In late September, Molson Coors revealed plans to launch a spirits-based version of its popular Topo Chico hard seltzer in key markets in 2023. Last week, Boston Beer’s spirit-based Truly Vodka Seltzer began hitting shelves. The week ended with an announcement from Mark Anthony Brands that they’re releasing a White Claw branded spirit-based vodka and soda as well. Are we officially in the era of the RTD trade-ups?
The moves from major beverage players do not come unexpected. Hard seltzer sales have slowed while sales of spirits-based ready-to-drink cocktails (RTDs) continue to rise, reflecting the overall spirits premiumization trend. Last year, premixed cocktails were the fastest growing spirit category in 2021, according to a report by the Distilled Spirits Council of the United States (DISCUS). Supplier revenue of pre-mixed cocktails and spirits-based RTDs rose by 42.3% to $1.6 billion in sales in 2021. The category also experienced a 56% increase in volume, selling 13.1 million more cases than in 2020, according to the same report.
Meanwhile, momentum for hard seltzer has hit a stall after a rise during the pandemic. Hard seltzer makes up 60% of the RTD segment, but volume is projected to decrease according to a new report from alcohol company the IWSR. Sales of hard seltzer already declined 5.5% in the last year, according to data from market research firm NielsenIQ.
During a distributors’ convention, Matt Escalante, Molson Coors VP of marketing for hard seltzers, stressed that Topo Chico Spirits “isn’t a replacement for our hard seltzer.” More so, the project is a premium way to complement the existing portfolio and drive trade up. The new line, Topo Chico Spirited, will be made with tequila and vodka, the two leading spirit bases for RTDs.
“Several malt-based brands have introduced spirit-based offerings given the trend toward this segment,” said Brandy Rand, chief strategy officer of IWSR, adding that the company forecasts a compound annual growth rate of 26.2% from 2022 to 2026 for spirit-based RTDs, led primarily by pre-mixed cocktails and spirit-based seltzers.
But the move into spirits doesn’t necessarily signal an abandonment of existing hard seltzer lines, especially if products are performing well. Topo Chico’s Margarita variety pack was Drizly’s No. 1 selling new item in Q2; and the brand family is now “neck and neck” with Bud Light Seltzer for the No. 3 hard seltzer spot, excluding spirit-based offerings, namely High Noon Sun Sips.
By leveraging Topo Chico’s popularity into a spirits-based line, Molson Coors is replicating how many larger alcoholic beverage companies are partnering or extending lines to build on brand equity. More than 50% of consumers are influenced to purchase RTDs made by a well-known spirits, beer or soft-drink brand, according to the IWSR report. RTDs produced by a local craft brewery or distillery also rated highly, whereas celebrity-backed brands ranked lowest in terms of influence.
Large companies have certainly also brought unique RTD products into the fold since the category’s popularity took off: Constellation Brands purchased Austin Cocktails this year, and last year Diageo acquired fast-growing hard spirits seltzer maker Far West Spirits which produces the Lone River Ranch Water and spirit-based RTD-maker Loyal 9 Cocktails. And Anheuser-Busch InBev has been a winner in the space since purchasing segment leader Cutwater Spirits in 2019. In the past few months however, more announcements have come from companies who are building versus buying.
“We’d expect more mergers and acquisitions for unique RTD propositions while larger companies tend to focus on brand line extensions or co-branded partnerships to leverage known trademarks versus launching new brands,” said Rand.
Examples include Coca-Cola’s roster of mashups: the Jack & Coke RTD global launch, Simply Spiked Lemonade through its partnership with Molson Coors. Vita Coco also announced in July a collaboration with spirits conglomerate Diageo to release a line of coconut water spiked with Captain Morgan white rum.
Escalante also stressed that the brand has an opportunity to reach new drinkers and raise awareness with 21- to 34-year-olds with its next chapter. That’s in sync with new data from IWSR showing that millennials (age 25-39) make up 43% of RTD consumption, which is about 4 in 10 drinkers. Gen Z (21-24) is also important as they enter into drinking in terms of brand trial and awareness, especially given how much choice is available and the fact that people tend to drink across categories more frequently, according to Rand.
“Gen Z also tends to favor premium and lower ABV products and demonstrates more tempo drinking, which is staying in the occasion longer by enjoying the social experience,” said Rand.
For Boston Beer, leaning into its spirits products to drive growth is a strategy after its malt-based RTD offerings didn’t perform as expected this year. The company’s Dogfish Head’s canned cocktails are gaining traction in the canned cocktail market. Dollar sales of the Dogfish Head brand family are outpacing the overall segment, according to NielsenIQ total U.S. all off-premise data year-to-date through September 17, shared by Bump Williams Consulting.
By pushing Dogfish Head and Truly Vodka, Boston Beer is also diversifying its ABV offerings: Truly Vodka offers 5% ABV, while Dogfish hovers a little higher around 7%. Made with six-times-distilled premium vodka and real fruit juice, Truly Vodka will be available nationally in four flavors starting Oct. 11.
The launch comes on the heels of the original Truly— a once fast-growing hard seltzer that launched in 2016 — experiencing slower demand. Truly with spirits is the latest innovation of the line that has evolved into more than 30 flavors, and a flavored vodka in collaboration with Beam Suntory.