At Chicagoland-based The PRIDE Stores, a new wave of beverages is driving customers to the cold box. Thanks to their premium branding and convenient packaging, Pride management isn’t wasting any time making room for more.

“We’ve noticed that the ready-to-drink (RTD), pre-mixed cocktail category is seeing growth from premium liquor brands,” and not just from the likes of High Noon Sun Sips and Chi-Chi’s, said Chris Peckat, director of purchasing at the 17-store convenience store chain, which was featured in the 2021 NACS Ideas 2 Go video “Parent Petroleum’s Brewing Success.”

Pointing to RTD cocktails that feature the branding of high-end spirits, such as Basil Hayden bourbon, Cazadores tequila, and Bombay Sapphire vodka, Peckat said the products “have been a huge hit at PRIDE locations” and fit in well with the company, which also operates its own brewery, several restaurants and a liquor store. “Demand from our customers is driving increased shelf space,” he said.

Indeed, sales of liquor-based prepared cocktails are skyrocketing, and new brands are flooding the market. According to the Distilled Spirits Council of the United States (DISCUS), RTD cocktails were among the top five fastest-growing spirits categories, with sales increasing 36% to $2.2 billion in 2022.

Momentum for RTD products also is strong in convenience stores.

“While other subcategories in liquor had a harder time in 2022, prepared cocktail monthly sales soared,” remarked Jayme Gough, NACS research manager. “Sales of this subcategory have continued to grow as consumer options expand.”

Although still a small subcategory, Gough noted that the segment registered both sales and gross profit gains year over year.

The Convenience Factor

The emergence of prepared cocktails, whether packaged in cans or bottles, has been a game changer for many consumers as they can now easily sip a premixed margarita out on a boat or a ready-to-drink cosmopolitan at a backyard barbecue.

“The convenience of having a good tasting cocktail readily available and ready to drink is driving the popularity of the segment,” said Tracy Frisbie, vice president, marketing, at BuzzBallz LLC/Southern Champion. “Consumers want convenience for the everyday occasion and want to skip having to buy multiple ingredients and measuring ratios to make a cocktail.”

Heather Boyd, managing director, U.S. RTD at Beam Suntory, agreed that the convenience factor has been pivotal to the growth of the segment. But product quality has also been a contributor, she added.

“The rise of spirits-based RTDs speaks to the growing cocktail culture in the United States,” Boyd explained, with the products taking part in more occasions. “Many consumers may want to make cocktails at home, but don’t have the time, skills or ingredients needed to do so. Spirits-based RTD and ready-to-serve options eliminate those barriers,” she said.

They’ve jumped in head first and now there’s a plethora of these products.”

Recent revisions to alcoholic beverage laws in some state have loosened restrictions that prohibited the sale of the products in c-stores, and retailers report strong trends.

“We jumped on board two years ago when the state of Michigan revised restrictions on c-stores selling low-proof spirits products,” said Eric Patterson, chief merchandising and marketing officer at Beacon & Bridge Market, with 24 stores in the Great Lakes State. “We did a soft rollout last year and this year devoted extra space in our planogram. They’re doing well.”

The regulation changes also resulted in an explosion of prepared cocktail labels available from distributors.

“It used to be that only liquor distributors could handle them, but now beer distributors can too. They’ve jumped in headfirst and now there’s a plethora of these products,” Patterson said.

Spirits-based RTD sales are permissible in grocery stores in 31 states and in convenience stores in 29 states, according to DISCUS. The association, along with the Texas Food and Fuel Association (TFFA), is working to change current state laws. TFFA President and CEO Paul Hardin and DISCUS President and CEO Chris Swonger shared their insights on this issue in the recent Convenience Matters podcast episode “RTD Cocktails Fuel Accessibility Fight.”

In markets where c-stores are prohibited from selling full-strength liquor, RTDs can offer an opportunity for retailers to sell packaged alcoholic beverages at a price point that’s comparable to premium beer and imports.

Affluent Consumer Appeal

Prepared cocktails are popular among a wide range of consumers. Herb Smith, vice president of customer development at E&J Gallo Winery, said the drinks appeal to consumers aged 21 to 55, with “consumers in the age range of 22 to 32 the most engaged.”

Both Boyd and Frisbie said that their respective brands attract affluent consumers, many of whom are females.

“As a whole, spirits-based RTD consumers are typically middle-aged and skew higher income,” said Boyd, adding that many On the Rocks (OTR) shoppers are millennial women. “Given this demographic, c-stores that choose to offer spirits-based RTDs may see additional benefits from reaching new consumers and driving additional sales,” she said.

Among BuzzBallz consumers, meanwhile, the female to male ratio is 59/41, Frisbie reported, and the average household income is around $100,000. But the biggest commonality among the brand’s consumers is that “convenience is a priority,” she said.

As with beer and hard seltzers, prepared cocktails can be merchandised in a variety of ways. With packaging configurations that include single cans and bottles, multipacks and variety packs, the drinks are at home in the cold vault, beer cave or stocked warm on the shelf.

At Beacon & Bridge, Patterson said “High Noon is king” among prepared cocktails. It comes in 700-ml singles, eight packs and variety packs, as well as variations of the brand’s new tequila-based option. As it does with beer singles, the chain promotes 50 cents off the purchase of two single cans.

Retailers should keep the top-selling flavors in the cold box and then use the warm shelf as backup, since the sales velocity from the cold box is three times faster than the warm shelf.”

Marketers of prepared cocktails recommend that c-store operators ensure the products are available chilled, and if possible, supplemented with inventory on warm shelves for backstock.

“Retailers should keep the top-selling flavors in the cold box and then use the warm shelf as backup, since the sales velocity from the cold box is three times faster than the warm shelf,” said Frisbie.

In addition to the cold box, stores with beer caves “can stack a varied assortment to maintain holding power while driving incremental purchases,” said Smith.

When it comes to warm placement, Boyd advised that 375-ml bottles of OTR be merchandised next to wine, since “consumers shopping those aisles are typically looking to spend $12–$20 a bottle. It’s also a great way to capture the attention of someone who may not have been considering a spirits-based RTD option.”

While prepared cocktails are relatively new items in most c-stores, marketers believe they have staying power. Frisbie noted that in addition to providing incremental sales, the products can help attract new shoppers.

“Between being an impulse purchase and increasing the basket ring, spirits-based RTDs complement wine- and beer-drinking occasions,” said Boyd, adding that retailers should educate shoppers on the differences between malt-based and spirits-based offerings.

And Smith minces no words when he speaks of the opportunity prepared cocktails offer c-stores: “Apply for your license to start selling spirits now so you can catch this fast-growing category.”