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Monday, July 22, 2013, 6:30 am

Free Flow’s kegs tap wine-by-glass thirst

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    NAPA — Free Flow Wines is quadrupling the size of its keg-filling operation in a move to southern Napa Valley to keep up with demand for providing wine to on-premise accounts in a format that allows for more sales and less waste.

    Free Flow Wines principals Dan Donahoe and Jordan Kivelstadt

    By September, Free Flow (415-626-1215, freeflowwines.com) is set to be moved into a 22,000-square-foot facility at 2557 Napa Valley Corporate Dr. in south Napa from a warehouse south of Sonoma where the company started three and a half years ago.

    “We were bursting at the seams at the previous facility,” said Jordan Kivelstadt, chief executive officer and a founder.

     Last year, company revenue grew by 300 percent while transferring the equivalent of 400,000 bottles of wine into Free Flow’s specially designed 19.5-liter GreenCask containers and receiving empty kegs for refilling. This year, the company anticipates filling 1 million bottles’ worth of kegs.

    Free Flow touts the reduced waste from cardboard cases, bottles, labels, stoppers and capsules by using refillable kegs, which hold the equivalent of 26 bottles.

    “For every keg we put in service, we reduce the carbon footprint for the wine served by 97 percent,” Mr. Kivelstadt said. “I hope what we’re doing is really impactful, both from a business side and from an environmental side.”

    The company filled 2,300 kegs in December and is filling 5,000 this month. The staff has increased from eight at year-end to 13 now in anticipation for the expansion, and the workforce is expected to expand to 20 to 22 by mid-2014.

    The number of wines available by the glass at casual and fine restaurants increased by 6.5 percent from 2009 through last year, according to a presentation by Charles Gill of Winemetrics at the Unified Wine & Grape Symposium. In the same timeframe, the number of wines for sale by the bottle in casual and fine restaurants slipped 4 percent from 2009 through last year.

    The list of wineries using the service has grown from a handful of early adopters such as Paul Hobbs, Skylark, Lioco and Saintsbury to more than 150 producers today, ranging from E&J Gallo, Constellation Brands and Treasury Wine Estates to Trefethen, J and small North Coast wineries.

    The process of getting the wine from the producer to the consumer works like this: The winery leases kegs from Free Flow and moves wine to the transfer facility in bulk. Before wine meets keg, Free Flow uses a 10-step sanitation and quality-control process on the transfer system and a 14-step sparging and cleaning regimen on the kegs returned.

    Then wine goes into the keg, to be pushed out to the on-premise tap via an inert gas blend of three-quarters nitrogen and one-quarter carbon dioxide. The producers’ distributors pick up the kegs and deliver them to on-premise venues, and Free Flow bills and credits distributors for keg deposits.

    The service costs roughly $10 to $14 for the equivalent of a 9-liter case of wine plus $4 to $7 per keg in return-shipping costs. The service cost also covers printing and application of keg and cap brand labeling.

    Currently, Free Flow has about 20,000 kegs placed in 42 states as well as outside the U.S.

    Originally a branded wine-in-a-keg producer, the company has transitioned into a custom kegging and logistics provider. Mr. Kivelstadt and Chairman Dan Donahoe started Free Flow in 2009 to produce the wine brand Silvertap. The inspiration for the brand came from a visit to Atlanta restaurant Two Urban Lix, opened in 2004 and featuring a glass-enclosed tower of dozens of wine kegs. Restaurant proprietor Todd Rushing himself was inspired by the stainless-steel kegs he saw West Coast wineries use to top off oak barrels after evaporation.

    A significant challenge in distributing the Silvertap brand was adapting beer keg delivery systems to the more reactive qualities of wine, according to Mr. Kivelstadt. Tubing from keg to tap had to be able to keep out oxygen for two or more days to account for restaurant operating hours. Silvertap brought in Micro Matic, a major maker of beverage draft dispensing systems, to remake common brass- and nickel-coated tap parts in 304-grade stainless steel.

    Then to smooth the process of getting kegs from the production facility to restaurants nationwide and back, consolidator and reverse-logistics provider Kegspediter was brought on.

    About 18 months after the launch of Silvertap, the founders realized the wisdom in the advice of a company mentor that building a brand and category at once was highly challenging. In the next two years, the company started transitioning toward keg logistics, and a buyer for Silvertap is being sought, according to Mr. Kilvelstadt.

    One keg-filling challenge still to be surmounted in coming months is bubbly. Because of regulations, carbonation would have to be done at the facility, which would be problematic for various winery-centric processes for effervescent wine.

    The company has received about $2 million in angel-level investment so far. Free Flow’s board of directors includes Bill Price, formerly of TPG Capital and now invested in Sonoma-based Vincraft Group; virtual vintner Jeff O’Neill, who headed Golden State Vintners before its sale in 2004; restaurant financier Albert Baldocchi; and Justin Chang, another TPG executive and now a principal of private-equity and real estate investor Colony Capital.

    In the mid-June lease deal for Free Flow’s new Napa location, Glen Dowling, Matt Bracco and Chris Neeb of Cushman & Wakefield represented both the company and property owner LBA Realty.

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