Spirits RTDs Asking Pricing, Packaging Questions

Pricing, Problems, and Potential: A Look at RTD Packaging

by Beth Demmon

When choosing what beverage alcohol product to drink, components like base spirit, fl avor, and nutritional information are some of the primary factors that guide individual decision-making. Will it be wine, beer, spirits, hard seltzer, or something else? It is time for something tropical, or would fl oral notes satisfy?

However, there’s one overlooked trait that may infl uence one’s choice more heavily than many realize: the packaging.

According to a 2017 Mintel report, “Two thirds of alcohol buyers pay attention to packaging,” meaning it remains one of the fastest ways to communicate value, uniqueness, and product information with potential consumers. And while consumers have the ability to choose what products they purchase, the decision of what to package said products in happens long before it hits the shelves.

Producers across all beverage alcohol segments have to pick between a relatively small menu of standard options: aluminum cans, glass bottles, or, in rarer instances, less common alternatives like the bag-in-abox option popularized by boxed wine.

So what value propositions do producers take into consideration when selecting packaging? Aspects like up-front cost, sustainability, regulatory limitations, and supply chain availability all come into play. And things can change quickly, something that Mark Anderson, founder and CEO of

Drake’s Organic Spirits knows fi rst-hand. “White Claw and Truly will sell approximately 10 billion cans alone in 2021,” he estimates. Both brands launched in 2016, and with those two companies alone now accounting for an estimated three-quarters of the entire hard seltzer industry, beverage brands producing less volume may face challenges when entering such a competitive supply chain. Balancing standard on-premise shelf measurements while offering eye-catching packaging that’s both affordable and consistently acquirable is not always easy. unlike glass, which is often not allowed on beaches, boats and other outdoor areas where it could break.” Considering the fl exibility canned RTDs tend to offer, this is one scenario where packaging may outrank other components in importance to consumers, especially those looking for convenience.

“Convenience has always been a key consideration for beverage alcohol packaging. Today, it’s a must-have,” reports packaging experts Fres-co. “[I]t’s a key driver behind the success of ready-to-drink cocktails in fl exible liquor pouches.”

The Current State of RTD Packaging

One look at retailers like BevMo or Drizly and it’s clear the vast majority of readyto-drinks (RTDs) opt for the industry standards of cans or bottles.

Bottles are more likely to be used for multi-serve RTDs for their ability to be re-sealed for future enjoyment and completion, while cans tend to be favored for single-serve due to their convenience and comparatively less breakable form. Of the fi rst 24 selections under Drizly’s “Ready To Drink” category, 18 are single-serve cans with the remaining six all falling under the multi-serve category in glass or plastic bottles.

Geography and specifi c consumer demographics also affect brands’ packaging decisions. “I decided on aluminum cans not just for effi ciency, but also because they are perfect for island living and summer activities,” explains founder and CEO of Fishers Island Lemonade, Bronya Shillo. The seaside brand primarily caters to drinkers enjoying the outdoors or on-the-go, often to destinations where glass is prohibited. “Cans have the benefi t of being durable,

Drake’s is one company chasing convenience as well as eco-consciousness, opting for pre-mixed boxed cocktails (or “boxtails”) as their featured RTD offering. “Boxtails substantially reduces the amount of cans going to landfi lls by utilizing 1.75 liter boxed wine format with recycled corrugate,” says Anderson. “With only 20%-30% of cans recycled, more than 8 billion seltzer cans are heading to the landfi lls this year.”

Other companies outside the RTD space, like U.K.-based Sustainable Spirit Company and U.S.-based Holla Spirits, also rely on bag-in-a-box packaging for sustainability reasons. IWSR reports Sustainable Spirit Company claims its 2.8-liter “eco pouch” reduces packaging by 95%, while Holla also espouses an 80% lower carbon footprint than a glassbottled equivalent.

While Drake’s does use glass bottles for multi-serve spirits like their Spiced Rum or Premium Vodka, Anderson says the decision to eschew bottles and cans for their ready-to-drinks was due both as a way to stand out from the increasingly crowded segment, as well as a way to promote

sustainability through every step of their process. As a company who touts a mission of creating “great-tasting spirits produced with the healthiest and most sustainable ingredients while giving back to this planet,” adding cans to the pile of trash or recycling didn’t line up with Drake’s ethos.

“The seltzer companies are shipping truckloads of empty cans to the bottling plants, fi lling, then trucking fi lled cans to distributor/retailer. Boxtails are made of recycled corrugate that ship fl at to our bottling plant, fi lled and shipped to distributor/retailer,” says Anderson. “It only takes one semi of boxtails to equal the volume of nine truck loads of seltzer cans.”

