Ready-to-drink cocktails are popular with Millennials and Generation Z. Can brands make them taste better?

At Suntory Global Spirits’ office in New York’s Flatiron District, I visited the liquor giant’s R&D lab, where I sipped cocktails including an Old Overholt whiskey sour and a couple of rums made with Cruzan rum.

But there is no waiter in front of me. Instead, I’m with Eric Schwetzler, head of global R&D for Suntory Global Spirits. He told me that 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 spirit-oriented cocktails, we tried to take the spirit forward with the cocktails,” says Schwetzler. “When the flavor is more fruit-forward, like a strawberry daiquiri, we lean toward that.”

On The Rocks is a key pillar of Suntory’s goal $3 billion in RTD sales Globally by 2030, the company expects the market to grow to $50 billion by that year. RTDs grew by 27% last yearAccording to the spirits trade association, the Distilled Spirits Council of the United States, it is the fastest-growing spirits category in terms of revenue.

In fact, RTDs are growing so strongly that they help mask flat or declining sales across all alcohol categories in the United States. For the 52-week period ending in early April, sales of all types of RTDs — including those with a beer, wine or spirits base — rose 6% in dollar sales, according to data from consumer intelligence firm NIQ.

Younger drinkers in the Millennial and Generation Z demographics like RTDs to be convenient. RTDs are strong sellers in grocery stores and convenience stores, and although they were initially popular for picnics in the park or a day at the beach, these brands have found increasing success in bars, sports stadiums, airports and hotels.

“Diversity in flavour”

In the early years, solid brands like White Claw and Truly helped push the category, and flavor innovation focused on staples like citrus, raspberry or tea, but some RTD makers have taken riskier bets on turmeric and hibiscus.

“One flavor probably won’t be enough for most consumers,” says John Berg, vice president at NIQ. “They want that diversification of flavor.”

There is also an increasing focus on making sure RTDs taste good. Consumers were initially willing to sacrifice the flavor these beverages provided in favor of ease of transportation. Industry experts say that is no longer the case. Sales of hard sodas and malt-based RTDs have declined, while products made with actual vodka or tequila resonate more with today’s drinkers.

“Consumers have said, ‘I really want something more authentic,’” Berg says. “Something that tastes like a margarita should have tequila in it. “We’ve seen some transformation.”

There was a time when drinkers were willing to sacrifice flavor for fewer calories or less sugar, says Heather Boyd, managing director of Suntory’s U.S. RTDs division.

“We’re seeing consumers starting to reevaluate that,” Boyd says.

This year, Suntory began a global expansion of the company’s -196 RTD (pronounced “minus one nine six”), which has been sold in Japan for nearly two decades but is only now entering markets such as the US, Germany and the US. UK-196 is made using whole fruits that are picked at peak ripeness and frozen in liquid nitrogen, then crushed and infused with vodka.

“There’s a bigger trend that we’re seeing, and that’s not just RTD, but in general, seeking a better understanding of what you’re putting in your body and demanding more transparency,” Boyd says. .

Suntory says the final product -196 is more flavorful than what’s available on the shelf today, and doesn’t take a standardized approach to levels of sweetness, carbonation, or alcohol content. These variables are translated by geographic region.

Established brands are making their offerings

Alcoholic drinks giant Diageo’s RTD strategy is to draw on a wide range of brands to address the different trends emerging in the category. Some RTDs focus heavily on flavor, while others focus on low calorie or sugar content for those aiming to make healthier choices.

Diageo launched new RTDs under the Captain Morgan and Smirnoff brands this year, with eight new flavors including Watermelon Lemon, Pineapple Daiquiri and Raspberry Peach. Diageo has also redesigned the packaging for its Lone River solid brand and launched a new blackberry flavour.

“What we need to do is have great-tasting products made that can really excel in flavor in whatever white space the consumer is looking at in terms of ABV, in profile, in terms of amount of sugar, in terms of ingredient profile.” “It’s a great choice,” says Laura Merritt, marketing director at Diageo Beer Co.

Diageo has used malt in the company’s drinks inspired by the Captain Morgan cocktail to attract more price-conscious shoppers, but in other cases, it uses spirits such as vodka. “We’re definitely seeing a shift toward people saying, ‘Hey, actually, what’s in this?'” Merritt says.

Funny Water combinations include cucumber, mint, lemon, ginger and blueberry. “We don’t want to be so risky that consumers shy away from us without even trying,” says Matt Gies, chief operating officer at Funny Water.

The base of Funny Water is malt, because the brand wanted to keep the price point at a more affordable range, around $10 for a six-pack. When the RTD Funny Water brand was initially launched, founder PJ Loughran said his initial inclination was to focus on flavors and then add wine to them. This turned out to be quite simple, and the brand made adjustments to the flavours. Like turning down the heat on a lemon jalapeno.

“I really look at our flavors in our product like little pieces of art,” Loughran says. “We’ve made adjustments sometimes just to make sure what we’re doing is more unique and more engaging.”

The Finnish Long Drink, a gin-based alcoholic drink, recently received investment from Marcy Venture Partners, the venture capital firm co-founded by rapper and entrepreneur Jay-Z. The brand has already been backed by celebrities including actor Miles Teller and Norwegian DJ Kygo, although Finnish Long Drink co-founder and CEO Evan Burns says he is skeptical about such links.

“I really think there are too many celebrity brands out there,” Burns says. “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 drive awareness, with Burns saying they only have about 2% brand awareness nationally. “The game is just getting liquid on the lips,” Burns says. “We spend a lot of money on it.”

He also takes a slightly ambivalent view on what consumers want from RTDs. Despite all the hype around new flavor accessories, Burns says less is more. The Finnish tall drink has only three flavors on the shelf today: citrus, cranberry, and peach.

“Do you know what customers want? Something that tastes good at the right price,” Burns says.