At some 200 Kum & Go stores in Iowa, Missouri, Nebraska and South Dakota, sales of ready-to-drink cocktails have doubled in growth in the past year. While still a small part of the chain’s liquor sales, “the RTD category has been performing well,” said Christian Rogers, alcohol category manager, driven by brands like Monaco, High Noon and Cutwater. “This category was already growing pre-COVID, but growth was certainly accelerated by the pandemic,” he noted, as drinking occasions moved from on-premise venues to homes.
In Oklahoma, RTD cocktails “have been taking over large sections of our wine and floor space” since the state moved to allow the sale of high-alcohol beer and wine products in c-stores two years ago, remarked Alex Williams, COO of Jiffy Trip. Led by brands such as BuzzBallz and Chi-Chi’s, and priced at under $2 a serving, the RTDs sell particularly well in the early evening when customers come in to pick up dinner or needed supplies, the retailer said.
At Minit Mart East in Holland, Michigan, owner Greg Hill said it’s the products’ convenience that’s important to customers. “The canned products can easily be taken to the beach. You don’t have to buy a bottle of liquor and all the mixers,” he noted of brands like the canned gin and tonic from the local Coppercraft Distillery that sells well at his store.
The typical RTD customer isn’t a liquor-, beer- or wine-only shopper.
Indeed, RTD cocktails—including products that are liquor-, malt- and wine-based—are among today’s hottest alcoholic beverage products. “In 2020, the RTD category was up 73% in sales,” reported Shreyas Balakrishnan, general manager of Anheuser-Busch InBev’s Cutwater Spirits, citing NielsenIQ data.
According to the Distilled Spirits Council, liquor-based pre-mixed cocktails was the fastest-growing spirits category last year and took share from beer, wine and cider. The popularity of the drinks has spawned a wave of new entries in recent years from major producers such as A-B, E&J Gallo, Bacardi North America and Diageo, joining already-established brands such as Monaco and Clubtails, as well as contenders from craft distilleries. Molson Coors Beverage Co., meanwhile, has announced plans to distribute Superbird, a Tequila-based RTD cocktail, this spring.
The emergence of liquor-based RTDs in single-serve containers has prompted NACS to add a new subcategory to its recently released Category Definitions 8.0. According to Jayme Gough, NACS research manager, “It’s our expectation that the addition of this subcategory will allow retailers and the industry at large to better benchmark and track trends within their broader category.” Malt-based RTD cocktails, such as Clubtails, will continue to be identified as flavored malt beverages.
New Subcategory Alert
Ready-to-drink cocktails are a new subcategory under liquor in the newly released NACS Category Definitions & Numbering Guide–Version 8.0. The new category definitions take effect in 2022, and retailers—specifically category managers and IT teams—should start reviewing and updating classifications now to reflect these new changes. Common category definitions are the building blocks that help convenience retailers develop marketing strategies and category management plans. For questions on category classification, contact Jayme Gough, NACS research manager, at [email protected]. Download Version 8.0 at www.convenience.org/categorydefinitions.
“The pandemic has certainly accelerated the RTD category,” said Don Duebler, CEO of Atomic Brands, marketer of the Monaco brand, which is available in some 10,000 c-stores. “Consumers have engaged in the ease that these products offer, and that fits their new reality. The projection is that the category will continue to grow.” The single-serve cocktails are ideal for c-stores, Duebler continued. “For this channel, the shopping mission of the consumer is something for the moment or on the go,” he explained. Still, multi-packs are beginning to advance. “Today, we now have over 50% of c-stores selling four-packs,” he reported.
Spirits-based RTDs offer a portable and flavorful spirits option that may entice a beer drinker at the point of purchase.
RTD cocktails are primarily merchandised in cold boxes. At J.D. Streett & Co.’s ZX stores in Missouri, “the main goal is to offer these items in the cold vault,” remarked Mark Hornback, retail merchandising manager. Due to the growing number of SKUs and consumer demand for variety, the chain also features the items on warm shelves, he said. At Kum & Go, RTDs are almost always merchandised chilled in in-line coolers or in singles racks in beer caves, Rogers said. The chain also has offered promotions on multi-unit purchases, he added, and cross-merchandises with beer, where legal. Duebler advocated for a two-for-$5 price point. “Consumers are looking for the immediate satisfaction,” he said, while for retailers, the promotion drives impulse sales.
By all accounts, the RTD consumer is a broad-based one. “Young and old, across most ethnicities and genders,” said Paul Rene, vice president of U.S. operations at Geloso Beverage, of the Clubtails consumer. According to Rogers, “the typical RTD customer isn’t a liquor-, beer- or wine-only shopper. The lines are becoming more and more blurred between the alcohol categories, and alcohol consumers are enjoying beverages from all three of the major alcohol categories, including ready-to-drink cocktails.” Hornback added that the typical RTD consumer at ZX also purchases premium beers and liquors.
Space and Price Challenges
Despite the sales growth, the emerging segment presents some difficulties for c-stores. For Kum & Go, “one of the biggest challenges with RTDs is educating the consumer that these are made with real spirits,” offered Rogers. As a result, they’re “generally more expensive and in smaller packaging than beer and seltzer single-serve offerings,” he noted.
Not surprisingly, other retailers and marketers point to the space needed to merchandise RTDs. “Limited merchandising space for the growing variety of items consumers are looking for is a challenge for all categories, not just RTD cocktails,” remarked Hornback. Jiffy Trip’s Williams agreed. “Carving out space in existing stores is a challenge. What do you take out?” he asked. Duebler conceded that with so many RTD brands and flavors now available, “what was traditionally a space for beer now needs to offer RTDs.” But with consumers knowing what they’re looking for, “running out of stock could mean losing a customer,” he said.
Rene advised c-store operators to “invest time in reviewing space allocation” for all RTDs, whether marketed by large or small producers. Other vendors pointed to the margins and profitability that RTDs, particularly spirits-based options, provide retailers. “Margins are higher on spirits-based RTDs when compared to beer, and these canned cocktails offer a portable and flavorful spirits option that may entice a beer drinker at the point of purchase,” remarked Sean Eckhardt, senior vice president and managing director of sales at Bacardi North America, which launched Bacardi Real Rum RTD cocktails last year. “With 65% of RTD drinkers coming from beer, this is an easy way to attract buyers,” he said. RTDs have been so successful for the company that Bacardi is introducing both Bombay Sapphire Gin & Tonic and Cazadores 100% Tequila variants this year.
Marketers and retailers are bullish on the opportunity for ready-to-drink cocktails in c-stores and insist that the products aren’t a fad but a viable emerging segment. “Single-serve, high-ABV RTD cocktails are in the wheelhouse for c-stores,” said Rene, and the more space retailers provide them, the less likely customers will seek them out at other channels.
“I believe RTDs are here to stay and will continue to see enormous growth into 2021 and beyond,” said Kum & Go’s Rogers. “Consumers are learning that beer and wine are no longer the only convenient options, and that they can now enjoy their favorite cocktails by just pouring over ice or directly from the can.”