The Opportunity for PA-Made Ready-to-Drink (RTD) Cocktails in Pennsylvania

Introduction 

In 2024, Pennsylvania enacted a transformative change for the ready-to-drink (RTD) cocktail market. The state passed a law allowing malt beverage distributors to sell spirit-based RTDs containing less than 12.5% alcohol by volume (ABV). This "get with the times" legislation has opened unique opportunities for Pennsylvania-based manufacturers and malt distributors, creating new revenue streams and customer bases. Plus, more options for the consumer. Hooray!

This blog explores how the new law benefits local manufacturers, malt distributors, and Pennsylvania consumers, while highlighting the competitive advantages of PA-made RTDs over national brands.

The 2024 Law and Its Implications

Expansion of Market Access for RTDs

Before 2024, spirit-based RTDs were sold through Pennsylvania’s state-controlled liquor stores, limiting options for consumers and increasing costs for everyone. Now, with the law change: 

• Malt distributors can sell RTDs with less than 12.5% ABV directly to consumers.

• PA manufacturers can bypass state-controlled liquor stores and sell directly to malt distributors. However, they must submit reports on their sales volumes, and the state has the authority to request the product be sold through its system. 😒

Avoiding State Markup for Local Brands

A critical distinction of the new law is that malt distributors purchasing PA-made RTDs can buy directly from the manufacturers, bypassing the state’s markup. This setup creates a win-win:

• Manufacturers enjoy higher profit margins by selling directly.

• Distributors purchase these products at a lower cost compared to buying national RTDs through the state system. Many PA manufacturers also provide direct delivery—a convenience not offered by the state system.

Caveat: State Price Parity

While this law offers clear advantages, it includes a caveat: If a product is listed in the state’s liquor system, it cannot be sold at a lower price than the state’s retail price. This incentivizes PA brands to keep select SKUs out of the state system, especially if they can generate enough direct demand.

Challenges with National RTD Brands

Dominance of High Noon and Stateside

National RTD brands like High Noon and Stateside dominate the market and are widely available in state liquor stores. However, this dominance poses challenges for malt distributors:

• Consumers know the state retail price, leaving little room for distributors to earn significant profit margins.

• Trying second-tier national RTD brands with small volume and smaller margins is less than desirable.

Limited Profit Potential

For malt distributors, reselling nationally recognized RTDs purchased through the state system provides little financial incentive. To stand out and maximize profits, distributors need alternatives that align with their business goals and justify the hefty RTD permit cost.

Advantages of PA-Made RTDs

Unique and Differentiated Products

Local manufacturers have an edge when it comes to offering:

• Trendy flavors and varying alcohol percentages.

• Distinctive packaging that captures attention and celebrates Pennsylvania roots.

• Locally rooted stories that appeal to consumers eager to support regional businesses.

Cost-Effective Partnerships

By purchasing directly from Pennsylvania manufacturers:

• Distributors avoid state system markups (sometimes as much as 60%), enabling competitive pricing.

• Local brands often provide delivery services, further reducing logistics costs.

Supporting Pennsylvania Businesses

Choosing PA-made RTDs helps:

• Retain revenue within the state.

• Strengthen Pennsylvania’s local economy by supporting other small businesses.

• Enhance brand loyalty by emphasizing community support.

Strategic Opportunities for Malt Distributors

Prioritizing Unique Local Brands

By focusing on local RTD brands, malt distributors can:

• Differentiate their offerings from competitors.

• Capture higher profit margins on less well-known, high-quality products.

• Collaborate with local brands on marketing and tasting events.

Leveraging Delivery and Direct Sales

Local manufacturers’ ability to deliver directly to malt distributors simplifies logistics and reduces costs. This efficiency helps distributors:

• Stock inventory faster.

• Serve customers more effectively.

Conclusion

The 2024 legislation marks a pivotal moment for Pennsylvania’s RTD cocktail market. By leveraging their unique ability to sell directly to malt distributors, PA-made RTD brands have a golden opportunity to thrive. Distributors, in turn, can benefit from the profitability, uniqueness, and local appeal of these products.

In a landscape dominated by national brands, Pennsylvania’s local manufacturers and distributors are poised to rewrite the rules and bring new options to consumers in the state. We will see what 2025 brings!

FAQs

1. What is the new 2024 RTD law in Pennsylvania? The law allows malt distributors to sell spirit-based RTDs with less than 12.5% ABV and enables Pennsylvania manufacturers to sell directly to distributors.

2. How do PA-made RTDs benefit malt distributors? They offer higher profit margins, unique flavors, and local connections, unlike national brands purchased through the state system.

3. What are the limitations of national RTD brands for malt distributors? National brands like High Noon and Stateside often have low-profit margins due to fixed retail prices and widespread availability.

4. Why should distributors prioritize local brands? Local brands provide cost advantages, innovative products, and support Pennsylvania’s economy.

5. What incentive do PA manufacturers have to stay out of the state system? By staying out, they can sell directly to malt distributors at competitive prices, avoiding the state markup.