Spirits RTDs Keep Rising

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RTDs keep searching for a niche on-premise

By Ferron Salniker

Things were good at BTL SVC. Leading up to the pandemic, the premium ready-to-drink cocktail company, was increasingly found in some of the country’s most well known hotels, at concession stands at Madison Square Garden and Radio City Music Hall, and had just received purchase orders from Jet Blue Airlines.

“Then all the arenas went down, all of our travel stuff, the hotels, it all went to zero. We lost 80 percent of our customers,” said Michael Baruch, founder of BTL SVC (pronounced bottle service).

While BTL SVC’s sales have rebounded, the company’s carefully planned entry into showy on-premise channels like airlines and hotels shifted during the pandemic, a move that mirrors the journey of other spirit-based RTD brands. Now, many are searching, again, for high-visibility niches as their competition grows and new channels open up post-lockdown.

Demand is growing for these spirit-based products: while maltbased RTDs still retain 91% share by volume in the U.S. RTD market, spirit-based RTDs grew by 53% in 2021, approximately double the growth of the wine-and malt-based categories, according to alcohol industry data provider IWSR. By 2025, spirit-based RTDs are expected to see annual volume growth of 33% in the U.S.

“The increased number and variety of RTD options on the market has fueled the category’s growth, which has inspired even more brands to launch RTD products,” said Liz Paquette, head of consumer insights at Drizly.

Today there are nearly 650 RTD brands on Drizly, up from 450 in 2021, which was a 45% increase over the previous year, and a whopping 170% increase over 2019. With all that variety, brands are clearly looking to distinguish themselves with new fl avors, premiumization, and branding — but where they meet consumers’ lifestyles is another branding and revenue strategy in itself. While

the explosion of RTD products has sparked a race to the retail cold-box, these companies, start-ups and established players alike, are also looking for visibility through placement in entertainment venues, hotels, and every facet of the travel industry.

INROADS IN HOSPITALITY & ENTERTAINMENT

Baruch was no stranger to consumer goods: prior to launching BTL SVC in 2017 he was the founder of retail boutique Fred Segal Beauty; he also had done some consulting for other CPG brands. So when mixologist Nathan Oliver came to him about bottling craft cocktails, he initially didn’t see a future in traditional distribution. They were, after all, selling elegant box sets and glass bottledcocktails – without a large marketing budget. But he knew Los Angeles hoteliers and saw a large captive audience in the broader travel industry. Last year, 670.4 million passengers flew on U.S. carriers and U.S. hotel rooms hosted over 1 billion guests, with numbers expected to rebound to post pandemic levels this year.

“It was a pretty robust market, and they were captive in their seats or their rooms, and oftentimes they were going from the plane to the road to the plane,” he said.

From there he launched in hotels across the country, and American Airlines picked up the cocktails for its business and first class lounges.

It was perfect timing: airlines and hotels were shifting to local or more authentic flavors, recruiting well-known chefs for hotel restaurants and upgrading snack and minibar options. But Baruch saw a need for more cocktail options, a demand that continues today.

“There’s been increased customer demand for cocktails on board for many years -- especially for classics like margaritas and old fashioneds,” said Mike Henny, managing director of Onboard Services Operations of Delta Airlines.

In 2021 Delta partnered with Tip Top Proper Cocktails on domestic routes. Tip Top works with Atlanta bartender and James Beard finalist Miles Macquarrie, of Kimball House, to develop their classic cocktail recipes. The cocktails will be offered on transAtlantic routes starting this month. Tip Top co-founder Yoni Reisman suspects it was the company’s hometown advantage that opened the door to conversations with the airline, which then resurfaced after Delta’s RFP for in-flight cocktails was scrapped at the start of the pandemic.

“Being in Atlanta, Delta is our hometown airline. We felt like this is the perfect product for an airline, and so we were bothering them before we even had a product,” he said.

Premium RTD On The Rocks, which was acquired by Beam Suntory in 2020, was initially inspired by conversations with Virgin America’s food and beverage team. The former bartender and On The Rocks co-founder, Rocco Milano, impressed the airline staff with his bartender’s choice cocktail. When asked to design an in-flight cocktail menu, Milano proposed bottled options, a unique proposition in 2015. While Alaska Airlines’ acquisition of Virgin America canceled that deal, Milano pivoted to produce signature tropical cocktails for Hawaiian Airlines.

“We really wanted to establish that partnership and drive something amazing there that really brought the spirit of aloha alive for those guests that were going to be on board,” he said.

That relationship opened a door to other airline accounts: after Hawaiian Airlines was awarded an International Flight Services Association award for its cocktail program, Milano was approached by United Airlines. The cocktails can now also be found on certain American Airlines routes and through premium cabin service on Japan Air. In the U.S., On The Rocks is Beam Suntory’s highest performing RTD brand, and saw triple digit growth in 2021. Milano credits the brand’s success with airlines— well before it had the resources of a large liquor company— to connections he made at the World Travel and Catering & Onboarding Services Expo.

“Every industry has a conference,” he said.

For the founders of Crafthouse Cocktails, the increased in-

terest in classic, quality cocktails has been a long time coming. The two hospitality veterans aspired to put bartender-quality palomas and smoky margaritas in a bottle format back in 2013.

