Michael Houlihan & Bonnie Harvey, Founders of Barefoot Wine
What it Takes to Build America’s Largest Wine Brand, With Barefoot Wine’s Michael Houlihan & Bonnie Harvey
When you think about wine, you most likely imagine stern-faced sommeliers, or parties where tuxedos and hors d’oeuvres on silver platters are the norm.
Michael Houlihan and Bonnie Harvey do not fit the stereotype. You probably wouldn’t even expect them to be wine-lovers, let alone the co-founders of Barefoot Wine, the largest wine brand in the world. But according to them, the reason they’re so successful is precisely because they knew nothing about the industry going in.
Houlihan and Harvey never planned on going into the wine business, but when the opportunity presented itself, they jumped on it.
“If we had known then what we know now, there would be no Barefoot Wine. It’s now the largest wine brand in the world, but it would not exist if we had a clue,” Houlihan says.
Not having a clue turned out to be their secret ingredient. Instead of being influenced by years of tradition and trying to fit the mold of the wine industry, they decided to do something different and make wine fun and accessible to the average person.
Despite the backlash and criticism they received, despite the fact that they had no established brand or marketing presence, they found a strategy that led them to become one of the fastest-growing wine brands in the nation. To make it even more impressive, it was all achieved without paid advertising.
“It was by contributing to the community, by supporting the same issues that our shoppers were interested in, that we were able to sell our product. Because we weren’t paying for advertising, this became our form of advertising. It’s what we called ‘Worthy Cause Marketing,’ and that’s what we used throughout the nation when we started to spread the word and grow and expand,” Harvey says.
Barefoot Wine has come a long way since its inception in 1986, when Houlihan and Harvey naively thought they would make a profit within four years. Now they’re a little older and a little wiser, but they still possess that lively spark that led them to create one of the most popular wine brands in the world.
- Why ignorance and naiveté might be your strongest weapons in disrupting an industry
- What “Worthy Cause Marketing” is and how you can use it to build your brand
- The painful lessons in logistics and distribution Houlihan and Harvey had to learn from selling a physical product
- Where to go to learn the lessons you need to succeed
- How to stay true to your vision and not let anyone else hold you back
Full Transcript of the Podcast with Michael Houlihan & Bonnie Harvey
Nathan: Hello, ladies and gentlemen. Welcome to another episode of the Foundr Podcast. My name is Nathan Chan and I’m your host coming to you live from hometown, Melbourne, Australia. Now, today’s guests is a little bit of a mix-up. We actually have a couple joining us, and this is something that we don’t do that often, and this is quite fun. We’ve got Michael Houlihan and Bonnie Harvey, and these guys are the founders of Barefoot Wine.
Now, they actually sold that company, but they wrote a New York Times best-selling book called “The Barefoot Spirit,” and they ran that company for close to 20 years, which was absolutely incredible. We’re really interested in how they got into the winemaking business and how they stayed in the winemaking business. They talk about, you know, the hard times. I think, you know, from the conversations it took many, many years before they even turned over a profit.
And, you know, they share with us what kept them going but they also share a lot of great insights around, you know, producing, and selling, and marketing a physical based product. They’ve got some amazing really interesting insights around the number one customer acquisition strategy, and how they scaled that up. And I think it’s something that you might be interested in to utilize with your current business.So it’s something to think about.
They’re really, really lovely people. They were so kind that they actually invited me to visit them in Napa Valley, at their ranch. When I’m next in town, I probably will take them up on that offer. A little bit like how I was lucky enough to connect with Gary Muller and he was kind enough to invite me to the Mill House Inn, which is one of the top bed-and-breakfast in the Hamptons. And he invited me and Emily, and I took him up on that offer for sure. So I’ll definitely take up Bonnie and Michael’s offer the next time I’m in the States.
But anyway, that’s it from me, guys. Let’s jump in the show. But before we do, I just wanted to give you a shout out and let you know about an awesome project that we’re working on. It’s a Foundr book. It’s a physical coffee table book. It’s gonna have a compilation and the best of our interviews. It’s gonna be beautifully designed. If you know our work, especially with the magazine or any of our design work, you know we go above and beyond when it comes to branding and design.
