This summer’s hottest cocktail comes in a can.
Between 2019 and 2020, the premixed cocktails category in the US grew by 50%, according to industry tracker IWSR. The segment is still relatively small, accounting for only 3% of US spirits volume, based on data from the United States Distilled Spirits Council. However, companies and industry experts expect enormous growth after the pandemic boom. Bank of America Securities predicts the category will generate revenue of $ 3 billion to $ 4 billion over the next few years.
The rise of the tough seltzer has fueled the growing popularity of canned cocktails. Ready-to-drink vodka sodas or gin and tonics appealed to consumers looking for a stronger flavor or a more alcoholic beverage, and the category has expanded with greater variety.
Canned cocktails, like Hard Seltzer, appeal to consumers who choose their alcoholic beverages based on convenience and taste. However, ready-to-drink cocktails are usually of higher quality because their base is made from real spirits, not the sugar or malt found in hard seltzer or lemonade. A six-pack of hard seltzer usually brings back about $ 10 for consumers, which is also the starting price of a four-pack of canned cocktails.
Canned cocktails can also be harder to find outside of liquor stores, as states regulate them differently than flavored malt beverages.
In a March report to customers, Bank of America beverage analysts Anheuser-Busch selected InBev and Diageo as the two companies that will be key players. Currently, according to analysts, some of the standout brands are E. & J. Gallos High Noon, Monaco, AB InBevs Cutwater Spirits, and Beam Suntorys On the Rocks.
Alcohol giant AB InBev entered the segment in 2019 by purchasing Cutwater, a San Diego-based craft distillery. Cutwater is the second best canned cocktail brand in US dollar sales, accounting for 10% of the ready-to-drink cocktail segment based on IRI data for the 13 weeks ended May 9th.
For the Budweiser brewer, the acquisition was an opportunity to enter new categories, as beer consumption has declined in recent years. Fabricio Zonzini, president of the company beyond the beer division, said that his division’s first priority is ready-to-drink beverages.
“I think Covid was a propeller for ready-to-drink products because it brought the convenience of the bar to your home,” he said. “And we’ve seen that growth. Thank goodness we had Cutwater.”
In addition to Cutwater, AB InBev has also partnered with a Canadian distiller for Nutrl, a line of vodka beverages. Zonzini said the company will be testing the beverages in the U.S. to appeal to consumers who want a lighter, more refreshing cocktail, similar to the taste profile of a hard seltzer. Last year the company released flavored vodka under its Natural Light brand, which could mean the brewer will get canned vodka cocktails from the brewer if the liquor sells well.
“When we see the results, if it connects the way we believe it will open another door,” said Zonzini.
Johnnie Walker owner Diageo is now pushing itself into the segment. In April it bought Loyal 9, which mixes vodka and lemonade in a can. Before the purchase, the company had already launched cocktail offshoots from Crown Royal, Ketel One Botanical and Tanqueray.
“The category did really well. It’s the fastest growing part of [total beverage alcohol] and just accelerates quickly, “said Jay Sethi, senior vice president of North American convenience food for Diageo.
Sethi said consumers are starting to look for more premium canned cocktails, which means they are ready to spend more too.
It’s not just the alcohol giants who want to capitalize on the growth of canned cocktails. Smaller upstarts like the Cardinal Spirits craft distillery have also released versions.
Zing Zang, who has cult following for his Bloody Mary blend, launched its first line of canned cocktails in the alcoholic beverage market last year. The move took several years as he perfected the recipes and found vendors who could easily carry alcohol, but the drinks have been good so far, according to CEO Brent Albertson.
Albertson, who spent three decades at Diageo before joining Zing Zang, said the company’s market research found that 25- to 37-year-olds were the target market for the beverages.
“You don’t drink it to get drunk,” said Albertson. “They want to do it on boats, on golf courses. They want that convenience and portability.”
Even if consumers return to their favorite bars, the canned cocktail trend cannot be expected to wear off. Brandy Rand, chief operating officer for America at IWSR Drinks Market Analysis, said she expects more ready-to-drink beverages to appear on the menu.
“Consumers like them and offer local operators a viable option when faced with capacity and staffing issues, tighter margins and leaner menus,” said Rand. “Canned cocktails are also a great take-away option in states where it’s legal.”