Diageo Tests Ready-to-Drink Cocktails in 12-Ounce Cans

Early Results Could Be a Bad Sign for Beer Industry

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CHICAGO (AdAge.com) -- In the spirits industry's latest intrusion upon brewers' turf, Diageo is testing ready-to-drink cocktails in 12 oz. cans with the same alcohol content as most beers.
Retailers in Florida said the canned rum, vodka and whiskey cocktails were selling briskly in the test area.
Retailers in Florida said the canned rum, vodka and whiskey cocktails were selling briskly in the test area.

Strong early returns
The Tampa-area test involves four brands -- Captain Morgan and Cola, Smirnoff Vodka and Lemon-Lime Soda, George Dickel Whisky and Cola, and Seagram's 7 American Whiskey and Lemon-Lime Soda -- and participating retailers said early returns were strong.

"They're selling very well and we're pleased," said Bob Gibson, marketing director for ABC Fine Wines & Spirits, a chain of 150 Florida liquor stores. Mr. Gibson said Diageo has indicated that it intends to expand the test to a larger geographical area, and to a fifth cocktail featuring Crown Royal whiskey.

"We see [ready-to-drink cocktails] as an untapped category," said a Diageo spokeswoman. "We're anxious to see how consumers react to them."

Accepted overseas
While ready-to-drink cocktails are largely absent from the U.S. market, they've been widely accepted in certain overseas markets. In Australia, for instance, Beam Global Wine & Spirits sells 7 million cases of Jim Beam Bourbon Whisky and Cola each year, a "significant percentage" of the Beam brand's Aussie sales, according to a spokeswoman.

Despite that success, however, the marketer has not aggressively marketed the ready-to-drink product in the U.S., choosing instead to focus on its signature bourbon. But Diageo's apparently successful test so far (it's expected to run until next spring) could potentially pave the way for a much larger ready-to-drink spirits presence in the U.S., a move that would serve as another offensive by spirits distillers into beer's traditional domain. It's also likely, however, to spur complaints by advocacy groups that pre-mixed cocktails may have appeal among too-young drinkers.

Sitting next to beer
Like beer, these new products are about 5% alcohol by volume and come in 12-ounce cans, meaning they can be sold alongside beer in convenience stores, gas stations and beverage depots. With beer's share of the alcohol market falling to 51.6% from 55.5% since 2000, and spirits' share having climbed to 31.8% from 28.7% during the same period, any innovation that cuts into beer's portability edge will be viewed warily by brewers.

"It extends the occasions [spirits] can penetrate, and in that way it's a threat to beer," said alcohol-industry consultant Brian Sudano, managing director at Beverage Marketing Corp. "It opens up picnics and beaches and even some concessions."

Still, Mr. Sudano said that the ready-to-drink cocktails pose as much risk to traditional spirits as they do to beer. "I mean, if the quality is there, you can just buy the [ready-to-drink product] and not buy the spirit," he said.
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