category.
On a regional basis, the growth has been widespread. Markets such as Spain and the UK have spearheaded the growth in Europe but strong performances were seen across all regions in 2011, Euromonitor states.
What is more, Euromonitor forecasts that the current environment provides the right conditions for further growth. "The dawn of the new era of thrift, convenience and home consumption has created the ideal environment for the latest generation of RTDs/high-strength premixes to flourish. Since these trends are widely expected to remain relevant in the short to medium term, the category should retain its buoyancy for at least the foreseeable future, if not in the longer term." Product innovation will also help maintain the positive momentum.
While the growth may have been effectively built on an economising trend during a period of austerity in many markets, the RTD phenomenon embodies something of a dichotomy, as it is also linked to a certain premiumisation trend within the category. "Natural ingredients and new advances in technology will secure an increasingly premium profile for the category, while bringing 'cocktails-in-a-can' a step or two closer to the full on-trade experience."
At the same time, however, because of the products' relative affordability, the RTD category’s appeal in emerging markets will still focus on value-for-money, allowing a point of entry in those countries to recruit new drinkers. This will allow the products to continue to fulfil the other primary function of RTDs, namely to introduce new consumers to the associated spirits brands, creating significant opportunities to build brand loyalty.
A recent example of this has been Beam Inc.'s launch in India of two ready-to-drink variants in the Teacher's range, Teacher’s & Soda and Teacher’s & Cola. These 4.8% abv products, available both in the on- and off-trade, retail in Mumbai at the relatively accessible price point of INR160 (US$3.05) for 33cl can and will sell for INR100 in other parts of the country. First launched in Mumbai at the start of the year, the products are now being rolled out into other parts of India including Delhi, Hyderabad and Kolkata.
It is perhaps no coincidence that their introduction followed the launch of both Teacher’s 25 and Teacher’s Highland single malts in India. Harish Moolchandani, chief executive officer and managing director of Beam India & ISC, explains: “We have seen a significant level of aspiration amongst the consumers to experience premium spirits. Teacher’s RTD is the answer to these aspirations.”
Interestingly, Beam has also observed strong interest in the new pre-mixes among premium beer drinkers. "We have witnessed a high level of consumer demand for the new Scotch-based product, especially amongst premium beer drinkers," says Satish Kaul, vice president of operations for Beam Inc. in India. "The cans have allowed us to introduce consumers to our Teacher’s whisky whilst maintaining the easy and refreshing drinking experience of canned beer.”
The possibility that the new 'grown-up' manifestations of the RTD could be taking share from the premium beer sector provides an additional explanation why this category is prospering, and further justification for the major spirits companies increasing investing in the category.
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