Today’s hard seltzer consumers are tomorrow’s ready-to-drink cocktail imbibers.
That’s the consensus from those building an RTD cocktail market that is projected to eclipse $1.6 billion in global sales by 2027, according to Grand View Research.
According to Dharma Tamm, the president of Rogue Ales & Spirits, which itself entered the RTD sector last year, the growth of hard seltzers like Truly and White Claw proves that drinkers are “looking for non-beer products in historically beer-centric occasions.”
“Hard seltzer delivered against this, however there is very little differentiation in the category,” he said.
Indeed, most hard seltzers are made from a fermented sugar base, packaged in 12 oz. slim cans, contain 100 calories, and come in a variety of fruit flavors.
They are positioned as a more health-conscious way to consume alcohol, and their appeal is not that they are an overly sophisticated beverage. Rather, consumers gravitate toward hard seltzers because they offer relatively mindless refreshment at the right price.
“One of the main attractions for hard seltzer is that it doesn’t taste like alcohol at all, but it still delivers a light buzz,” said Caroline DesRosiers, the co-founder of Troop Beverage Co., which makes a line of canned cocktails.
But anyone who has paid attention to the rise of craft beer over the last decade knows there will always be a certain group of drinkers who desire more elevated experiences.
Enter canned cocktails, which are effectively the antithesis to hard seltzer. They pack more of a punch — both in terms of flavor and ABV — and often contain more premium ingredients.
“We’re targeting a consumer that is looking to trade up from their hard seltzer or away from beer and wine,” DesRosiers added.
For his part, Cutwater Spirits co-founder Earl Kight believes that while hard seltzer could be a gateway for canned vodka sodas, it’s a “big leap” for drinkers to move from lower ABV seltzers to full-strength cocktails.
According to data and intelligence firm IWSR, which tracks worldwide alcohol trends, volume sales of spirits-based RTDs in the U.S. grew 86% between 2019 and 2020.
Sensing opportunity, several startups have entered the space.
Felipe Szpigel, who previously ran Anheuser-Busch’s high end craft beer division before launching F!VE Drinks Co. in 2019, believes the RTD spirits opportunity is worth billions.
“The liquor category is worth $80 billion and growing mid-single digits,” he said. “Spirits-based RTDs are going to be a couple billion dollars within the next few years,” he said.
Both DesRosiers and Szpigel believe that drinkers who are already buying ingredients to make their own concoctions at home will eventually opt for RTDs. Similarly, they also believe that some hard seltzer drinkers will convert to canned cocktails.
“A big chunk of it will be the people who are drawn in to the convenience and quality of what we’re putting out, and the other half will be people graduating from seltzers,” Szpigel said.
Another startup betting on the drinker’s desire for better booze is DRNXMYTH, a Los Angeles-based company that has reinvented the entire craft cocktail experience from product to purchase.
DRNXMYTH partners with well-known mixologists who create recipes using fresh cold-pressed juice. Finished products are packaged in proprietary two chamber “twist-to-mix” bottles that can be purchased on the DRNXMYTH website. Local retailers then fulfill orders and deliver freshly made cocktails to a customer’s doorstep within 24-48 hours.
According to co-founder Brandon Schwartz, the company is on pace for 400% growth in 2021 and is in talks with several investment firms as it works to close a $10 million Series A fundraising round that will value the company at $50 million.
“The perception of RTDs has really shifted from this race to the bottom, with low price and low-quality options, to more of a focus on unique ingredients and better formulas,” Schwartz said. “People now realize that you can get a high-quality product in a prepackaged bottle, which is pushing the category to become more premium, and I think we’re definitely at the pinnacle because we’re using fresh ingredients and none of it is artificially flavored.”
Meanwhile, 10 Barrel Brewing and Devils Backbone — both owned by Anheuser-Busch InBev — have their own canned cocktail lines. A-B also owns Cutwater, which was born inside of Ballast Point Brewing. The global beer giant also recently invested in RTD cocktail maker Canteen Spirits.
Kight, who noted that Cutwater has been making RTD spirits since 2014, said he was “flattered to see so many brands that seem to be inspired by Cutwater.”
“Makes me blush a little,” he said.