Ready-to-drink canned cocktails (RTDs) will continue to grow, and supply chain constraints will persist for at least the next six months, executives from alcohol importer MHW predicted Wednesday during a webinar.
Although MHW focuses primarily on wine and spirits, CEO Gabe Barkley, chief revenue officer MaryAnn Pisani and director of client development Chrissy Beaudette each shared predictions that could affect the overall alcohol industry.
Barkley: ‘RTDs Are Here to Stay’
“I think a majority of the growth in the category this year is going to come from spirits-based RTDs,” Barkley said. “It’s a much smaller base than the malt-based RTDs, but I think that’s where consumers are continuing to drive demand.”
He added that the trends in the base spirits and flavors of RTDs will likely affect growth in the spirits category, such as margarita-inspired RTDs leading to a rise in tequila sales.
Beaudette said she expects “an elevation” in flavors as well, as both malt- and spirit-based RTDs get away from the original hard seltzer flavors from the past few years.
“We started out … it was a citrus RTD or cherry, and now we’re in apple-cinnamon mule or jalapeno margarita,” she said. “There is this innovation in flavor and in packaging that we’re starting to see across RTDs, and certainly also in bases.
“And the big thing to keep an eye out for is obviously there are some tax ramifications depending upon what your base is,” she added, in reference to federal and state excise taxes, which vary depending on a beverage’s alcohol base.
Barkley also acknowledged the trend of non-alc beverage producers partnering with alcohol brands, such as Boston Beer Company and PepsiCo launching Hard MTN Dew earlier this week.
“We’ve now got cross-beverage-category involvement in this industry we’re all participants in,” he said. “It also means it’s driving changes through the supply chain and the different stakeholders in the industry. It’s asking wholesalers to think about how they’re merchandising different products. It’s asking producers to decide what channels they go to market with, with different product categories. Maybe a spirits-based RTD doesn’t belong in the same wholesaler that a beer does, or maybe it does, and different suppliers are making different choices.”
Pisani: Celebrity Brands
More celebrity brands will pop up in 2022 as producers continue to battle a crowded market, Pisani predicted.
“I think we’re going to see that expand throughout the various categories, and it’s definitely a great way for a brand to start,” she said. “The juice has to be able to stand on its own merit, but the introduction – the starting with the followers that the celebrities have on Instagram and all the social media platforms – just gives a brand such a leg up in the beginning.”
Recent examples of celebrity- or influencer-backed alcohol brands include: Eight, a beer brand from former NFL player Troy Aikman; Happy Dad hard seltzer from YouTubers the Nelk Boys; Anheuser-Busch-owned Cacti hard seltzer from rapper Travis Scott (which ceased production in December).
Beaudette: Creative and Sustainable Packaging
Producers will get creative with packaging this year, as the industry continues to battle supply chain constraints, Beaudette predicted.
“The ‘Debbie-downer’ news is that [the supply chain’s] getting complex, and it’s staying that way,” she said. “But I love the positivity coming in, and just being more creative in your packaging, and being more sustainable and thoughtful. And a lot of people I think will be smart and utilize this complexity to their advantage.”
Still feeling the effects of the COVID-19 pandemic, supply chain issues such as slowdowns, lack of availability, and price increases have continued into 2022, and Pisani said she doesn’t expect them to improve significantly in the first half of this year.
“We’ve had clients who’ve had containers stood out in the water, because they can’t get to the pier, [because] the dock is just so backed up, and then it gets to the dock and it can’t get in the warehouse,” Pisani said. “What we’re advising our clients and anyone out there listening is you’ve got to stay ahead of it. You can’t be bringing in a container when you’re out of product, you’ve got to be doing a lot better at your production and forecasting and know that the numbers are up.”
Beaudette added that suppliers will have “to invest a little bit more in forecasting, in demand planning, and make sure that they’re being thoughtful to ensure that you can’t be out of stock.”
Trend Watch: Premiumization
Each executive agreed that premiumization is a trend to watch in 2022 across bev-alc.
During the pandemic, when on-premise locations were closed or restricted, and consumers were often staying home, some people found themselves with excess money that they weren’t using to visit bars and restaurants or spending on other forms of entertainment, MHW founder and president John Beaudette said.
“I think that’s the one thing that I question about the continuation of the rapid growth [in premiumization], is whether as we return to more normal life, will that excess cash be there to fuel premiumization of our categories so rapidly,” he said.
Barkley predicted that consumers’ desire for premium brands will continue this year.
“As you start to buy more and more premium products, it’s really hard to then downgrade,” he said.
However, Barkley noted that consumers will likely be more selective in which premium brands they choose, as some of that money previously allocated for upscale brands will go back to being used for pre-pandemic activities.
“I don’t know that we’ll see them downgrade to value priced options,” he said. “But will they change how much consumption they have as the world opens back up and some of their choice-set starts to include services again [such as] travel, food at restaurants, and some of those other things people were used to?
“[Alcohol] typically has a pretty solid place in people’s lives,” he continued. “We’ve seen alcohol be consistent or grow through every major recent recession. I don’t think this will be any different. Does the speed change a little bit, do the choices people make and do the categories that see high growth change? They may a little bit.”
Chrissy Beaudette added that any value brands looking to capitalize on premiumization should explore expanding their product range, rather than raising the price on mainstay offerings.
“Really anyone can really play in this space and, and take advantage of these niche categor[ies’] growth,” she said.