So it’s gonna be a beautifully designed coffee table book with the best content from all of our back issues, all the podcast episodes, you know, Richard Branson, Arianna Huffington, Tim Ferriss, Seth Godin, Tony Robbins, the list goes on and we’re gonna crowdfund it and we’d love your help and support. If you do follow this podcast, if you would like to get behind this amazing project, please sign up at foundrmag.com/book. I’d love your support. It’s gonna take this community that we’re building to bring this project to life and it’s gonna be an amazing body of work that I’m really, really proud of. All right, guys. Now let’s jump to the show.
The first question that I ask everyone that comes on is, how did you get your job?
Bonnie: That’s a very interesting question. We never really intended to go into the wine industry, interestingly enough, we kind of got into it by accident. What Michael and I really intended to do was to live a wonderful life here in Northern California in the wine country, in Sonoma County, and continue with our consulting businesses. We were both business consultants. But I had a client, shortly after Michael and I met, and I’d found out that he was owed for three years’ worth of his grapes. He hadn’t been paid.
Bonnie: And I had asked Michael to please go to the winery and see if he couldn’t collect the funds that were due my client. So Michael went there and he found out something pretty interesting, didn’t you, Michael?
Michael: Yeah, when I drove up, I found out that they had declared bankruptcy that morning. So this did not look good for the home team. It didn’t look like we were gonna collect a penny. It was, you know, “Take your ticket and wait your turn.” So I went into the meeting anyway, and they were all sitting around and I was looking out the window and I noticed a big row of tanks, and I said, “Well, what do you got in those tanks?” And they said, “Oh, we have bulk wine, Cabernet Sauvignon, and Sauvignon Blanc.” And I went, “Oh, really?”
And I looked out another window and I saw this huge machine, it looked like a chrome locomotive. And I said, “What’s with the chrome locomotive?” And they said, “Oh, no. that’s a bottling line.” I said, “Really, does it work?” And I said, “Yeah,” and then it hit me, and I said, “Oh my God, why don’t we do this. Let’s do a trade. You take some of that wine over there in those tanks, and you run it through that bottling machine, and instead of paying my client money, you pay him bottled wine.”
So I went back to Bonnie…we got a contract, they agreed, and so we were gonna scrub…so we basically scrubbed the debt by trading for goods and services. And so I went back to Bonnie, and I said, “Hey, I think I got this all figured out,” you know, and what did you have to say about that?
Bonnie: I said, “Well, that’s certainly not gonna pay any bills. Now we’ve got another challenge. How do we convert this wine and bottling services into cash, so our client gets paid?” So that’s essentially the very beginning of how Michael and Bonnie got into the wine business and how we created Barefoot Wines. The short story is after four months of research on both of our ends, our client said that he was unable to take on another business. So we said, “Well, instead of us working for you, why don’t you work for us? You’re a winemaker and a grape grower, so we can use your expertise, you can front us grapes, you can give us winemaking consulting, and we’ll take the debt, and we will take the bottling services and the bulk wine, and we’ll go out and sell it.” Hey, how hard could it be?
Michael: And how long could it take?
Bonnie: Oh, we figured it would take, you know, three, maybe four years.
Bonnie: Well, it took 19.
Nathan: Yeah. Well, and can you give us some context, the audience some context, when did you guys, when did this occur? Like, when did this company start?
Michael: Okay. So the original company started in 1986, that’s when we did our first bottling of Barefoot Wine and the context is that in America, wine was very snobby. Only about 1 out of 10 people drank wine, most people drank beer. People didn’t like wine because it was not only snooty, but it was expensive, and it was hard to understand. So we came out with a brand called Barefoot, which is fun, it’s got a big foot on the label. So we’re obviously not taking ourselves really seriously and it’s $5.99, so people can really afford it.
So now, people who used to just drink beer all of a sudden are trying wine because they can afford it for the first time. Well, that’s the good news. The bad news is that when you’re trying to produce, you know, an inexpensive product, you’d better produce a gazillion of them because you’ve gotta pay your bills. And so, for us, we didn’t break even until we sold 200,000 cases a year.
