RTD Spirit Market Analysis

RTD Spirit market (Global, 2024)

Introduction

Ready-to-drink (RTD) spirits are a dynamic part of the beverage industry, characterized by its new product offerings and changing consumer preferences. As people’s lives have become busier, the demand for convenient and portable alcoholic beverages has increased. As a result, more and more brands are experimenting with different flavors and formulas. RTD spirits are attracting not only consumers looking for new ways to enjoy spirits but also a younger generation looking for novel ways to imbibe. RTD spirits are increasingly available in the form of classic cocktails as well as experimental blends, catering to a wide range of tastes. Social media and lifestyle trends also continue to influence the industry, with brands looking for ways to engage with consumers through creative marketing strategies. The RTD spirits market is constantly changing, and it is important for brands to stay abreast of these trends in order to stay competitive.

PESTLE Analysis

Political

By 2024, the RTD-Spirit market will be affected by a number of political factors, such as regulatory changes and tax policies. The federal excise tax on spirits in the U.S., for example, has been set at $13.50 per proof gallon and has been unchanged since 1991. States, however, can levy their own taxes. In California, the state excise tax on spirits is $3.30 per proof gallon, which could have an impact on the prices of RTD-Spirits. Furthermore, the ongoing discussions about alcohol advertising, especially on social media, could have an effect on marketing strategies for RTD-Spirits.

Economic

Inflationary trends in the economy will affect the spirits market in 2024. The CPI for alcoholic beverages in March 2024 was 4.5% higher than the previous March. This means that consumers will have less purchasing power, which may lead to a shift in spending habits, for example, to more affordable RTDs. The US unemployment rate is expected to be around 3.8%, which shows that the labor market is relatively stable and that discretionary income can be used to buy premium RTDs.

Social

In 2024, the trend in the habits of consumers is a growing preference for ready-to-drink beverages, especially among millennials and generation Z. According to a survey, about 60 percent of consumers between the ages of 21 and 34 prefer to drink RTD beverages because of their ease of use during social gatherings. In addition, there is an increase in the importance of health and well-being, so 45 percent of consumers prefer low-calorie or low-sugar RTD drinks, which makes the beverage industry develop these preferences.

Technological

The market for RTD spirits is a crucial one in 2024. By the end of the year, e-commerce alcohol sales will reach a total of $18 billion in the United States. Also, technological innovations in packaging, such as eco-friendly materials and smart bottles that can track their own freshness, are increasingly common. And already thirty per cent of brands are investing in sustainable packaging to appeal to consumers who are concerned about the environment.

Legal

In 2024, the legal factors affecting the RTD Spirit market will be the strict regulations governing alcohol production and distribution. RTD Spirits will have to comply with certain labeling requirements, including revealing their alcohol content and ingredients. In 2024, the TTB will increase its compliance checks, with more than 1,200 violations reported in the first quarter alone. In this regulatory environment, it will be important for brands to stay on top of their compliance efforts to avoid penalties.

Environmental

In 2024, the market for RTD spirits will be increasingly shaped by considerations of the environment and by a growing concern for sustainability. Some 70% of consumers say they prefer brands that show concern for the environment. In response, many companies have adopted sustainable practices such as local sourcing and reducing their carbon footprint. Brands are aiming to reduce water consumption by 20% by 2025, and many are already implementing water-saving measures in their manufacturing processes.

Porter's Five Forces

Threat of New Entrants

The spirits market in 2024 will be moderately threatened by new entrants. The market is growing and attractive, but the market share of established brands is high and brand loyalty is high, which can deter new companies. Also, high regulatory costs and high investment costs in production and distribution limit the entry of new players.

Bargaining Power of Suppliers

Suppliers in the RTD-spirits market have low bargaining power because of the large number of ingredients and raw materials available. Suppliers are easily replaced without significant costs. This abundance reduces the influence suppliers have on price and terms.

Bargaining Power of Buyers

The buyers in the RTD Spirits market have a high degree of bargaining power because they have access to a large variety of brands and products. The increasing number of brands and products allows them to easily change brands according to price, quality, and taste. Competition among brands makes companies compete to keep their customers.

Threat of Substitutes

The threat of substitutes in the spirits market is moderate. The threat of substitutes is moderate because there are many alternative alcoholic beverages, such as beer, wine, and cocktails, but the unique convenience and attraction of RTD spirits can reduce the threat. The only risk to the spirits market is that the consumers' tastes are changing from alcoholic to non-alcoholic.

Competitive Rivalry

The competition in the RTD spirits market is intense, with numerous established brands and new entrants vying for market share. In an effort to capture consumers’ attention, companies are investing heavily in marketing, product innovation and price. Strong competition and the need to differentiate the products are making the market highly competitive.

SWOT Analysis

Strengths

• Convenience and portability appeal to on-the-go consumers.
• Diverse flavor offerings cater to a wide range of consumer preferences.
• Strong growth in the premium segment enhances brand positioning.

Weaknesses

• Higher price points compared to traditional spirits may limit market penetration.
• Perception of lower quality compared to freshly mixed cocktails.
• Limited shelf life can lead to inventory challenges.

Opportunities

• Growing trend of health-conscious consumers opens avenues for low-calorie and organic options.
• Expansion into emerging markets with increasing disposable income.
• Collaboration with popular brands and influencers to enhance visibility.

Threats

• Intense competition from both established brands and new entrants.
• Regulatory changes affecting alcohol marketing and distribution.
• Economic downturns could reduce consumer spending on premium products.

Summary

The 2024 market for RTD spirits will be characterized by its strengths in convenience and variety, which are attractive to modern consumers. However, higher prices and quality perceptions will hinder growth. Opportunities will come from health trends and expansion into new markets. Competition and regulatory changes will bring significant risks. The strategic focus on innovation and brand alliances will be key to achieving growth.