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Innovator: Free Flow Wines

Author: Bonnie Durrance
August, 2016 Issue

"If you have men who will only come if they know there is a good road, I don't want them. I want men who will come if there is no road at all."—Sir David Livingstone

One of the charms of touring through the sunny hills of European Wine Country is stopping in little village bistros and sampling local fare with, of course, local wine—which often arrives at the table in a carafe, straight from a tap.

“I think the first time I experienced wine on tap was in a small bistro in Verona with some sommelier friends and other wine producers,” says Chris Hall, executive vice president and COO of Long Meadow Ranch in St. Helena. “At the end of a day out drinking all these important wines, everybody was interested in having a casual experience with friends. Nobody shied away from ordering the house red by the carafe. We were surprised with the quality.”

He asked about the wine and the bistro owner told the story of his friend, a wine producer in the region. The owner wanted to support his friend, but in his restaurant, he only poured wine from a tap. So he and the friend got together to make a blend every year, which he serves proudly at his restaurant—on tap. “When people [in the United States] began offering wine on tap, there weren’t that many wineries participating,” says Hall, “I saw it as an ‘untapped’ opportunity.”

Here in the North Bay, the trend toward enjoying wine freshly poured from a keg is catching on. Napa-based Free Flow Wines handles the process from concept to keg and back again, letting wineries, distributors, restaurants and other “on-premise” businesses deliver premium wines with the freshness of a newly opened bottle—by the glass, every time.

Two wine lovers, one great idea

In 2009, Dan Donahoe and Jordan Kivelstadt had the idea to launch the first premium wine brand available exclusively in kegs and distributed nationally. Though successful, the brand gave way to an even bigger idea as other wineries started asking for help filling and managing the logistics for putting their wines in kegs. Out of these requests came Free Flow Wines, which focuses on providing keg leasing, filling and logistics services to wineries and being category ambassadors in the wine on tap market.

So far, Free Flow Wines boasts more than 140 winery partners, encompassing in excess of 230 brands. “While we don’t have clear visibility into the operators pouring wines on tap,” says Free Flow Vice President of Sales and Marketing Heather Clauss, “based on our volumes, we guesstimate there are close to 6,000 accounts (including restaurants, hotels, bars and sporting venues) pouring wine on tap nationwide.”

Kivelstadt is excited about the company’s success so far. “We’re growing every year,” he says. “We keg wines from all over the world. We’re opening a facility in New Jersey in July to accommodate European wines.”

Free Flow offers a complete kegging and logistics service. It leases stainless steel kegs to wineries, fills them with wine as directed, then manages the logistics and return of the empty kegs back to its Napa headquarters. Using state-of-the-art procedures and equipment, kegs are cleaned a refilled. (Kegs are constructed of 304-grade steel, which prevents any leeching of flavors.)

“Each keg is the equivalent of 26 bottles of wine,” says Kivelstadt, “So we can calculate the number of bottles a winery’s keg program has saved from landfill to-date by multiplying the number of kegs sold by 26. For distributors, we use the number of kegs purchased.” To-date, Free Flow has eliminated close to 8 million bottles from circulation.

The current goal is to control 10 percent of all on-premise wine by the glass consumption delivered in keg in the United States. To reach that goal, the company needs to continue offering great products and service to assure consumers that this isn’t just a trendy alternative but a truly better way to enjoy wine by the glass. “The important thing,” he says, “is that we’re really out to serve better wine by the glass. The huge benefit of sustainability is wonderful, but at the end of the day, it’s what’s in your mouth.”

“Free Flow makes the customer’s experience simple,” Kivelstadt continues. “We’re a packaging and logistics company—the backbone of the entire category. It’s our job, as Free Flow, to work with wineries and distributors to make sure they have enough product at the wholesalers, and we make sure there’s sufficient inventory in stock behind that.”

Free Flow provides a full range of services that keeps the kegs moving, the wine flowing and the demand growing across a broad range of customers. In the process of developing the business model, it’s captured the majority of the category. “We have about 85 percent of the whole wine on tap market,” says Kivelstadt. “This is relative to others currently kegging wine in the United States.”

The company provides customers with everything needed to deliver premium wine on tap, from the first consultation to pick-up and keg return. “There’s nobody else out there doing anything like what we’re doing,” he says. Does it mean somebody could? “Yes, but it would cost them tens of millions of dollars in start-up capital to compete.” For Kivelstadt, staying ahead of the competition really means staying ahead of all competition, and Free Flow has managed to do that by working fast. “You have to grow quickly,” he says, “so there isn’t an opportunity for competition.”

Lest this sound greedy, he explains that “owning” the category is actually a good thing—not just for Free Flow Wines, but also for customers. “In a business like ours, you can’t have a lot of competitors in the market, because it’s a ‘pooling’ model,” he says. “All our kegs have to work in tandem. All our customers benefit from all the other customers. We’re working together to build a market. It’s a synergistic relationship.”

