The seemingly unstoppable rise in ready-to-drink (RTD) beverages is well documented. So, what are the key factors driving this trend and the implications for the beverage companies manufacturing them? As Lion launches the RTD Kirin Hyoketsu Lemon into the on tap format, Lion’s RTD brand director, Penni Terrey, talks to Food & Drink Business about just what makes this category so successful and where it’s heading.
Why is the RTD market so successful?
There are many factors that come into play for success in the RTD market, however one that remains consistent is that RTD consumers are always looking for something new, and the trends change quickly.
Key trends at the moment are:
Higher ABV – some consumers see this as better value and it meets their desires for high tempo occasions.
Nostalgia – both for brands and flavours. During tough economic times consumers want to be reminded of times when things were easier, and brands/flavours can fill this gap for them.
Asian Beverages – Asian culture is trending now. This is due to increased immigration into Australia but also from a ‘cool factor’ perspective across food, fashion, music, and drinks.
Healthier alternatives – seltzer started this trend, prior to seltzer, RTDs were all about high sugar and high sweetness. Consumers now want to enjoy a more mindful RTD choice, hence the balance of sugar and calories versus flavour being ultra-important.
The RTD category is very interesting, constantly evolving and changing. The biggest trends in the RTD world right now are that RTDs are no longer a ‘younger persons’ drink and are being enjoyed by consumers of all ages.
In the past, RTDs have been considered sweet ‘sugar water’, however the healthier alternative offerings today provide options for all ages of drinkers.
Premiumisation of the category will continue to grow with the release of liquids that are unique and different, from both international and local brands.
RTD consumers are less gender specific now compared to 10 years ago, when RTDs skewed more towards women.
What is Lion’s RTD portfolio?
Lion's RTD portfolio.
Lion has a strong RTD portfolio with James Squire Ginger Beer, White Claw, and Hyoketsu. We are assessing growth in the portfolio to ensure it is sufficient for our ambition in this category.
The RTD market in Australia has grown to the third largest volume in the world after the US and Japan.
This huge growth – paired with Australians’ interest in Japanese culture that has become apparent in food, drinks, fashion, and travel (this time last year, Japan was our third most-visited overseas destination) – strongly indicated to us that the demand should be there for an authentic Japanese product.
It made sense that Japan’s number one RTD, Kirin Hyoketsu Lemon, would be well suited to the Australian market. Australia was also the first country outside of Japan to launch Hyoketsu.
We’ve seen an increasing number of lemon-flavoured RTDs – what is the appeal of this flavour?
One of the key reasons for RTD choice is that consumers prioritise the flavour of the spirit base. Vodka is still the number one spirit base, but we are seeing growth in other bases.
Refreshment is also key factor in RTD choice, and lemon flavoured beverages both alcoholic and non-alcoholic are synonymous with refreshment.
Kirin Hyoketsu delivers against this with a sweet yet slightly sour taste with natural lemon juice, which differentiates it from the overtly sweet and artificial aftertaste of alternatives in-market. It is a blend of vodka, soda, and frozen natural lemon juice, with an ABV of six per cent.
Consumers are not just loving lemon though; we have recently launched peach and pineapple flavours into the Australian market which have been received well by consumers.
We’re not stopping innovation at flavours but also in pack formats, as Kirin Hyoketsu is the first Asian RTD to launch with a variety pack of all 3 flavours.
What are the production implications of RTD growth?
From a production standpoint the competitive landscape means speed to market is incredibly important. Continual innovation also means more products being developed and produced which impacts production as well.
This of course has run on effects to materials and warehousing, but with demand being what it is, ideally products are hitting
shelves as quickly as possible.
Having said that we’re operating in an environment that is evolving quickly, for example 56 per cent of Light RTD sales in 2023 came from brands that didn’t exist before July 2020, so being agile and flexible in how we produce, warehouse, and distribute product is another element required to succeed.
With its RTD success, why launch Hyoketsu on tap?
The RTD market on tap is seeing an exciting period of growth, with consumers continually seeking exciting, flavour-forward drinks on tap at their favourite venues. Kirin Hyoketsu Lemon adds to this landscape as a more mindful choice, low in both sugar and calories for consumers to enjoy in the on-premise.
There are 3 reasons behind the launch:
- consumer demand for RTD on tap is rising, so it makes sense to create an offering in this space;
- venues are looking to meet the consumer demand for RTD on tap as drinkers look for alternatives to beer; and
- sustainability – this is both from a corporate responsibility perspective and from consumer demand. On tap equates to less packaging and can be considered a more sustainable option for consumers than drinking from cans or bottles.
There was around six months of rigorous research and development, testing and tasting to ensure we had the recipe right for the final on tap product. We’re proud of what we have produced and confident it is as close to the ‘in can’ liquid as possible.
What’s ahead for the RTD category?
The RTD category continues to evolve with the ever-changing preferences of consumers’ tastes and consumption occasions.
As with all categories, innovation is key in keeping up with consumer trends and driving growth.
I believe growth will come from brands with a solid core range, who then continue to innovate with seasonal or limited-edition SKUs.
The RTD category is more innovation led than other alcohol categories, so we’ll start to see new and exotic flavours coming through in RTD.
