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The Rise of Ready-to-Drink Cocktails and Associated Considerations for Asset-Based Lenders

By Sandy Mickas
Home / Perspectives / The Rise of Ready-to-Drink Cocktails and Associated Considerations for Asset-Based Lenders
HVS Cocktails 1212025
SMARTER PERSPECTIVES: Alcohol

January 2025

Industry Overview

The alcoholic beverage market includes all products that are produced by fermentation or distillation. While the market has typically been divided into below five segments, this article will focus largely on a relatively newer subsection of the market known as Ready-to-Drink Cocktails.  

The Traditional Five Segments: 

  • Beer – The beer market includes fermented beverages based on malt. This market is further divided between alcoholic and non-alcoholic beer.
  • Spirits – The spirits market includes alcoholic beverages that are produced through the distillation of wine, fermented fruits, or grains. This includes, but is not limited to, vodka, whisky, rum, gin, tequila, brandy, liqueurs, and other spirits. 
  • Wine – The wine market includes all fermented juices made from grapes. This is further divided into still wine (including red, white, and rosé), and sparkling wine, among others. 
  • Hard Seltzers – The hard seltzer market includes alcoholic beverages made with carbonated water, alcohol, and often fruit flavoring. 
  • Other – This category includes cider, perry and rice wine as well as all other wines made from fruits other than grapes, grains, or other plants. 

The Ready-to-Drink Cocktails Subsection: 

The popularity and consumption of ready-to-drink (RTD) cocktails has significantly expanded over the last several years and is projected to continue to grow.   

There are different types of RTD alcoholic beverages, some of which are wine-based and some are spirit-based. Wine-based cocktails generally contain fruit juices, such as grapefruit, orange, lemon, mango, or various berries. These products are sometimes perceived as being healthier and, therefore, more desirable than spirit-based products or traditional wine. This, in turn, has resulted in somewhat of a shift from wine to wine-based RTD cocktails, as the latter contain less alcohol by volume. 

Spirit-based RTD cocktails usually contain alcohol by volume of between 5% and 13%, include alcohol mixed with other ingredients such as juices, and are generally available in single-serve cans or bottles with various flavor options. Vodka, whiskey, gin, tequila, and rum are the most commonly used spirits in RTD cocktails.  

Ready-to-drink cocktails are sold in both cans and bottles, with bottle packing accounting for a revenue share of 56.8% in 2023. Initially, the RTD concept was launched in a bottle package design which became quite popular worldwide. Aluminum shortages in countries such as the U.S. led to the use of glass bottles for the introduction and rising awareness regarding water and land pollution caused by beverages packaged in plastic bottles led to heightened demand for RTD cocktails in glass bottles. 

Markets change and preferences evolve. Notwithstanding continued consumer concerns about the environment, canned cocktails are today one of the strongest categories of alcoholic drinks in the U.S. and are expected to grow at a higher rate than their bottled counterparts. Having observed the shift, a large number of manufacturers have been offering canned cocktails, improving their accessibility across the U.S.  

RTD cocktails are sold through various channels including, but not limited to, grocery stores, specialty beverage retailers, liquor stores, and various online retailers. Retailers are assigning more shelf space to RTD products given increasing consumer interest, which many industry participants attribute largely to rising health awareness and the appeal of a lower alcohol content. The increased range of distribution channels and their reach across urban and rural areas are positively impacting the U.S. RTD cocktails market. And more consumers are going online to obtain their favorite RTD products, taking advantage of features such as automatic or one-click re-ordering, free deliveries and the ability to compare prices right from their own desktops or mobile devices. With online sales growth expected to continue, manufacturers are increasing their online distribution investments with an eye toward further expanding their reach.   

Market Growth 

The RTD market was positively impacted by the COVID-19 pandemic. Though demand for these newer alcoholic beverages was already rising, the segment exploded after the COVID-19 pandemic arrived. With bars and restaurants closed or operating at limited capacity, consumers turned to RTD cocktails to recreate the experience of enjoying professionally crafted drinks at home. According to VinePair, the volume of vodka and tequila-based RTD cocktails grew by 84% between 2020 and 2025. In general, the consumption of ready-to-drink (RTD) cocktails increased by more than 40% in 2020. The variety and innovation in flavors, along with collaborations with well-known brands and mixologists, have contributed to the market’s continued appeal and diverse tastes since that time.  

The U.S. RTD cocktails market size was estimated at $207.1 million in 2023 and, although final figures for the year are not yet available, is expected to reach $229.3 million in 2024. Moving ahead, the market is expected to grow at a compound annual growth rate of 15.2% from 2024 to 2030 to reach $599.4 billion by 2030. 

Chart 1 (3)

Wine-based cocktails dominated the market with a share of 43.9% in 2023. As consumers have become more sophisticated and discerning with their tastes and preferences in alcoholic beverages, we have seen a brisk shift from wine to wine-based RTD cocktails, as the latter contain alcohol in lesser quantities. This has negatively impacted the U.S. wine industry, as sales of wine have continued to decline over the last several years. 

Recommended Due Diligence Discussion Topics  

  • Excise Tax: With few exceptions, alcoholic beverages are produced in a bonded facility and are not subject to excise tax until removed from a bonded facility. Excise tax is determined based on the type of alcohol, i.e., wine or spirit. There would be a requirement for excise tax to be paid on any of the bonded finished goods sold to a consumer in the event of a liquidation. The lender should either reserve for excise tax payments on the borrowing base or it should be deduced as a liquidation expense when calculating a net orderly liquidation value to properly account for what would be due in a liquidation.
  • Distribution Channels: Distribution channels in the US are determined by state, so the ability to sell alcohol into various channels must be followed at the state level. 
    • States such as California allow sales to every channel, which means that if the manufacturer has the appropriate licenses and/or permits, products can be sold directly to consumers, retailers, restaurants, and distributors.   
    • States such as Utah are “control” states, meaning that manufacturers and suppliers may only supply alcohol products to the Utah Department of Alcoholic Beverage Services (DABS) or licensed beer wholesalers. DABS then distributes alcohol products through state liquor stores, package agencies, licensees, and permittees.  
    • States such as North Carolina take more of a hybrid approach where the state controls wines with high alcohol content, but shipping directly to the consumer is also allowed. Manufacturers with the appropriate licenses and permits can freely sell to all states, assuming all necessary permits or licenses are in place and all rules and regulations are followed.  

Understanding the already established distribution channels is critical to the success of a liquidation. 

  • Aging: While spirits and some wines are not generally subject to short-term shelf-life issues, RTD cocktails have a more defined shelf life. Generally, the shelf life of RTD cocktails is six months to one year, depending on the type of product. As such, inventory should be carefully monitored as many retailers have minimum shelf-life requirements when purchasing finished goods. If the product is short-dated, significant discounting may be required in order to sell the it in a liquidation.
  • Licenses and Permits: Selling alcoholic beverages requires specific licenses or permits, depending on the operations of the company and distribution channels. The lender would want to ensure that the company not only has all necessary licenses and/or permits but that these also remain current and in effect throughout the duration of the liquidation timeframe. 
Contributors
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Sandy Mickas

Valuation Director
Hilco Valuation Services
smickas@hilcoglobal.com phone vcard linkedin

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