Ready-To-Disrupt: How Startup RTD Brands Are 'Clawing' Through the Competition

Hard seltzer swept the nation in 2018, popping up on college campuses, bachelorette parties, beach picnics, and all other manners of social gatherings. Hard seltzer, and specifically White Claw, offered a new way of drinking: people no longer had to choose between a 30-rack of Bud Light or a fancy bottle of wine. Instead, they could partake in #ClawLife, with a canned beverage that was affordable, low in calories, easy to transport, and endlessly sharable.

In the coming years, as White Claw’s ubiquity grew, consumer demand for ready-to-drink (RTD) beverages increased right alongside it. Other brands quickly followed suit and the space saw competition from newer brands like High Noon (a vodka-based seltzer) and titans of the industry like Bud Light and Corona.

When the pandemic began in 2020, the growth of RTDs only accelerated. People were stuck at home, missing the cocktails and other beverages they had typically enjoyed at bars, restaurants, and gatherings. RTD beverages offered consumers the chance to experience the drinks they missed without having to leave the house or buy a slew of expensive ingredients.

A few years later, and with pandemic restrictions largely lifted, it is clear that RTD beverages were not just a pandemic fad like making sourdough or watching Tiger King. In 2021, RTDs growth was greater than any other leading alcoholic beverage sector including tequila, whiskey, and scotch.

One-third of all US households bought an RTD product in 2022, and according to Drizly's Retail Report, 60 percent of retailers surveyed plan to stock more RTD beverages in the coming year.

RTDs are the future of modern alcohol — so what are they and who is buying them?

WHAT IS A MODERN RTD?

Today’s RTD beverages have come a long way from their wine cooler predecessors. And though White Claw may still reign supreme, RTD includes much more than hard seltzer. RTD primarily includes three categories:

1. Malt-based (hard seltzer, hard kombucha, hard tea, etc.)

2. Spirit-based (i.e vodka soda and other RTD cocktails)

3. Wine-based (wine in cans)

Of these categories, hard seltzers account for 43% of RTD sales, flavored malt beverages make up 37%, spirits-based takes 10.5%, and wine-based is the lowest at 8.9%. While hard seltzer and maltbased RTDs are still the most popular, spirit-based cocktails are growing rapidly. The total volume sales of spirits-based RTD cocktails increased 226 percent from 2016 to 2021, making the category one of the fastest-growing segments across beverage alcohol. Furthermore, in a survey from Public Opinion’s Strategies, fifty-five percent of respondents said they preferred spirits-based beverages to other RTD choices

RTD’s main consumers tend to skew young: of the people buying RTDs in 2022, two-thirds were millennials and Gen X. The online platform Drizly found similar numbers: 62% of RTD purchases on their website were from millennials. RTDs reach an audience that is moving away from the drinking styles of their parents, who stuck to one of three things: wine, beer, or spirits. No longer confined to being wine, beer, or whiskey drinkers, Millennials and Gen X want more: new flavors, enticing branding, sharable packs, and healthier options.

Such demand for RTDs offers an exciting opportunity for young brands and others considering entering the market. But the RTD space is also getting crowded, and any brand considering throwing its hat in the ring will need to be extremely clear on its point of differentiation before doing so.

We spoke to four brands making their mark on the RTD space with new and exciting offerings to gain insight into how brands can differentiate in this quickly growing market.

PEOPLE DON’T WANT ANOTHER HARD SELTZER

When Chris Tran and Holly Paul first started Mizo, they debuted a hard seltzer line with flavors inspired by their Asian heritage. However, they quickly realized that buyers simply weren’t interested in yet another hard seltzer. The buyers they spoke with had too many hard seltzer brands on shelf, and they were only trying to consolidate. Why would a buyer take a risk on a new small hard seltzer brand when they are already full to the brim with White Claw, Truly, and 50 other hard seltzer brands with brand recognition and a proven track record?

Buyers are increasingly asking this question about not only hard seltzer, but all RTD beverages. With such a saturated market, brands will need to be able to prove “why me” and “why now” to break through the noise. To do so, brands can focus on four elements: storytelling, flavor, better-for-you options, and premium positioning.