“There was no [RTD] space when we started,” said Matt Lindner, co-founder and CEO. “So when the category did finally turn the corner and people finally had the light bulb go off, we were poised and ready to go with a full array of really well thought out cocktails in multiple formats.”

In addition to the 200ml cans and 750ml bottles, the cocktails also come in a bag-in-a-box option that serves up to 15 drinks, providing an alternative that allows on-premise accounts to keep pour costs down. According to the founders, the diversified formats and the increased demand for cocktails made with premium ingredients have given the brand a leg up on finding non–traditional on-premise channels, which will make up 20% of their revenue by year’s end.

“I think so much of that is coming from the fact that we do not have the pockets to compete against the big portfolios, we just don’t have a 200-person sales team,” said Linder. “But with so many of those partnerships we are able to compete because the buyer just tries it and they like our assortment, it’s just good quality and taste, and that’ll keep customers coming back for a

second. It’s an elevated experience with zero effort.”

In addition to fi nding success in transportation channels like United Airlines and Virgin Voyage Cruise lines, the brand is expanding into entertainment venues, playhouses, and Cedar Fair amusement parks. Next month, cocktails will be available at AMC theaters, part of their strategy to keep after national non-traditional on-premise chains. These types of accounts also provide marketing exposure they couldn’t afford otherwise, Linder said.

But standing contracts with larger brands and portfolios can make sporting or entertainment venues tricky arenas for start-ups to compete. Tip Top’s Reisman came to the alcohol industry from a music festival background.

“There’s a lot of larger brands out there with really large budgets, and these startups just can’t compete with those sponsorship contracts,” he said. “I knew it would be an uphill battle.”

They’re also up against traditional cocktail programs that provide venues with higher margins. Positioning bottled cocktails as a line killer and an alternative to a skilled mixologist is where he fi nds the sale. For now, he’s testing the product’s performance in a few local Atlanta music venues.

A PATHWAY TO RETAIL

For On The Rocks and BTL SVC, success has been built around fl exibility and working closely with partners to fi t their needs. On The Rocks bottles are designed to fi t trays for LSG, one of the world’s largest airline catering services. Baruch and his team developed a 375 ml bottle for American Airlines, which requested a larger format allowing guests to self-service without them nabbing 100ml bottles for the road. It’s now available at hotels too.

At hotels the brands are fi nding niches in poolside service, inroom dining, VIP amenity programs and special events. BTL SVC is soon to be in every Four Seasons nationally, and has a growing roster of upscale hotels in the seven states it currently has distribution. The company is also dipping its toes into international locations and customized cocktails. Customized branding of its boxes, which can be used as a merchandising unit or a gift, can be found in venues like the Aria in Las Vegas or Equinox in New York. On The Rocks is served in many major hotel groups, including multiple Hilton hotel chains.

While BTL SVC and On the Rocks declined to share sales information, both founders insist the travel industry is a revenue generator as well as a brand builder. Baruch specially designed a bar cart for ambassadors to offer cocktails in hotel lobbies, which now also functions as a sampling display at gourmet markets and liquor stores. That tasting experience at hotels put the cocktails in the hands of anyone visiting.

“To this end, owners, executives, managers, etc. of retail establishments, as well as many other types of businesses, contacted us to pick up our cocktails for their stores and businesses,” said Baruch.

Some of those relationships became essential during the pandemic: BTL SVC provided at-home cocktails for virtual events such as HBO premieres and employee events for companies like Nike and American Express.

Before the company had wider visibility, Milando said hotels were a key aspect to the company’s growth and success— they also created a platform to showcase how the RTD could insert itself into an already liquor-fi lled venue. The power of hotels is in creating opportunities that previously weren’t addressed by run-of-the-mill beverage options, he said.

“What are you doing for your guests who are choosing to spend one of the most important days in their lives with you? You’re going to send old fashioneds to the groomsmen suite, you’re going to send margaritas to the bridal suite,” he said. “And I feel dirty every time I say this but the phones come out, and that creates that instagrammable moment.”

When the downturn of travel during the pandemic forced the RTD makers to focus on selling via traditional retail and online, the emotional association with a special occasion like a vacation or family celebration was a boon for connecting with customers and retailers. Milano has met customers who said they picked up an On The Rocks because it reminded them of their fl ight to a vacation in Hawaii, for example.

“That positive association and impact for people is what is so rewarding about hotel and airline partnerships – we see that return on investment while also encouraging loyal fans,” he said.

The founders of these brands say they’re building on their work during the pandemic to continue in retail, and now that sales in travel and concessions have picked back up, expand globally. BTL SVC survived 2020 because of its retail accounts, and after two years of legwork has a slew of new retail partners, including supermarkets. For Tip Top, selling online has been less of a revenue builder than it has been an opportunity to get to know its customers. Reisman said he’s using that data to focus on continuing to build brand awareness and developing new cocktails. Milano is likely taking his lineup to more international markets.

“Hotels are a global enterprise, airlines are a global thing,” he said. “So I very much see us continuing to pursue those and if it takes us outside of our borders and beyond our shores then we’re going to have a great time introducing cocktails to our new guests.”