Michael: So we kind of, like, you know, ignorance is bliss, and we were totally naive about what it took or, you know, what we were up to. If we had known then what we know now, there would be no Barefoot Wine. It’s now the largest wine brand in the world but it would not exist if we had a clue.
Nathan: Yeah, I know that’s the funny thing, right when you get into an industry you know nothing about. If you did know something about it, you probably would stay away from it. That’s kinda like me with publishing a magazine.
Bonnie: Yeah, I bet it is, Nathan.
Michael: But you know, Nathan, it’s folks like us that disrupt a system because we’re coming in from left field, and we’re doing stuff that we feel is right, and that people we know want but the industry is not addressing, and so that’s where disruption happens. And so Barefoot disrupts the entire industry. The industry realizes, “Oh my gosh, you can’t have a fun label. You can’t have wines that are blends. You can’t have easy drinking wines that are inexpensive,” and not only that but they’re gonna lead people to buy the more expensive wines.
So the industry really didn’t like us to start with they said, oh, it’s a joke. You guys are cheapening wine. You know, how could you do it? You put a foot on your label. You guys are nuts. And then 10 years later it’s, “Yo, gee, we really like Barefoot.” You know, my tasting room was filled with people who started on Barefoot Wine.
Nathan: Yeah. Wow. So tell me about the early days. Take me back to, you know, you were charging $5 per bottle, I guess shelf space was difficult to attain, difficult to break even, like you said, moving and producing at scale. Tell me about that, take us back.
Michael: I’ll speak about this because I handled the sales, Bonnie handle the production. But we went to the largest supermarket in the state of California at the time, the largest wine buying supermarket and we asked them, you know, we said, “Hey, we’ve got all this wine, we’ve got all these bottling services, just tell us what you want.” And they said, “Wow. Nobody’s ever asked us what we wanted. They all come in here telling us what they got, beat us up with features, and benefits, and pricing. And you come in here and you ask us what we want? Well, we’ll tell you what we want. There’s an opportunity in our set…” which is in their planogram, which is you know the brands that they carry, “There’s an opportunity for a 1.5-liter bottle because that category doesn’t have a lot of choices. And so, if you give us a 1.5-liter bottle, you know, and you make it like a red and a white varietal and you keep the price down…
Bonnie: And the quality up.
Michael: …and the quality up, of course, you know, we’ll consider it.” And so, we did exactly that. We put it into a 1.5-liter bottle, you know, we gave it a fun name, and a label, and all that. The name was the same as the image, Barefoot. It’s English, Barefoot, and the Barefoot image is international non-confounding logo. So we take it back into them, and we say, “Here it is, everything you asked for.” And they said, “We can’t take that.” And we said, “What are you talking about? We bottled it all up for you.” And they said, “Well, nobody knows anything like Barefoot. Nobody’s ever heard of a brand called, “Barefoot.” You know you’re gonna have to go out and sell it to every mama, papa in every corner grocery store.” So there went plan A.
Plan A was, we were gonna bottle it all up, sell it to the big chain store, make a bunch of money, pay off the debt, and put a little on our pocket and go on to the next program, right? But no, now we’ve got all this stuff bottled up and nobody will buy it. So we have to start selling it door-to-door and that was tough. We went to 100 accounts in San Francisco and only 10 bought it, and they said, “Look, are you gonna do any advertising on this? Nobody knows this brand and if it doesn’t sell in two months, we’re gonna discontinue it.” And so we thought, “Oh, what are we gonna do?” But then what happened?
Bonnie: But then we got a call from a man that was doing a fundraiser for an after-school park in San Francisco, for the kids. And he asked for several thousand dollars and we said, “Well, we certainly don’t have any several thousand dollars to give you, but we really do wanna support the kids’ park. So I’ll tell you what? We’ll give you some wine. Heck, we can’t sell it anyway.” So we gave them some wine for their fundraising event. We said, “Maybe, you know, you can auction it off, or you can serve it with your dinner, maybe it will loosen up the people a little bit and they’ll write you a bigger check.”