Efficiency is enhanced when everybody uses the same format, he explains. So the many businesses using the Free Flow platform can be comfortable knowing their kegs, fittings and fridge setups have become almost standard.

One-stop shop

The company’s marketing plan is comprehensive. “A small percentage of our marketing is targeted at consumers,” Kivelstadt says, “but we really focus on the wineries. We also provide sales and marketing support to wholesalers, educating and working with them, as well as working inside the trade with restaurants and operators, educating them about categories of wine on tap (wine varieties and price points), as well as dispensing equipment options and installers. So we’re marketing across a very broad spectrum of people.”

Free Flow offers consulting services, too, helping wineries decide what and how much to keg. For example, Kivelstadt says, small wineries that do their bottling only once or twice per year have to decide how much they want to put in bottles and how much in kegs, whereas big wineries may keg 10 or 11 times per year, because they have a tremendous amount of wine. “When a winery owner comes to us and says, ‘I’m interested in diving into this space of wine on tap,’ we sit down together and look at the price points of their wines,” he explains. “We also look at the price points and varietals of wines already in the marketplace in kegs, and we look at their distribution network. Finally, we make recommendations about what an optimal starting point is.”

Does a winery’s brand suffer if wines are available on tap? “That was a concern a few years ago,” says Kivelstadt, “but I don’t think anyone cares anymore. In fact, a lot of premium brands are using wines on tap to reach customers they couldn’t otherwise.”

He explains, “Say you’re an established winery and your wines are getting more expensive—you’re pricing yourselves out of the market for wines by the glass, which means losing out on a whole customer base. We say wine on tap is a great way to extend your brand into a new format that appeals to a younger generation and offer it at a more competitive price point.”

According to Kivelstadt, wine on tap is a win-win all around: “We introduce a great product at a great price point to a group of customers most wineries wouldn’t otherwise be able to reach.”

“I think millennials are open to new varietals and new ways of enjoying wine,” says Hall, a self-confessed member of that sought-after demographic, “but they’re also interested in the experience. So for Long Meadow Ranch as a whole, I focused on bringing up our entire philosophy, mission and vision to the table.” He’s found no concern with the wine on tap concept in his restaurant. “Here, there’s no problem,” he says. “There’s no confusion with patrons: You’re in Napa. You make wine. They trust you.”

Opportunities are flowing

Normally, when ordering fine wine by the glass, you risk getting something from a bottle that’s been sitting on a shelf (and not at the optimum temperature), which makes it lose some of its taste. “If you open a bottle with a cork or a screw cap, the clock starts ticking as soon as you’ve broken the seal,” says Bill Batchelor, winemaker for Martin Ray Winery in Santa Rosa, “whereas wine in a keg stays fresh for months.” So for restaurants, it’s more profitable, as there’s no need to discard portions in bottles that have gone stale.

“Wine on tap creates new opportunities across the board,” agrees Batchelor. “Consumers ordering by the glass may not know the difference if it’s not advertised as wine on tap, but they’re getting a glass that should be consistent and fresh. For the establishment, there’s the advantage of efficiency—there’s no waste, and wine is kept fresh.”

For wineries, the wine on tap option opens up ways to reach new customers. Batchelor says wine on tap opens up a whole range of wine to choose from—and choosing adds to the fun. “I think, for restaurants that do advertise wine on tap, there’s a novelty element, like the micro-brew revolution. People are used to trying small batches of things in unique flavors and styles—being more experimental. So if they’re going to an establishment where they know the wine is on tap, there’s probably some thrill about, ‘What’s on tap this week?’”

In the end, the deciding factor for the person holding the glass shouldn’t be whether the wine is from a bottle or a keg; it’s whether it meets the taste test. “It doesn’t matter what the packaging is,” says Batchelor. “What counts is what it tastes like, and if you can deliver there, you’ve won a friend for the brand.”

Eric Sothern, national sales director for the Bespoke Collection, a wine producer and lifestyle company that currently features three labels, Blackbird Vineyards, Resolute Wines and Recuerdo Wines, goes a step further: “I believe you’re more likely to get a nice, fresh glass of wine, at the proper temperature for both red and whites, from a keg rather than out of a bottle,” he says, because storage of bottles—especially open bottles—is tricky.

“Wine in a bottle could be sitting in the back of the bar for two or three days at 70 or 80 degrees, whereas [wine on tap] programs will have their wine keg fridges set at the proper temperature.” So each glass is like one poured from a newly opened bottle that’s been stored at its optimum temperature. “Free Flow is the leader in making sure kegging is done right.”

 Customers concur

“We’re growing our wine business,” says Hall, “so I was willing to explore new opportunities to sell.” Long Meadow Ranch was looking to sell a few of its core wines on the wholesale market and, when the family opened Farmstead at Long Meadow Ranch’s restaurant in St. Helena in 2010, it was a perfect place to feature its wines by-the-glass. “That’s going very well for us in our own internal environment and in the wholesale market across the country,” he says.

