The ready-to-drink (RTD) beverage market has experienced explosive growth in recent years, driven by consumer demand for convenience, variety and innovation.
The RTD sector, which encompasses a diverse range of products from hard seltzers to canned wine and cocktails, was the only major category in the global beverage alcohol market to record volume growth in 2023, with a 2% increase in volume and a 6% rise in value, according to beverage market research firm IWSR. This trend is expected to continue, with both volume and value projected to grow at a compound annual growth rate (CAGR) of 3% between 2023 and 2028.
Evan Burns, co-founder and CEO of The Finnish Long Drink, attributes much of the category's success to the unique appeal and authenticity of certain brands.
"We think that customers are tired of innovation just being more flavors," Burns tells Forbes. "The innovation that we see winning and that we think will lead the long-term owners of the category are the brands that innovate on the best route to market (easy to find at right price for target customer) and the best brand experience that customers want to align with."
Originating from a beverage created for the 1952 Helsinki Olympics, the recipe for the Finnish Long Drink was crafted in Finland. But the company was founded in 2018 in New York City, and it is produced upstate in Utica, New York.
Burns stipulates he doesn't see The Finnish Long Drink as an RTD in that "it's not a cocktail that you can make at a bar that is put in a can for convenience." While there isn't an official definition, RTDs usually refer to canned alcoholic beverages that are premixed and ready for immediate consumption.
"It is it's own thing, but people love it because of the taste and authenticity of the story," Burns says.
Regardless, Burns emphasizes that consumers are increasingly willing to pay a premium for products that offer better taste and a compelling backstory.
"I think the 'RTD category' is going to continue to grow as customers show they will pay a premium for better tasting products, but I think brands that lack authenticity, or a soul, will just be seasonal flashes in a pan versus building relationships with customers like a brand like Guinness has for hundreds of years."
Jake Bilbro, winemaker and creator of Revelshine in Sonoma County, California, also sees significant potential for innovation within the RTD sector, particularly in how wine is presented and consumed. Revelshine offers wine in aluminum bottles, a move that Bilbro believes aligns with consumer demands for sustainability and portability.
"Our packaging allows consumers to enjoy quality wine in all sorts of new environments, and every bottle of wine purchased in aluminum versus glass brings massive carbon savings to boot," Bilbro tells Forbes.
Chris Budzik, a market analyst at beverage industry research firm IWSR, further underscores the role of innovation in driving the RTD market forward. He notes that the pandemic played a significant role in accelerating the popularity of hard seltzers, which in turn spurred innovation in other RTD subcategories such as canned cocktails.
"Emerging brands need to offer something new to stand out in an ever-crowded marketplace," Budzik tells Forbes. "Continued, yet focused, innovation is crucial to staying at the forefront in the eyes of consumers."
Budzik notes that sustainability and health consciousness are becoming increasingly important factors for consumers.
"Hard seltzers often market themselves as low sugar, low calorie and gluten-free. Hard kombuchas tout their digestive health benefits," Budzik explains. "Aluminum cans are not only more convenient to carry than glass bottles, but they also have a lower carbon footprint than single use glass bottles."
He also identifies the on-premise channel (bars and restaurants) as a significant untapped opportunity for RTDs. "As bars and restaurants continue to struggle with staffing shortages, the ability to quickly serve a consistent cocktail could make RTDs more attractive to outlet owners," Budzik says.
Despite its rapid growth, the RTD market faces challenges. As the category becomes more saturated, brands will need to keep up with fast-changing trends to maintain consumer interest. The evolving preferences of consumers -- who are increasingly seeking premium, health-conscious and sustainable options -- will shape the future of the market.
"Maintaining the interest of consumers with new innovative products will likely be the biggest challenge for RTDs over the next few years," Budzik says. "A portion of recent innovation has centered around tropical flavors and pairing familiar flavors with more esoteric ones."
The success of RTDs suggests that the category is here to stay, but its future will depend on the ability of brands to adapt to shifting consumer demands.
"While traditional bottled wine and other alcoholic beverages pose some level of competition, the convenience, portability and unique packaging formats act as mitigating factors," says Bilbro. "I don't think anyone knows specifically where it is going to go from here, but as long as we lead with quality and authenticity, I think we'll end up in a good place."