So we did that and we never heard from him again. However, we noticed in the depletion reports that we got from our distributor in San Francisco, that the stores around the region where this fundraiser had taken place, were selling Barefoot. They were reordering the product and we were not getting orders from elsewhere because we were brand-new at this time. So we got really excited and we said, “I wonder if this has something to do with our contributing to this fundraiser.”
So we tried it in a few different areas, supporting local fundraisers, and charities, and projects that the community was interested in supporting. We started supporting these same charities and sales really took off around the area where we were supporting charities. So it was by contributing to the community, by supporting the same issues that our shoppers were interested in that we were able to sell our product. And because we weren’t paying for advertising, this became our form of advertising.
It’s what we called “Worthy Cause Marketing,” and that’s what we used throughout the nation when we started to spread the word and we started to grow and expand. That’s what we used to get the word out, worthy cause marketing, and it worked like crazy. We never to pay for advertising, yet we became one of the fastest growing wine brands in the nation without paid advertising. Now that’s pretty amazing, don’t you think, Nathan?
Nathan: Yeah, I know, that’s crazy. And would you be able to give us some context around the numbers in terms of either bottles produced and sold in one year or turnover during that period?
Michael: Oh, sure. Well, we had 12 bottles in a case and we were selling about 600,000 cases a year. So you can do the math. It’s a lot of bottles. So, I guess, the thing that Bonnie was trying to say is that we discovered and today, as consultants, we help businesses by putting them together with the right cause that resonates with their product, and their logo, and their name, and all that. And we call it worthy cause marketing, but you’re giving the members of the community a social reason to buy your product, which we found to be stronger than a mercantile reason.
They would buy our product even when it was priced higher than competitors just because they knew that we were supporting them. We got involved, for instance, with the Surfrider Foundation and they only had like three little chapters. And they were dedicated to cleaning up the ocean and the beach, and we thought, “Well, our label is Barefoot and they’re barefoot and you wouldn’t wanna step on a piece of glass on the beach in your dirty feet so…I mean, in your in your barefoot and you wouldn’t wanna put your foot in the polluted ocean, so why don’t we work with these guys?”
So we went down and met with them, and we said, “How can we help you?” And they said, “We have a blue water task force where we’re opening Petri-dishes in beaches, up and down the coast to see where the pollution is coming from.” And so we put a sign on our bottles in the supermarkets in Los Angeles and San Francisco along the Pacific Ocean and said, “Hang 10 for clean water.” So imagine, here we are, we’re not saying, “Buy one, get one free.” We’re not saying, “$2 off,” we’re not saying, “Two for the price of one.” We’re saying, “Pay $5 for this bottle of wine and then pay another $10 to this nonprofit organization that’s cleaning the beach.”
And so that was a really radical departure from standard marketing, let me tell you. And we raised quite a bit of funds for them. And we became friends with them and they supported our product as we expanded across the United States on to the East Coast, and even into Europe, and down into Australia.
Nathan: Once you found that this strategy worked really successfully, you scouted up across the nation, right, and into other countries as well?
Michael: Absolutely. See, what we did is we said, “Okay, what are the groups that are important to the people who come into this store, right here, wherever it is in the world, and buy our product? What’s important to them?” And so then, by supporting what’s important to them, we gave them a social reason because they’re gonna buy wine anyway and they could choose any brand they wanted. So why not choose the brand that supports your group?
Nathan: Yeah, and you guys were never a non-for-profit either, right?
Michael: Oh, no. we were for-profit. Although…well, that’s questionable.
Bonnie: That’s questionable. We actually were…we did not make a profit for several years. It took a long time to build our brand, and even when we did start making “a profit” that was all reinvested into growth.
Michael: Yeah, see what happens is we deal with a lot of clients and students today who are, you know, entrepreneurs and wantrepreneur, and they think, “Oh, I’m gonna start a business and make a lot of money.” Well, what they’re really talking about is starting a business, building a business, and getting acquired, and getting a giant check for the acquisition. Now that’s real success. Now those people…they’re called “Serial Entrepreneurs.” They build one business, they sell it. They build another business, they sell it.
