Eugene, Ore.—Keg wine sales found a niche as Oregon wineries sought to keep sales going through the economic downturn of 2008 and 2009. Today, they’re opening a world of opportunities for King Estate, which expects to keg upwards of 50,000 liters of wine this year for domestic and international markets.

“We’re only in 12 states right now, but we’re ready to bust it open as soon as we get into the 2011 (wines.) We could sell 2,000, 3,000, 4,000 kegs—it’s so hard to project,” Steve Thomson, executive vice-president for King Estate, told Wines & Vines this week.

Since working with Free Flow Wines LLC of Sonoma, Calif. to launch kegged wines at the beginning of the year, demand has been surprisingly strong. King Estate has actually taken some wines back to bulk to satisfy demand for wines in the 19.5-liter stainless steel kegs Free Flow fills then ships to licensees from Washington State to Florida.

“We’ve been opening up bottled wine, putting it in the tank and shipping the tank to Sonoma where we’ve had it kegged up and then sending it across the country,” Thomson said. “It’s been awkward!”

Uptake by the glass
Uptake of King Estate’s kegged wines is driven less by lower packaging costs, one of the selling points touted by early adopters of kegging, and more by benefits to licensees with by-the-glass programs, including wine that remains fresh between pours and better cost control through standardized pours.

“The cost of the packaging for a little over two cases of wine and the cost of the kegging process are about the same,” Thomson said. “There’s not a big savings there, so we’ve been trying to sell on the benefits.”

It seems to be working; uptake has been good, with fewer placement and promotion costs that have meant better margins than King Estate expected. “It’s just like craft beer was 20 years ago,” said Thomson, a former craft beer distributor. “The people want it want it badly enough that they’re not concerned about the cost of the set-up.”

But international markets will require a different approach. With the launch of its 2011 wines, King Estate will start shipping its Acrobat-tier Pinot Noir and Pinot Gris wines to Fresh Tap in Vancouver, British Columbia, to be kegged for local licensees. Fresh Tap opened at the beginning of March, kegging wines for a half-dozen wineries, including British Columbia’s Blasted Church Vineyards and Desert Hills Estate Winery. King Estate is its initial U.S. client.

Who controls the kegs?
Thomson said getting the wine across the border is easy; a more difficult question is who controls the kegs. King Estate’s distributors handle deposits for the kegs in each state, but the winery is still working out who will handle deposits in Canada.

“We don’t want to have to pay a deposit on a keg that someone is using in a different country,” he said. “It’s a lot easier to keep track of the kegs if someone up there is responsible for them. Otherwise they get lost pretty easily.”

Steve Thorp of Fresh Tap said many distributors in Canada handle keg deposits, or alternatively the agency or the winery handles them. While non-refillable kegs made from hard plastic and cardboard-plastic (effectively, a giant wine box) exist, Fresh Tap opted for steel as the premium choice. The lifespan is also longer—20 years for steel versus just five to seven for plastic.

Hard plastic is a dubious choice in Canada because of temperature fluctuations, Thorp added. “It doesn’t really work well for our climate in Canada, because if it gets too cold they can crack.”

But with markets in Japan and Australia also on the horizon for King Estate, hard plastic kegs are one option Thomson is considering for export purposes. Plastic kegs are about the size of the water bottles usually seen atop the office water coolers, and could be recycled when empty. But they tend to be larger, which makes them more unwieldy, in turn increasing Thomson’s concerns about breakage costs. Wine, after all, isn’t as cheap as water.

“They don’t have handles on ‘em, they’re big and heavy, and I just worry about what if someone dropped one – you’ve got several hundred dollars worth of wine in there,” he said.

Local reuse program?
Still, Thomson said that Jeff Renshaw, managing director of beverage distributor Orca International in Tokyo, is keen to receive kegged product and has even expressed a willingness to establish a local reuse program for the kegs.

“That might be three, four five years down the road,” Thomson said. “(But) I think there’s going to be a lot of innovation on this front moving forward, and I’m really excited.”

In the meantime, King Estate will focus on managing existing demand for its wines. While keg sales will remain a fraction of the 200,000 cases it sells each year, keeping enough wine to meet keg demand will be this year’s challenge.

He is currently planning for 2,000 kegs of Acrobat Pinot Gris, and 500 to 1,000 kegs of Acrobat Pinot Noir. Three of the winery’s NXNW wines from the Walla Walla AVA are also destined for kegs, including a Chardonnay, a Riesling and a red blend. All told, about 3,300 to 3,800 kegs are anticipated this year.

“We’re going to keep a significant amount of the 2011 Pinot Gris and Pinot Noir in tank as long as we can, … (so) we can pull the wine down from tank as we need it,” Thomson said. “But it’s going to be a really challenging thing to figure out.”