The canned cocktail category has been thriving, but brands in the space could soon face new challenges as the pandemic winds down, consumer habits shift and the market differentiates beverages that have long-term potential from those that will fade out.
The inflection point — which experts say will call for deeper brand association targeting millennial drinkers — comes after the category experienced an 86.8% rise in year-over-year off-premise dollars through the first five months of the pandemic, according to Nielsen data cited by Drizly. This growth hinged on the circumstances of the health crisis, as well as the demand established by its predecessor and ready-to-drink (RTD) relative, hard seltzers.
"The introduction of hard seltzers in the market opened a door for consumers looking for light and refreshing drinks with a more sessionable ABV [alcohol by volume]," said Monica Rustgi, vice president of marketing for Anheuser-Busch's Beyond Beer brands. "Canned cocktails really tap into the consumer need for convenience and portability."
For similar reasons, the category has been a natural fit for a country that faced long lockdowns. As alcohol consumption increased for U.S. adults during the pandemic, those looking for novelty could find in canned cocktails the chance to experiment with mixed drinks in an easy, convenient and affordable way. Moreover, a raft of restrictions made bars and restaurants less accessible, preventing consumers from purchasing real cocktails and further shifting their expectations of the beverage in the direction of RTD products.
"We'll probably see a shakeout because there's just too many entrants coming into the marketplace and there's only so much room out there."
Executive director, Affinity Creative Group
Coupled with the early entrance into the market by strong, opportunistic brands, these circumstances comprised what Ed Rice, executive director of agency Affinity Creative Group, calls a "happy collision" that created a space for many more entrants to crowd in.
"It's like turning on the faucet," Rice said. "Everyone wants to jump in, everyone wants a piece of the action."
But as the pandemic eases and more people routinely leave their homes for bars, restaurants and other social activities, Rice predicts the faucet will start to turn off. When that happens, brands will have to zero in on their marketing strategies, focusing on building identities, targeting millennial audiences and showing consumers why they deserve to stick around.
"I think we'll probably see a shakeout because there's just too many entrants coming into the marketplace and there's only so much room out there," Rice said.
"For those that have been able to establish [familiarity and association] and continue that, they're going to survive" he added.
From convenience to connection
A core driver of canned cocktails' success is their convenience, especially compared to the effort required to make a traditional cocktail from scratch. Brands have channeled this quality through their marketing efforts. In a tie-up with last year's all-virtual Governors Ball music festival, Bacardi promoted its RTD rum cocktails on Twitter using the hashtag #BacardiToGo and a caption emphasizing direct order to one's living room, as noted by DMS Insights.
Yet as more people get vaccinated and leave their living rooms, brands must refocus their marketing from convenience to connection. This effort will require marketers to grow a distinct personality around their offering, with an emphasis on clarity so consumers can learn quickly what the brand is about. For an esoteric category like cocktails, in which complex ingredients can be a barrier to entry, sending a straight message is even more important.
"When consumers start to go back to the store, we have to remember the three-second rule," Rice said. "You get three seconds to grab someone who's three feet away, because consumers are moving through the store fast."
"Big alcohol guys still have the most marketing dollar and power."
Director of food and drink, WGSN
Communication will be especially key for this category considering the many variants and the need for canned cocktails to separate themselves from other beverages in the RTD industry. For example, if a consumer doesn’t know that a canned cocktail is made with real spirits whereas a hard seltzer is produced from fermented cane sugar or malted barley, they likely won't be as willing to spend the extra money on the cocktail.
White Claw, though a hard seltzer, is a pioneer of the RTD industry and an example of a brand that has succeeded in this communicative connection, according to Rice.
"There's a lot packed into [White Claw]," he said. "In the white [packaging] you get the lightness and the refreshment, you get the edgy aspect with the claw. Their marketing communications is fun, and there's an attitude attached to that brand."
Know your audience
Canned cocktail brands must remember their target audience differs from other RTD categories'. Millennial drinkers, according to Kara Nielsen, director of food and drink at trend forecasting company WGSN, are one of the primary drivers of canned cocktails, as they weren't as attached to beer as previous generations. While canned cocktails and hard seltzers share significant overlap in audiences, cocktails typically cater to an older, more experimental palate.
"Millennials love flavor and variety and experimentation," Nielsen said, noting that canned cocktails offer "an invitation to experimentation with a low bar to entry."
To specifically target millennials, Nielsen suggests digital channels as a way to spread the word, including advertising on delivery services like Drizly, where millennials in particular have expressed significant interest. Tie-ups with groups in the hospitality and tourism industries could also help reach a consumer group that favors experiences.
"Could a company forge a partnership with an airline or a hotel brand and then advertise that?" Nielsen asked. "That [could be] amazing advertising."
Influencers, too, could build strong presences for the drinks on social media. But in order to stick with their own audience rather than mistakenly cater to audiences of other related categories, brands must be selective in who they partner with.
In a campaign promoting its canned gin and tonic offering, for example, Bombay Sapphire teamed with Bill Nye, which allowed the brand to tap into '90s nostalgia that appealed to millennials. As with tailored partners like hotels and airlines, influencers with connections to people in their late 20s and early 30s could serve as touch points that specifically prioritize millennial drinkers over those of other generations.
Small brands will have to work extra hard
The sheer variety of drinks in the category is one of its most impressive qualities, per Nielsen. But the flip side of this means more brands are fighting for a limited number of premium spots in the market. And with beverage giants like Anheuser-Busch and Diageo using their advantages in size and reach to push their own offerings, smaller brands will have to work twice as hard to appeal to consumers.
"Big alcohol guys still have the most marketing dollar and power," Nielsen said.
Affinity's Rice agrees, though he still sees an opportunity for brands with the right marketing approach.
"While there's no substitution for distribution and shelf space... there's also no substitution for creating a brand that resonates with consumers and having strong consumer demand," he said.
Rice suggests smaller, niche brands lean into the specialty of their product to stand out. In marketing a limited-edition series for Kyla, a brand that mixes spirits and kombucha to create "kombucocktails," for example, Affinity emphasized the drink's healthiness.
Other niche brands are occasion-based, such as the brunch-oriented Picnic Brunch. WGSN identified a related "outdoor boom" that brands have tapped into as people have developed a new relationship with nature during the pandemic.
In short, the benefit of a special occasion- or ingredient-based personality is a deeper sense of brand association.
"These little niche players... they look different," Rice said. "They have different taste profiles... and once consumers take a liking to a particular product, they're going to demand it from the retailers."
The risk of being too niche, however, is also a consideration for marketers. If a brand is focused on a golf-related experience, for example, the drink may deter anyone who isn't golfing or interested in the sport, Nielsen said.
For big companies like Anheuser-Busch, whose Cutwater Spirits brand recently debuted a golf-focused cocktail, expansive marketing budgets and drink catalogs may offset whatever small risk could be incurred by offering a niche drink. But for smaller companies whose entire portfolio is niche, the costs of failure are much higher.
"It's really hard to build any business when you're limiting your occasion usage," Rice said. "If you're testing a product... and you see people nodding their heads, [saying] 'Yes, this would be great for camping,' that's kind of like the death blow."