Free Flow Wines fills a niche by filling kegs

Jan 1, 2014 3:00 PM ET

Napa Valley Register


Wine on tap is becoming ubiquitous, in large measure because of Free Flow Wines, which moved to a 22,000-square-foot space next to the Dey facility in the Napa Commons business park in July. It was formerly in Sonoma’s Eighth Street “Wine Ghetto.”

The 4-year-old company now supplies 300 premium wines from 150 wineries on tap. They are available at more than 2,000 restaurants, hotels, sports and entertainment venues nationwide from its 42,000 kegs.

The company has grown from filling 800 kegs a month in 2011 to 6,000 a month this year, and adding more kegs every month, the owners said.

The company has also just taken a step to further expand its business by installing an automated kegging line in its new plant. The system was made by KHS in Germany.

The new line will replace a slow and tedious manual system it’s been using to clean and fill kegs. The change increased the company’s output from 7,000 kegs a week to more than 20,000 kegs per week.

Free Flow also installed a water reclamation system that recycles all of the water used by the company.

The business is filling

The company’s business is filling the kegs and shipping them to wine distributors as well as receiving and reusing the kegs. It’s not a “wine company” that makes and markets wines. That’s left to its customers.

Ironically, it started out in a different business.

Dan Donahoe and Jordan Kivelstadt formed Free Flow Wines in 2009 with their own brand of wine on tap called Silvertap. The company recently sold the Silvertap brand to the Smart Wine Co., however, and is now focused on kegging and logistics services for other wineries.

Now wineries ship their wine to Free Flow in small portable tanks or deliver it in tank cars. Their wine customers range from small wineries like Arietta and Saintsbury here to giants like Constellation (Franciscan) and Gallo (William Hill).

“Wine on tap has allowed us to deliver wine in an exciting new way,” said Dave Nientimp, vice president of marketing at Constellation Brands. “The founders of Free Flow Wines are wine industry professionals who understand that quality is key in this business.”

Other Napa wineries that have used Free Flow’s services include Beringer, Flora Springs, Hill Family Estate, Hess Collection, Reata/Jamieson Ranch, Luna Vineyards, Long Meadow Ranch, Miner, Raymond, Robert Craig, Rutherford Hill, Scott Harvey, Spellbound and Trefethen Family Vineyards.

The wines go through their regular distributors like Southern Wine & Spirits and Young’s Market, though wineries in California can also sell directly to bars, restaurants and stores.

The customers include small bars and large corporations like Marriott Hotels and Caesars Entertainment. Free Flow Wines recently spearheaded a change to Florida laws that limited the size of wine containers to one gallon. The new laws allow restaurants and hospitality chains to offer wine on tap in their restaurants across all 50 states.

“Free Flow Wines allows us to offer great wines on tap so that our guests can experience them just as the winemaker intended,” said Lou Trope, a vice president for Marriott hotels. “It is not only a great quality solution but also alleviates the common wine storage challenges behind the bar.”

What you won’t find on tap from Free Flow are low-end wines. It packages only premium wines.

Free Flow isn’t alone in keg wines. Michael Ouelette started Vintap, and Jim Neal has N2 wines.

You can find wine from Free Flow’s kegs at most places in the valley that offer that option, though the company doesn’t really know where since that’s left to the wineries and their distributors.

What’s the appeal?

Wine on tap has many advantages on wine shipped in bottles, including quality, the environment and economy.

Premium wine in kegs maintains the quality it had when it goes into the keg. Every glass remains the same, delivering a fresh glass on tap. That’s especially important to restaurants and bars, for they don’t have to throw out the remainder in opened bottles if it goes bad.

The kegs require less sulfur dioxide for preservation than bottles with conventional corks, too.

Kegs eliminate “corked” wines contaminated with trichloroanisole (TCA) from the corks, which affects 2 to 3 percent of wines sealed with natural corks.

White wines in kegs stay fresh about a year in the kegs, red wines up to two years. It’s not the ideal format for old big red wines, but the whole idea of keg wines is to drink them young and fresh.

Kegs are a sustainable, environmentally friendly way to ship wine. Each wine keg holds the equivalent of 26 bottles, and in 2012 Free Flow Wines saved 347,254 bottles, corks, capsules, labels and cases (equaling more than 260 tons of packaging waste) from landfills nationwide.

Free Flow claims that every new 19.5 liter (about 5 gallons) keg it puts into service is like taking an average car off the road for two years. “Each keg will save 2,340 pounds of trash from the landfill over its lifetime,” said Kivelstadt. “One steel keg saves the carbon dioxide equivalent to that sequestered by 28 trees and because our kegs are reusable, there is nothing to recycle and less to the landfill.”

Some vendors use one-way kegs, but reusable kegs provide a 30 percent reduction in CO2 emissions to deliver the same amount of wine.

“Caesars Entertainment pioneered premium wine on tap in Las Vegas,” said Chris Picone, director of strategic sourcing for National Beverage at Caesars Entertainment. “By installing wine on tap throughout the casino, we have saved over 4 tons of trash and contributed significantly to our Code Green initiative.”

Kivelstadt says wine in kegs costs 25 to 50 percent less per ounce to ship in kegs.

The kegs save by eliminating the bottles, corks, capsules, labels and cases, and save in shipping those products as well as the finished wine.

Packaging wines in reusable kegs takes a lot of water to clean them, and in addition to installing the new kegging line, Free Flow also has built a water treatment plant. “The county wanted to charge $1.9 million to hook up and discharge our wastewater, but we installed our own water treatment system for $275,000,” said Kivelstadt. It contains four huge tanks, and a sophisticated filter, producing water so clean it could be used for pharmaceuticals.

The system will reduce the plants water consumption from 3,000 gallons per day to 100 gallons per day — not including office water.

Roots of the business

Dan Donahoe, the chairman of Free Flow Wines, began his career at Cakebread Cellars during the crush of 1992, and is well-versed in the production, wholesale, retail and marketing aspects of the wine industry. He founded his family winery, Teira Wines, in 2002 and built it into a nationally distributed wine brand. Donahoe continues to manage 100 acres of his family-owned vineyards in the Dry Creek Valley of Sonoma County.

CEO Kivelstadt co-founded Free Flow Wines with Donahoe in 2009, and has been leading the growth of the business since the beginning. Kivelstadt was trained as an engineer at Tufts University before moving on to management consulting for more than two years.

In 2006, he began his career in the wine industry as production manager for the Donum Estate. Since then he has made wine in four countries, founded his own bottle brand, Kivelstadt Cellars, and manages his family’s organic 10-acre Sonoma County vineyard.

Kivelstadt admits that the business is capital intensive, and says it would take $10 million to enter the market effectively. He has a well-connected board of directors, including Bill Price, co-founder and partner emeritus of TPG Capital; Justin Chang, principal, Colony Capital; Doug Muhleman, past group vice president, brewing operations and technology of Anheuser-Busch as well as CEO and president of Busch Agricultural Resources; Jeff O’Neill, well-known vintner; J. Taft Symonds, chairman, Symonds Investment; Albert Baldocchi, director, Chipotle Mexican Grill; and Micah Broude. consultant to the restaurant industry and founder of E&O Trading.

What’s next for Free Flow? There’s plenty of opportunity in the restaurant and bar business, but they also plan a home keg, though it will be recyclable rather than reusable.