Long Meadow Ranch kegs wines that are typically consumed at higher volumes in restaurants, such as Sauvignon Blanc. “We offer it by the glass, half liter or liter. And keg wines are a great option for those looking for more than a glass but less than a bottle. We’re doing it because we believe this is the highest quality way of serving our wines by the glass.” Long Meadow Ranch uses Free Flow Wines because, “It has the most well-organized filling and logistics solution available.”

Batchelor says when Martin Ray decided to experiment with kegging wine, it tried the alternative options but stayed with Free Flow Wines for many reasons. “It just made the most sense,” he says. “I send the wine to them and order as many kegs as I need. I never see it after that—they handle the distribution logistics.

“Plus, we’ve never had any issues with wine quality,” says Batchelor. “When they’re filling the kegs, we send out to an outside laboratory for an analysis to make sure there’s no yeast or bacteria that may have breached the filters. It’s always perfectly clean. Free Flow’s quality standards are good. They understand winemaking.”

As for the experimental factor, he says it really isn’t that much of a leap: “People act like this is some radical new thought. But beer and cider have been kegged forever, so what’s weird about it? It’s just a new wine packaging format, and it makes sense. If you’re doing by-the-glass sales, it’s the way to go.”

It’s not only about convenience, he says, but also about quality. “The wine consumers are drinking out of a keg or on tap is exactly the same as the wine they’d be drinking out of a bottle, but fresher and more consistent.” He believes the wine on tap option has opened up new opportunities for Martin Ray and Angeline wines. “I think filling a niche that restaurants are looking for lets us get our foot in the door much more easily than going through the traditional process of trying to solicit our wines to get on their list. People who aren’t kegging could very well be missing an opportunity. It surprised us. We dabbled in the business, testing it out, and it’s been pretty amazing.”

Handling the Details

“In a previous position, we did a smaller run of half barrels in steel, but the supplier only ever got two of them back—and they each cost hundreds of dollars!” says Eric Sothern, national sales director for the Bespoke Collection. “Free Flow manages all keg returns, all the deposits your distributor partners have to pay and then get back upon return of the keg.”

Bespoke started out using a competitor’s plastic kegs, but then found that Free Flow offered the complete service it needed. “The reasons we went with Free Flow included them taking over all keg production. That’s the niche it’s carved out. It’s also a leader in doing it right. Free Flow takes the headache off our production team and solves the logistics of keg return. It also owns all the kegs, which lowers the barriers to entry.”

He likes the Free Flow Wines—and wine on tap, generally—for more than just efficiency. He acknowledges there may have been an image problem with wine from a tap as opposed to a bottle with a beautiful and perhaps famous label, but that the quality of the product is moving that concern aside.

“In the past, keg wine was perceived as a ‘low end’ option,” he says, “but as more and more quality-minded suppliers, like Bespoke Collection, have entered the market, we’re pushing up both the quality and the price limit for the market, and there’s more and more acceptance amongst the gatekeepers in restaurants who are really hungry for kegs from smaller, artisan producers. Free Flow is connected to that as well. They removed a lot of barriers to entry, in terms of investment.”

 And the Keggy Goes To…

Earlier this year, Free Flow Wines presented the Second Annual Keggy Awards to recognize its partners (wineries, distributors and restaurant operators) for the sustainable impacts their wine on tap programs have made. Currently Free Flow is accepting nominations for extraordinary wine on tap programs nationwide for either program or design. 2015 Keggy Award winners includes:

• Constellation Brands and King Estate, which have each saved more than 500,000 wine bottles from landfills, individually earned Keggys for sustainability.

• Hess Collection, Long Meadow Ranch, O’Neill Vintners & Distillers, Prestige Wine Imports, Saintsbury, The Mendocino Wine Company and Treasury Wine Estates were each awarded a Keggy for saving a minimum of 100,000 wine bottles from landfills since they began kegging with Free Flow Wines. 

• A Keggy Distributor Awards went to Southern Wine & Spirits of California for saving more than 500,000 wine bottles from landfills to-date.

• Distributor Awards also went to Young’s Market of California, Southern Wine & Spirits of Nevada, RNDC Texas, the Henry Wine Group and Wine Warehouse of California for saving at least 100,000 wine bottles from landfills.

• The Keggy “People’s Choice” Award, which recognizes one exceptional wine on tap program and is chosen by the public, went to Samantha’s Tap Room & Wood Grill of Little Rock, Ark.

• Keggy Ambassador Awards, which recognize individuals who’ve impacted the wine on tap category in a substantial way, went to John Coleman from Savor Gastropub in Dallas, Tex., and Mike Klosterman from Apex Commercial Kitchen Co. in Kansas City, Mo.

 

 

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