New lease of life for RTDs
RTD producers may not have paid too much attention when Kopparberg branched out from its apple and pear cider variants to launch mixed fruit flavours into the UK market in late 2007.
Nobody could have predicted the impact they would have – from out of nowhere fruit cider sales have rocketed to £229 million and the category grew 66% in the past year alone, making it the industry’s star performer (Nielsen).
The most obvious casualty of its meteoric rise is the RTD category, which has suffered consistent volume and value declines as fruit cider soars.
RTDs were the go-to drinks for young adults who wanted to enjoy the effects but barely taste the alcohol, but they have been wooed away by the likes of Kopparberg, Rekorderlig and Bulmers fruit flavours. Fruit cider is sweet, fizzy, refreshing, unchallenging and often delicious if your palate is that way inclined, and it tastes nothing like cider.
But their sweet, easy-drinking quality is what makes fruit ciders so popular, for the same reason the likes of Hooch and Bacardi Breezer were so successful when they came along in the 1990s.
RTDs were in decline again in the past year, down 2% in volume (Nielsen, year to July 19, 2014). But resurgence is afoot: value sales are up 2.7% in the year and when you look at the past six months an even rosier picture emerges, with RTD volume sales showing 2% growth and value sales up 7% (Nielsen, 26 weeks to July 19, 2014).
This means RTDs make up a £232 million category in the off-trade – one that is slightly bigger than fruit cider and finally returning to growth – and suppliers are bullish.
“Commentators have said the category has lost volume and questioned its long-term relevance,” says WKD’s Debs Carter. “But the RTD category is very much still there and vibrant and dynamic.
“Fruit cider has taken from all long drinks categories. It’s taken volume from RTDs, but it’s also taken from cider as well – pear cider has seen sales decline by about a third – and beer has also lost volume to flavoured cider, so it’s not so clear cut.
“It will be interesting to see how fruit ciders evolve. They should take some lessons from what happened in RTDs. If you go back to the mid-2000s there was a huge amount of flavour duplication in RTDs. It’s important flavoured cider continues to innovate and not just have the same flavours.”
Suppliers continue to release new fruit cider flavours, so if consumers do tire of these it could go full circle and drive them back into RTDs.
WKD is the market leader, with 21% of the category, and bottles account for 57% of RTD sales.
But 40% of sales now come from cans and much of this has been driven by leading spirits suppliers such as Diageo pushing cans such as Gordon’s & Tonic and Pimm’s & Lemonade.
The final 3% of the category comes from pouches, and again Diageo has been instrumental in driving growth with its Parrot Bay range of frozen ready-to-drink cocktails.
Paul Isherwood, head of off-trade category development at Diageo, says: “The pre-mix segment is currently worth £85 million in value sales in the off-trade and has enjoyed 14% value sales growth year on year [Nielsen]. This is being driven by the popularity of existing SKUs as well as new products. Pre-mix drinks and ready-to- serve cocktails are widening the reach of brands and attracting different shoppers.”
Smirnoff Sorbets and Smirnoff Frozen Apple Bite are examples of further innovation from Diageo, and WKD’s Carter welcomes its presence in the RTD category, pointing out that leading spirits suppliers see its potential.
WKD has also launched cans to capitalise on the growth in the format, and has rebranded a mixed set of its variants as a Mix It Up pack including cocktail recipes, which retailers are urged to merchandise with spirits and mixers.
Carter says: “Over the past five to 10 years in the on-trade we have seen the growth of cocktails. They can be beautifully crafted in top bars, but in many of the more high street bars you get a WKD, a spirit and a mixer.
“We are starting to see that come into the take- home arena. People want to make cocktails at home but in a way that’s fun and doesn’t involve a massive financial outlay.”
Carter, who points to WKD’s sponsorship of TV show The Only Way is Essex as driving the brand, adds: “RTDs are appealing to a wide variety of shoppers and that’s really healthy. But it’s important that we all evolve and innovate.”
If they do they might just give the fruit cider producers something to think about.