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At the corporate office of Suntory Global Spirits in New York’s Flatiron District, I visited the liquor giant’s research and development lab, where I sipped on cocktails including an Old Overholt whiskey sour and two libations made with Cruzan rum.
But there’s no bartender in front of me. Instead, I’m with Eric Schuetzler, head of global R&D for Suntory Global Spirits. And he tells me the goal of these ready-to-drink (RTD) cocktails, under the On The Rocks brand that Suntory acquired in 2020, is to get the flavor of a margarita, cosmopolitan, or Negroni as close as possible to what a mixologist would concoct.
“In the cocktails where it is spirit-forward, we tried to be spirit-forward with cocktails,” says Schuetzler. “Where it’s more fruit-flavored forward, like a strawberry daiquiri, then we lean into that.”
On The Rocks is a key pillar of Suntory’s goal to notch $3 billion in RTD sales globally by 2030, a market it expects will grow to $50 billion by that year. RTDs grew by 27% last year, according to spirits trade association Distilled Spirits Council of the United States, the fastest growing spirits category by revenue.
In fact, RTDs have been growing so strongly that it is helping mask the flat or declining sales across all alcoholic beverage categories in the United States. For the 52-week period ending in early April, sales for all RTDs—including those with a beer, wine, or spirits base—grew by 6% in dollar sales, data from consumer intelligence firm NIQ shows.
Younger drinkers in the millennial and Gen Z demographics love that RTDs are convenient. RTDs are strong sellers at grocery and convenience stores, and while initially popular for picnics in the park or a day at the beach, increasingly these brands have made inroads in bars, sports stadiums, airports, and hotels.
“Diversification in flavor”
In the early years, hard seltzer brands like White Claw and Truly propelled the category and flavor innovation was focused on staples like citrus, berry, or tea, but some RTD makers have taken riskier bets on turmeric and hibiscus.
“One single flavor probably isn’t going to cut it for most consumers,” says Jon Berg, a VP at NIQ. “They want that diversification in flavor.”
There is also a growing emphasis on making sure that RTDs taste good. Consumers were initially willing to sacrifice on the flavor delivered by these drinks in favor of portability. Industry experts say that’s no longer the case. Sales have softened for hard seltzers and malt-based RTDs, while products made with actual vodka or tequila are resonating more with drinkers today.
“Consumers have said, ‘I really want to have something that’s more authentic,’” says Berg. “Something that tastes like a margarita should have tequila in it. We’ve seen some shifting.”
Heather Boyd, managing director of RTDs in the U.S. for Suntory, says there was a time when drinkers were willing to make a sacrifice on flavor for a lower-calorie count or less sugar.
“We’re seeing consumers start to reassess that,” Boyd says.
This year, Suntory began a global expansion of the company’s -196 RTD (pronounced “minus one-nine-six”), which had been sold in Japan for nearly two decades but is only now entering markets like the U.S., Germany, and the U.K. -196 is made using whole fruits that are picked at peak ripeness and frozen in liquid nitrogen, then crushed and infused into vodka.
“There is a larger trend that we’re seeing, and this isn’t just specific to RTD but in total, and seeking to have a better understanding about what you’re putting into your body and asking for more transparency,” says Boyd.
The final -196 product is fuller in flavor than what’s available on shelf today, Suntory says, and it doesn’t take a uniform approach to the levels of sweetness, carbonation, or alcoholic content. Those variables are localized by geographic region.
Established brands make their pitch
Liquor giant Diageo’s RTD strategy is to lean on a broad range of brands to address different trends that are emerging in the category. Some RTDs focus keenly on flavor, while others hone in on lower calorie or sugar content for those aiming to make healthier choices.
Diageo has launched new RTDs under the Captain Morgan and Smirnoff brands this year, with eight new flavors including watermelon lime, Pineapple Daiquiri, and raspberry peach. Diageo also redesigned the packaging for its hard seltzer brand Lone River and launched a new blackberry flavor.
“What we have to do is have great-tasting, crafted products that can really break through in flavor in whatever whitespace that consumer is looking for in terms of ABV, format, in terms of amount of sugar, in terms of ingredient profile,” says Laura Merritt, chief marketing officer for Diageo Beer Co.
Diageo used malt for the company’s Captain Morgan cocktail-inspired drinks to lure more price-conscious shoppers, but in other cases, uses spirits like vodka. “We’re definitely seeing a shift toward people saying, ‘Hey, actually, what’s in this?’” says Merritt.
Funny Water’s formulations include cucumber mint, ginger lemon, and blueberry acai. “We don’t want to be so risky that consumers shy away from us without even trying,” says Matt Giese, chief operating officer at Funny Water.
Funny Water’s base is malt, because the brand wanted to keep the price point at a more affordable range, around $10 for a six pack. When RTD brand Funny Water initially launched, founder PJ Loughran says his initial inclination was to focus on flavors and then add booze to it. That turned out to be a bit too simplistic, and the brand has made adjustments to flavors. like turning down the heat in the jalapeño lime.
“I really look at our flavors in our product like little art pieces,” says Loughran. “We’ve made adjustments at times just to make sure what we’re doing is more distinct and more appealing.”
The Finnish Long Drink, a gin-based alcoholic beverage, recently received an investment from Marcy Venture Partners, a venture capital firm cofounded by rapper and entrepreneur Jay-Z. The brand was already backed by celebrities including actor Miles Teller and Norwegian DJ Kygo, though Finnish Long Drink cofounder and CEO Evan Burns says he is skeptical about such tie-ups.
“I really think there’s too many celebrity brands,” says Burns. “I don’t think customers wake up and say, ‘I want to drink my favorite celebrity’s tequila.’”
The brand spends about 40% of its budget on tastings to raise awareness, as Burns says they only have about 2% brand awareness nationally. “The game is just getting liquid on lips,” says Burns. “We spend a lot of money on that.”
He also takes a bit of a contrarian view on what consumers want from RTDs. For all the hype around new flavor extensions, Burns says less is more. The Finnish Long Drink only has three flavors on the shelf today: citrus, cranberry, and peach.
“You know what customers want? Something that tastes good, at the right price,” says Burns.
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