It’s not an apples-to-apples comparison, however. Drake’s boxtails contain up to 14 cocktails per 1.75L package, which he claims can remain shelf-stable at room temperature for up to a year after it has been opened. A single-serving RTD in a can, especially one that’s heavily carbonated, starts losing its fi zz upon opening, but is meant for immediate consumption in its entirety.

Regardless of shelf life, sustainability in both product and packaging is only becoming more important to consumers.

What's Working (and What's Not)

Having the luxury of choice regarding packaging isn’t always possible, especially for small makers who lack the volume ordering capabilities of global conglomerates. COVID-19 disrupted virtually every aspect of human existence, and the global supply chain was—and remains—far from exempt from the ensuing chaos.

For months, story after story after story of the challenges beverage alcohol makers are facing have dominated headlines, and while the industry has adjusted somewhat to the new normal, allowances made during the pandemic to ensure producers’ survival has left some wondering what the future holds.

“The three-tier system is a challenge, to say the least,” admits Anderson. When onpremise sales plummeted in 2020, the new top outlet—off-premise—meant far less alcohol was heading to bars and restaurants, relegated instead to packaged takeaways from retailers. That shift to off-premise and online sales is expected to continue: Drizly’s 2021 Consumer Report cites that 53% of those surveyed “anticipate more of their alcohol purchases will be made online in the next year compared to during the pandemic,” with 33% expecting to order about the same amount as they did during the pandemic.

With these increased demands for relaxed restrictions on direct-to-consumer alcohol sales, as well as the United States’ pandemic-inspired spike in online ordering for off-premise consumption, the current three-tier system’s hold on the RTD industry (and beverage alcohol at large) may weaken. Nielsen data also charts anticipated consumer purchasing habits that will affect RTD packaging decision-making in the years to come, thanks to the pandemic’s lingering infl uence. “Beyond the infl ux of omnichannel buyers on the scene, many consumers are trading up to larger pack sizes in their off-premises purchases,” going on to cite huge increases in large variety packs sales, especially for wine and spirits.

“For spirits purchased on-premises via takeout orders, 37% of Americans indicate a preference for 200mL bottles, while 36% prefer ready-to-drink cans of spirits,” the report explains. “[T]here are clear differences between the package size preferences of today’s on-premises alcohol buyers.”

Drake’s has been able to weather supply chain interruptions, thanks to their unique packaging choices. “We have not had supply interruptions, nor do we expect any due to how we structured our production and supply chain,” says Anderson. The organic spirits company can fi ll up to 12 million cases of spirits without stretching their packaging suppliers: a handy safeguard during the pandemic’s peak and beyond.

The Future Of RTD Packaging

Now that COVID-19 has shifted consumers to more online and off-premise sales, the progression of packaging options towards larger variety packs of single-serving RTDs is likely here to stay. The Nielsen report cited above says that: “Large-format alcohol packages are growing in popularity… Doubling down on hard beverages [like RTDs] can drive sustained growth in these challenging times.”

U.S.-based Packaging Strategies also advises RTD producers to evaluate their packaging to evolve with the changing purchasing channels. “According to a Nielsen study, while in-store alcohol sales saw a bump of 21%, online sales experienced a 234% increase during 2020. This translated into greater demand for larger pack sizes and e-commerce friendly packaging,” they report. “Brands should consider the behavior of their target audience — whether they are likely to stay home or embrace reopening — and identify a packaging partner who understands the nuance of specifi c channel needs.”

Anderson adds to the advice: “Look for sustainable, unique options that extend shelf life and fl exibility,” he suggests. This should extend not just to the individual drinks, but outer packaging and all other supplemental packaging material.

ISWR agrees, especially regarding the growing importance of sustainability across all fronts. “Across almost every category, sustainability has become an important consideration within beer, wine and spirits, and is having an impact on everything from production methods to ingredient sourcing. And while environmental considerations aren’t new to the industry, there’s never been a time when they have been quite as important.”

As online ordering continues to increase in popularity, pouches may become more common, thanks to being comparatively underused currently as well as their above-average sustainability score. “Liquid pouch packaging is especially suited to e-commerce, making it a popular choice for beverage makers looking to expand their reach online,” says Fres-Co. “With off-premise alcohol consumption outpacing on-premise consumption, at least in the short term, packaging will take more of a front-and-center role.”

As buyers continue to seek out earthfriendly products and packaging, as well as convenience and value, RTD producers would do well to evaluate their current packaging plans to minimize supply chain interruptions as well as meet evolving consumer demand.