RTDs are undergoing a major period of reinvigoration, according to the latest category data, so is it time you gave more space to the category in-store and focused on the fastest-selling lines?
By Antony Begley
With electricity prices sky high and chilled space at an absolute premium, choosing what you stock in your fridges is mission critical. With every facing in a chiller coming at a cost, every facing is under pressure to deliver sales and profit in your store – and if it’s not, it should be.
Efficient, profitable retailing relies on frequent range and space allocation reviews to make sure that your chillers are filled with fast-moving products and to help weed out the lines that just aren’t cutting it.
This is true across all chilled product categories – does any store really need 17 rosé wine SKUs? – but it’s particularly important in a category that had fallen off the radar in recent years for many stores: RTDs.
Having once been the darling of the off-trade section of your store, their star had been waning for years. The latest category data, however, shows that the RTD category is enjoying a remarkable renaissance of late.
“Having spent a decade in Spain, I was astonished when I returned to the UK and drove around local retailing outlets in Glasgow, Edinburgh and Dundee to find that, other than Dragon Soop, the RTD category was pretty much as I had left it in 2007,” says Andy Ferguson who, working with Red Star Brands, is the man spearheading the Four Loko brand in Scotland as success grows across the UK. “I knew straight away there was an opportunity.”
RTDs up 20%
So how is the RTD category performing? Well, the fact that RTD sales by volume are up 30% over the last year [IRI, 12 months to Nov 2023] and nobody seems to have particularly noticed tells a story all by itself. Just as interesting, the supermarkets are actually seeing declining volumes over the same period, down 11.7%.
Those two statistics alone should be enough to make most local retailers sit up and take note.
“It’s a strange one for me,” says Ferguson. “Normally with stats that mind blowing, you’d be expecting to see the trade press running endless articles and retailers beating down a path to your door. To be fair, we are seeing more and more demand for our brand, Four Loko, and we are seeing some amazing growth, but it’s odd that the sector seems to be slow to wake up to the RTD opportunity 2.0 – retailers only need to check their own EPOS data, the evidence is right there… review and refresh.”
The latest IRI data also shows, however, that the face of the UK RTD market is changing dramatically. WKD remains the biggest brand in the market, worth over £10.6m, but in line with many of the other well-established brands, it’s losing value. WKD is down 15% in the last year by value, Jack Daniel’s is down 12% and Gordon’s & Schweppes is down 2%.
On the flip side of that coin, AU Vodka is up 279%, Four Loko is up 85% and Dragon Soop is up 28%. The RTD times, they are most definitely a-changin’.
When you look at convenience data specifically, the transformation is even more striking. Dragon Soop is the number one player with 18% value share, up 29% in the last year, while AU Vodka now sits in the number three spot with 12% value share, up 221% in 2023. And already at number four is Four Loko with 7% value share, up 77% over the year.
“There’s no question that the RTD market has changed substantially,” says Ferguson. “Brands like Four Loko, Dragon Soop and AU Vodka are driving the real growth. I’m particularly pleased with Four Loko’s performance and our position as a top-five brand in GB convenience. You have to remember that this is from a standing start, a brand-new product. Within just a couple of years we’re now the number five RTD in GB convenience.
Drill down even further to Scottish sales, however, and the picture gets even rosier both for the RTD category as a whole and for Four Loko as a brand.
“When you look at Scottish-specific data, Four Loko is actually the number two brand,” comments Ferguson. “In the UK we started in Scotland so that’s where the majority of our sales have come from so far, but it’s a pretty impressive achievement. In addition, in Four Loko White we have the fastest-selling RTD SKU in GB convenience and we have another eight SKUs in the top 12.”
Only AU RTD has added more value contribution in the last year, despite the fact that Four Loko is mainly only in Scotland and AU has been available across the UK.
“Distribution remains our key challenge,” says Ferguson. “We know that when retailers stock it, it flies. So, all we have to do is get them to stock it. We are having some success on that front and have added over 10,000 new distribution points in the last 12 months, about half of them down south and the rest in Scotland.
“That will massively help us continue to grow sales and profits for retailers. Recent figures show that we’ve only got weighted distribution so far of 16.2%. Compare that with AU which has 54% distribution. Then look at the value we add per distribution point. We’re adding £784,000-worth of sales compared to Au’s £289,000. To put that another way, Four Loko is delivering three times the value with one-third of the distribution.
“We are confident that as we grow distribution points, we’ll see volume and value continue to accelerate and that can only be good news for retailers stocking the brand.”
“Red Star Brands, the company that distributes Four Loko has a cracking record of really getting under the skin of product categories and working with people who really understand local retailing and how it works,” says Ferguson.
“They have a strengthening track record of bringing US disruptor drinks and snack brands to the UK and in Four Loko we have a brand with a real point of difference. It’s an 8.5% bold-flavoured RTD in 440ml cans. No PMP, no multipack. Importantly, it’s a vodka-based drink with no energy or stimulant ingredients.”
Ferguson is also very aware of the need to keep the category fresh and exciting for today’s RTD customers.
“The customer base for RTDs has changed and we know that flavours and NPD are key,” he explains. “The Four Loko range started out with just four lines but the range now extends to nine and we will have more NPD launching early this year. That helps drive excitement and trial and brings new customers into the category and importantly, your store..
“But the number one challenge I would put to local retailers is to take another look at their chillers and how much space they are dedicating to RTDs. The category is in volume growth by more than 30% in convenience. Is that fact reflected in their stores and in their chillers?
“And I’m not advocating just expanding the space for the sake of it. With electricity bills the way they are, every facing you have in the chiller needs to be earning its keep. That means stocking the fastest-selling lines, stripping out the dust gatherers and giving the category and the key products the space they need to deliver the sales and profits you need.
“There’s a clear demand for it from consumers and the space dedicated to the category in-store needs to reflect that.”