Big Beer vs. Canned Cocktails in the Grocery Aisle
The rise of hard seltzers across America’s drinking scene is hard to miss. From tailgates to grocery store shelves, these fizzy drinks known as ready-to-drink (RTD) beverages have increased from 3 percent of the overall alcohol market a decade ago to around 12 percent today. In raw dollar amounts, the current RTD market is valued at over $36 billion and is expected to increase to just under $100 billion by 2031. But beneath the bubbly surface lies a bitter struggle over protectionism and regulatory barriers in state legislatures nationwide.
A closer inspection of the fine print on these canned cocktails reveals a surprising fact: many are not crafted with distilled spirits—as any imbiber would expect—but rather with malt-based alcohol. In fact, up until recently something as simple as a can of Jack Daniels and Coca-Cola could not be found in the United States.
This distinction is not driven by consumer preference but, unsurprisingly, by government policies. Distilled spirits face a significantly higher taxation rate in the U.S. compared to beer and other malt-based products. Additionally, stringent regulations in many states restrict where spirits can be sold, often confining them to licensed liquor stores (or government-controlled outlets in some jurisdictions) rather than grocery stores. A true canned cocktail made with real distilled spirits is hit with a double-barrel blast of higher taxes and lower market access.
The disparities in treatment between spirit-based and malt-based RTDs are glaring, and the rationale for maintaining these different rules is illogical. Many spirit-based RTDs are only 5 to 6 percent alcohol by volume (ABV), just the same as malt-based versions. For instance, a can of malt-based White Claw is 5 percent ABV, while High Noon’s vodka-and-soda canned cocktail sits at 4.5 percent ABV.
Despite this, only 29 states permit the sale of spirit-based RTDs in grocery and convenience stores, while nearly every state (47 out of 50) allows malt-based RTDs in these same outlets. Moreover, 45 states impose higher taxes on spirit-based RTDs than on malt-based offerings—and often the tax gap is comically wide. In West Virginia, a 6 percent ABV malt-based RTD has an effective tax rate of 2 cents per can, while a spirit-based RTD with the same ABV is subject to a 71-cent tax.
The beer industry, which predominantly focuses on malt-based RTDs, has actively lobbied to maintain this status quo of high tax rates and low market access for canned cocktails made with real distilled spirits. Numerous states are currently considering bil
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