Storytelling

Once Mizo recognized the over-saturation of hard seltzer lines, they decided to pivot, launching a hard lemonade product. To further differentiate, they leaned into their form factor, invoking the nostalgia that lemonade so often brings with juice pouch packaging.

“People want to have comforting experiences that remind them of happy times, so we wanted to create a product that celebrated nostalgic memories. Everyone finds so much comfort in nostalgic memories and the juice box is kind of a universal memory.”

The lemonade pouch is now one of the first things people notice or comment on when encountering Mizo for the first time, and has helped them immensely in pitching their product to buyers.

Brands can also differentiate by offering something entirely new to consumers. After falling in love with tepache, a Mexican fermented pineapple drink, while traveling, Crooked Owl founders Camillia Taffe and Dave Bailey — both of whom have backgrounds in alcohol — decided to launch hard tepache in the States. Tepache is largely not commercialized, with only a few brands selling the non-alcoholic version in the states.

To introduce their hard tepache to an American audience, Taffe and Bailey are purposefully leaning into the historical background of the beverage and the sense of discovery it can provide consumers. In drinking Crooked Owl, consumers are given the chance to partake in and discover a long-storied tradition. In your branding, ask yourself, “What story are we telling?” and “What memories or feelings can we evoke with our beverage?” Drinking is largely a social act with stories, memories, and feelings associated with each sip. To stand out, RTDs can play into this, using branding to tell a compelling story that will get consumers to turn to the next page.

New Flavor Experiences

RTD brands can also differentiate themselves by offering new flavor experiences that move beyond the classic lemon, lime, or berry. For Tuan Lee, founder of craft cocktail RTD Vervet, that meant taking classic craft cocktails and re-imagining them with a California twist. Their Tiki Tea combines a margarita with a Moscow mule while their Pale Mary uses Santa Barbara lemons and spicy celery-habanero bitters.

Hooch Booch, a hard kombucha line, leans into classic cocktail flavors to attract consumers to their less traditional beverage. Offering classic cocktail flavors like Paloma, old-fashioned, or even espresso martini, lowers the barrier to entry for hard kombucha. “People think kombucha tastes like sticky, vinegary feet. Our flavors make the drink more approachable because people already know what an old fashioned is.”

Flavor is one of the top reasons consumers choose an RTD. In a 2022 survey from the Distilled Spirits Council, 94 percent of respondents said they choose RTDs because they offer their preferred flavor choice, and 88 percent selected RTDs because the taste aligns with their favorite alcoholic beverage. Offer consumers something entirely new or give their favorite cocktail an unexpected twist; above all, people want to drink something delicious.

Better-For-You

In a space that was once known for its overly sweet wine coolers of the 80s, many RTD brands are finding success in offering healthier alcohol options to consumers. In many ways, some of the popularity of brands like White Claw and High Noon lies in their “better for you” attributes, appealing to drinkers looking to consume something low in calories, low in sugar, and gluten-free.

Vervet has found success with their Sake tonic at Erewhon, offering shoppers an RTD that is gluten-free, has no artificial flavors, and utilizes plant-based preservatives. Mizo, on the other hand, positions itself as a healthier alternative to Mike’s Hard Lemonade, offering close to 90% less sugar. Their hard lemonade is also not carbonated while most RTDs on the market are. Mizo has found many consumers who appreciate the option to switch to a non-carbonated beverage to avoid bloating or any other gastrointestinal problems.

Taffe of Crooked Owl has Celiac, so she has to avoid anything with gluten in it. In creating Crooked Owl’s hard tepache, they made sure to create a beverage that Taffe and anyone else, no matter their dietary restrictions or preferences, could enjoy. Crooked Owl is gluten-free, diabetic friendly, 100 calories, and 5% ABV. Like Hooch Booch and other hard kombuchas, it also offers probiotic benefits.

As consumers adopt healthier habits, better-for-you alcohol options are gaining more and more traction among health-conscious consumers. Offering better-for-you beverage options only enhances the accessibility of RTDs as drinks that anyone can enjoy — and the more people who can drink your beverage, the more potential customers you will have.

