- Beam Suntory acquired premium ready-to-drink cocktail brand On The Rocks, according to a press release. Terms of the deal were not disclosed, but Beam Suntory previously owned a minority stake in the company.
- The company said it sees an opportunity to expand the OTR brand out of pre-mixed premium cocktails into “new occasions, formats, cocktail recipes, and the low-ABV space.” The spirits company said it is looking to become No. 1 in the spirits-based ready-to-drink market.
- OTR, which was founded in 2015, doubled its RTD cocktail sales in the first six months of 2020, according to the company.
Drinking less in quantity but of a better quality has been driving growth in alcohol for the last several years, and has taken a particular hold in the spirits category.
According to data from Nielsen, premium tequila, whiskey and gin were responsible for a large percentage of growth in 2018. Bourbon and Irish whiskey drove the majority of the segment’s growth in 2018, with volume increases of 2.6% and 6.3%, respectively. Similarly, premium tequila led overall growth in the spirits category that year. Going forward, data from IWSR and Vinexpo estimates the premium-plus category will continue to grow during the next five years and significantly outperform current volumes.
Beam has already tapped into this trend with its menu of spirits, including Knob Creek, Basil Hayden’s and Hornitos. In its partnership with OTR, both companies have taken advantage of Beam's premium liquors and collaborated to create premium RTD cocktails, including Knob Creek Old Fashioned and Cruzan Mai Tai. Going forward, the possibilities will multiply.
In 2019, IWSR data showed ready-to-drink products grew 49.7%. IWSR said consumption of RTDs is being driven by hard seltzers, which account for 43% of the category. Beam has some RTD brands under its umbrella, but they're all targeted at the Japanese market. By bringing OTR under its umbrella, Beam is opening its portfolio of canned cocktails to cater to a United States audience.
It may not be long until OTR has a whole new list of beverages. One of the categories that Beam CEO Albert Baladi suggested in the press release the company would look into following this acquisition is the low-alcohol space. While spirits have been growing, so too has the zero- and low-proof alcohol movement. Last year was the first time in a quarter century that wine consumption decreased. Companies have responded to this trend by releasing a variety of low-alcohol alternatives to traditional libations. The trend has grown so substantially, even companies that do not traditionally compete in the alcohol space have released nonalcoholic cocktail drinks. Beam could capitalize on the $967.3 billion market for non-alcoholic beverages with a little retooling of OTR’s offerings.
To gain drinkers of OTR’s canned cocktails, Beam will need to position the brand in a way that connects with the customer as the brand will compete with a myriad of other brands, including seltzer heavyweights White Claw and Truly. Despite the competition, Beam has the financial wherewithal to get its newest products in front of consumers.
Beam's new offerings would have one distinct difference from the popular seltzers that dominate the RTD category. OTR produces cocktails, the kind of drinks consumers may be used to ordering in bars. As the coronavirus pandemic has shuttered many bars and other places that people often enjoy a premium mixed drink, a premade bottled version can bring the taste from those bars to consumers at home.
Beam could also promote the super-premium nature of these cocktails in order to grab consumer attention. Despite the continued popularity of premiumization, if the U.S. economy continues to struggle and hundreds of thousands of people remain out of work, the appeal of this category – which is often synonymous with pricey – may begin to wane.