Spirit-Based RTDs Surge Ahead in US Market

Spirit-based ready-to-drink (RTD) beverages continue to demonstrate strong growth in the United States, solidifying their position as a dynamic segment of the alcohol market. Data from the IWSR US Navigator shows that since 2019, spirit-based RTDs have expanded across all 50 states, with notable volume increases in California, South Dakota, and Connecticut. In 2024, the ten states with the largest year-over-year percentage growth from January to August were Wyoming, Colorado, Virginia, Tennessee, New York, Florida, Arizona, Indiana, New Jersey, and Wisconsin, all exceeding a 15% increase.

IWSR's analysis highlights that spirit-based RTDs are projected to achieve a 6% compound annual growth rate (CAGR) from 2023 to 2028. This growth is attributed to shifts in consumer preferences, with declining hard seltzer sales being offset by rising demand for hard teas, flavored alcoholic beverages (FABs), and cocktails or long drinks. Vodka and tequila remain the dominant spirit bases, driven by the popularity of vodka and tequila sodas. Vodka, which surpassed tequila as the leading base three years ago, benefits from its adaptability and neutral flavor profile, making it appealing to a broad demographic. Gin-based RTDs, while holding only a 5% market share, are gaining traction among Gen Z consumers, signaling potential for future growth.

Convenience has also played a pivotal role in driving sales, particularly through the increased adoption of 355ml cans. Over five years, this packaging format's market share has surged from 7% to 69%, largely due to its portability in locations such as sports venues, concerts, and beaches. Regulatory changes have further supported the segment. For instance, recent legislation in North Carolina and Pennsylvania has reduced taxes and expanded retail access for spirit-based RTDs, respectively.

Innovation in the RTD category has slowed in recent years but remains focused on cocktail and long drink products, which now account for over a third of new offerings. This shift reflects a deliberate strategy by brands to streamline portfolios and reduce consumer overwhelm, following a period of market saturation in 2021 and 2022. Additionally, collaborations between RTD producers and established brands in other categories have gained traction. Notable examples include Sunny D's vodka-based beverage and partnerships such as Ocean Spray with Absolut vodka, Vita Coco with Captain Morgan, and Welch's with its Vodka Transfusion.

Consumer understanding of RTD products remains a challenge. Many buyers misidentify the alcohol base in RTDs, often assuming that malt-based beverages contain spirits. This misconception highlights the need for clear branding and educational efforts. Meanwhile, demographic shifts indicate that younger, predominantly male consumers are entering the RTD market, favoring spirit-based options and showing greater willingness to purchase these products in on-premise settings, which are critical for brand visibility and growth.

As spirit-based RTDs continue to outperform other subcategories, their sustained popularity underscores their role as a bright spot in the evolving US beverage alcohol market.