Premium

Brands can also target premium consumers, aka those who are interested in RTDs, but want something more elevated than your typical hard seltzer or vodka soda. Consumers may have flocked to White Claw at first, but as the RTD market has grown, many consumers want a product that is more crafted and distinct, providing a unique opportunity for brands to differentiate.

Vervet relies on its roots in craft cocktails to bring its brand to premium status. All of their recipes were crafted by Hope Ewing, a 15-year craft cocktail bartender and writer with bylines in PUNCH and Serious Eats, among others. Vervet aims to practice the same ethos of the chefs they love. Lee explains, “A recipe is only as good as its ingredients. The same applies to our cocktails.” Their negroni spritz uses a house-made Amaro with Santa Barbara citrus and their Strawberry Spritz uses berries sourced from Oxnard, a California city known for its prolific production of the fruit. Vervet attracts the same people who might seek out the hottest new chef’s restaurant serving farm-to-table produce or attend the farmer’s market with religious fervor.

Crooked Owl is also going after the premium drinker: “We don't think we're going to convert the everyday White Claw drinker.” Instead, they are targeting the “on-the-nose millennial who wants to signal that they know what’s cool.” In this way, the premium associated with Crooked Owl is less about the freshness of the ingredients and more about the clout of identifying the next big trend. “The person that would come to the party with a cool IPA a decade ago is the same type of person that might come to the party with our hard tepache.”

No matter if you’re targeting the Brooklyn millennial or California foodie, brands should consider seeking premium consumers if they want to find an untapped and eager consumer base.

WHAT SHOULD AN RTD COST?

When it comes to pricing, RTD brands need to be strategic as they come up against their inexpensive and mass-produced competitors. “Consumers can get a 12 pack of White Claw for $15 or $16.99, but it would be really hard for any up-andcoming brand to break even the $19.99 price point.” The wide availability of inexpensive RTDs has created a mental barrier for consumers when considering a new brand. “If it’s the choice between $16.99 White Claw and $20.99 craft hard seltzer, they’re going to pick the White Claw probably eight or nine times out of 10.”

To combat this mental barrier, brands can “play with pack configurations,” Tran explains. Consumers tend to be less aware of the price-per-unit when they’re buying alcohol, so brands can sell their products in four or eight-packs to offer consumers lower costs at the check-out line without jeopardizing their profitability. Non-spirits-based RTDs also have a leg-up when it comes to pricing; they can trade at a discount, compared to spirits-based RTDs that are hit with a hefty federal excise tax (The federal excise tax on a spirits-based RTD is more than double that of a malt-based RTD).

Brands should also consider who their competitors really are. Is it the mass-appeal brands like White Claw or the niche, locally-brewed beer? Crooked Owl is less concerned with competing with the heavy hitters than they are with the brands they sit next to on the shelf. “We don't think we're going to convert the everyday White Claw drinker,” Bailey says. Luckily, “we find we’re able to play in the upper premium channel really well because we stand up against hard kombucha and other craft RTDs, which are similarly priced.”

THE WILD WEST OF RTD

If you’re thinking about entering the crowded RTD space, Lee urges brands to practice “radical simplicity” at first. “Start with one flavor, build your brand, gain consumer trust, and grow a loyal audience. Focus on creating a massive hit with one flavor and then grow and expand from the momentum your first flavor creates.” Consumers are overloaded by choices — give them one flavor they love and grow from there as people come back again and again. Radical simplicity will also lower start-up costs, giving brands a head start in the capital-intensive alcohol industry.

Most important, however, is that any brand thinking of getting involved in RTDs understands the competition they are up against. Bailey explains, “The barriers to entry are getting lower and there is only going to be more and more competition. Before you put your dollars behind a brand, make sure you’re offering something that is truly differentiated and that you want to stand behind.”

“The RTD space is like a liquid gold rush,” explains Lee. Some brands will head out west and strike gold while others may get lost along the way. So before you jump on the RTD bandwagon, make sure you know exactly where you’re planning to strike and that no one else has already beaten you to the punch — gold is a finite resource.