Tapping into keg-wine profitsTapping into keg-wine profits

By James Scarpa


What do you have on tap?


For a growing number of restaurant operators the answer — premium wines and batched craft cocktails — is a welcome addition to the draft beers and soft drinks that have long inhabited kegs.


Consistency, ease and profitability are just some of the benefits restaurateurs are drinking 
in by using the newer bulk-
dispensed options, which they contend increase freshness, reduce waste, are easier to handle and store, and appeal to patrons seeking novelty. 


“Some customers were a little timid at first,” said Jennifer Ingellis, general manager and wine director of Brassica, a new Mediterranean restaurant in St. Helena, Calif., that has 10 wines on tap, including exclusive vintages from local winemakers. “But they have really thought it is very fun, and they’re having fun experimenting with them.” 


Tap wines allow operators with contacts in wine-growing areas the opportunity to feature exclusive limited-edition wines or wines custom made to match the menu. And some operators report that tap wines and cocktails have lower costs and higher profit margins than their bottled alternatives.


At Little Donkey, a new Mexican restaurant in Homewood, Ala., four premium California wines in kegs are an easy sell, said co-owner Nick Pihakis. The lineup consists of Zinfandel, Chardonnay, Sauvignon Blanc and a red wine blend, each priced at $7 to $10 per glass. 


“This is such high-quality wine, when people try it, they are blown away by it,” said Pihakis, who said he plans to add keg wines to the offerings at the 27-unit Jim ‘N Nick’s Bar-B-Q chain in which he also is a partner. 


Liquids with assets


Serving a glass of draft wine “is just like pulling a draft beer,” said Pihakis. And storage is easier. 


“You don’t have 14 different wines sitting around - two bottles of this, three bottles of that.”


The freshness of wine on tap, protected in the sealed keg from the damaging effects of air, could be a real boon for wine-by-the-glass programs, according to operators. 


“The issue that restaurants have is that after you open a bottle of wine, the next day it is not the same bottle of wine,” said Erik Oberholtzer, co-founder of Tender Greens, a seven-unit, Los 
Angeles-based chain of fast-
casual restaurants that has tap wines in its two newest locations. “I would argue that it loses its freshness and starts to deteriorate. In terms of both temperature control and just quality control, the tap system is better.” 


Paul Grieco, sommelier and co-owner of Hearth restaurant and the three Terroir wine bars in New York, said that kegs are the practical way to serve wines meant to be consumed soon after purchase, which describes the vast majority of wines in restaurants. An example is the New York State Riesling that he pours on tap.


“It’s young and fresh and balanced — a perfect Riesling,” said Grieco. “It is not meant to be great. It is meant to be perfectly quaffable. You have a 6-ounce glass of this stuff, and you have a smile on your face.”


Such a wine is not to be confused with the esteemed German Rieslings and Italian Barolos on the Hearth wine list, which evolve in flavor over years spent in the bottle, he noted. 


“There is still a place for bottled, cork-finished wines — no question about it,” said Grieco. “But what percentage of wine is consumed within five days of purchase? 90 percent?”


Tap wine can be a hot button for the earth-friendly crowd. Tender Greens touts a “bottleless” selection of six California boutique wines on tap and a selection of local draft beers, all of which fit the company’s mission of serving fresh, local and sustainable products.


“Aside from consistency, the reduction in packaging waste is probably the most compelling reason for having tap wines,” said Oberholtzer. “Our customer is very concerned and actively engaged in environmental care. They are very supportive, and they love the idea.”


Operators also look to tap wines for exclusive selections. For example, Brassica pours a Chardonnay custom made by a prominent Napa Valley winemaker. 


“They did a special blend of wines for us that weren’t quite right for their main program but were still great Chardonnays,” said Ingellis. What’s more, Ingellis said she has been invited by a local vintner to personally select a wine blend for Brassica’s taps. 


Another restaurant featuring custom keg wine is Out The Door, a three-unit casual Vietnamese eatery in San Francisco that is part of the Slanted Door Group. The six wines on tap are mostly “super local” selections from area vintners, said wine director Chaylee Priete.


Priete works with those small-scale winemakers to obtain wines that complement Out The Door’s Vietnamese cooking, which she said is best accompanied by un-
oaked wines with good acidity. 


“I can [take] what the winemaker has in stainless steel tanks or barrels and make our own blends,” said Priete. “It’s exciting to have a winemaker say, ‘Here are these three, five or eight wines, and if you can find a way to put them together, you can have an exclusive on it.’”


Out The Door patrons are so taken with the tap wines that only about 30 wines by the bottle are offered.


“It is hard to sell a true bottle of wine there anymore because people gravitate to the wine on tap,” Priete said. 


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Distribution hurdles 


Still, operators note that wine on tap can present logistical and supply challenges.


Oberholtzer of Tender Greens said that until recently the boutique winemakers he favors did not have distribution, forcing him to personally broker deals and transport kegs back and forth to the wineries.


“In the beginning, there was a learning curve, both for us and for our suppliers, because it is relatively new,” he said.


At Out The Door, which began offering tap wines three years ago, it was difficult to choose the proper kegs, lines and propellant gas at first, Priete said. She also has been forced to drive kegs to Oregon wineries that are making custom wine for the restaurant.


“Supply is hard to keep up with,” said Priete. “A few of the bigger wineries are getting into it, but if you want something that is really unique and, especially for us, kind of geared toward our food, there is a small field to choose from.”


Operators were divided on whether wine on tap lowered their wine cost, improved profit margins and allowed savings to be passed along to customers.


At Little Donkey, Pihakis said his profit margin is “much, much, much better” on tap wine than on bottles. He estimated that he pays the equivalent of $10 per bottle for California Chardonnay in a keg that would cost $15 to $16 per bottle wholesale. He prices that wine at $10 per glass.


Priete said she saves 20 percent to 25 percent on keg wine 
compared with equivalent quality wine in bottles.


“It is less expensive, so you can certainly pass on savings to the customer, as well,” she said.


However, the savings Oberholtzer expected to accrue by using keg wines at Tender Greens has not materialized. 

“We anticipated a savings of about $1 per glass that we could pass along to the customer,” said Oberholtzer. “But we are being told that a lot of the better wineries are resistant to charging less for wine in keg, partly because they don’t want to undercut their bottle business.


“And the smaller wineries that don’t have kegging equipment have to pass along the cost of filling service,” Oberholtzer continued. “So the price per glass works out to almost the same as it would be in a bottle for the same juice.”


While the use of wine on tap is growing, it is still uncertain just how widespread it will become. Glenn Schmitt, president of MarkeTeam Inc., a hospitality industry marketing company based in Mission Viejo, Calif., said none of his chain restaurant clients offers wine on tap, but he knows that the industry is discussing the topic. 


“We have had some large wineries approach our clients about custom-kegging wines for them,” said Schmitt. “I think it is only a matter of time before some major chains try it.” 


He added, “If I was an operator building out from the ground up, I would take a hard look at what my opportunity is [with keg wine].” 


Hearth’s Grieco agreed.


“Everyone who is opening a restaurant now and is installing a draft system is at least thinking about turning one of the draft lines into wine,” Grieco said. “Five years from now, if you are opening a restaurant and installing draft lines, you will at least have one wine on draft.”