Well, the first business they built, they had to take every dime that they made and put it into growth because the minute they opened their doors, especially with something disruptive or new, everybody knew, all of a sudden, “Oh my gosh, look at that. There’s a market for that. Look at that product.” And so, then the question is are they gonna get knocked off and how fast are they gonna get knocked off? And then the next question is how fast can they stay ahead of them because they started…they’re the original ones? They are the ones who identified the market.
The only way they can stay ahead of them is to continue to invest in growth. They can’t just sit there on their haunches and say, I was the first one to market, where they’ll get passed by somebody with more capital. So that means you don’t really get paid until you sell. And so that was the real hard pill that we had to swallow. I think we were in it for four or five years and we’d go, “Hey, when do we get paid on this deal?”
Nathan: Yeah, well, that’s really interesting because it is a common misconception. You’re right that a lot of people think that when you start a business you’re gonna become a millionaire or, you know, there’s such thing as an overnight success and you guys are a massive testament to patience. Can you give some context to the audience how long you guys, you know, you had started and then ended…how long it took for you to start and then actually ended up selling Barefoot Wine and which was inquired in 2005 by E & J Gallo Winery?
Bonnie: Yes, well, because we started off with a large amount of wine, the fact is the amount that we bottled and eventually sold, we started off as a medium-sized winery. It was a $300,000 debt that we converted into bottling services and wine. So that was a medium-sized winery, so we never really started small. And it took us many years to start growing it. We tried to expand into different territories and sometimes we were slightly successful and sometimes we weren’t.
For instance, we went into Hawaii thinking, you know, the beaches are covered with bare footprints, what great advertisement, right? And half the bars are called “Barefoot,” so that would really be totally successful. But we found out that unless Michael was there personally, making every sale in every market personally, and returning to get the reorders, we did not get reorders, neither did the market, nor the distributor, nor the distributors salesperson picked up the reorders because we were new and it was just not something that was forefront on their minds.
So until we could afford to hire a salesperson that was on our staff and worked exclusively for us in that territory of Hawaii we had to pull out. And we had to hire a salesperson in every territory where we expanded in order to keep an eye on the distributor, the marketplace, and also to support the community through worthy cause marketing. And it was by doing that slowly over the next, you know, 15 years that we were able to build our product from about 25,000 cases to 600,000 cases. And that was a long struggle. And we sold also in all military bases and in 26, 28 foreign countries.
Nathan: Yeah. Wow. So how long did it take before you guys turned over a profit?
Michael: I don’t know that we ever did but I think…see, what happens in business is the business winds up providing things for you. At first, the business doesn’t have enough money to afford cars but after a while, the business buys cars, okay? So now you don’t need a car. And then after a while, the business is able to pay for an office, so you don’t have to have an office in your house. And so after a while, the business winds up being able to buy insurance and so now you don’t have to buy insurance. And so this is the kind of…if you wanna call it profit that we received in terms of actual money I think we took a very modest draw in actual cash.
You have to remember that, you know, we wanted to buy a house. It was about a $300,000 house which is very low-price house in California where houses are selling for millions. But anyway, the bank wouldn’t give us a loan and we went to the bank, we said, “Hey, wait a minute, four of our employees have applied to you for a mortgage to buy houses for themselves, we know it because we filled out the forms and your bank’s logo was on it, and we’re here asking you for a mortgage for this little house and, you know, we own the place and you won’t give us a loan.” And they said, “Well, that’s different. They have a good solid job.”
Bonnie: And we were self-employed, that was the big difference.
Michael: So we were self-employed. So what we had to do, and this is crazy, this is really nuts, we had to incorporate and then pay ourselves a salary. And then two years later, we had pay stubs to show the bank to get a loan on a house, isn’t that crazy? Now when you’re incorporated, when you’re a c-corporation, you know, half of the profits go to Uncle Sam, in our case, in the United States. They take 50% of the profits. And so, now it behooves you as a business owner to figure out how many things you can buy through the business that are close to the business, right?
Bonnie: And expansion of territory is one of those expenses. We used any, shall we say excess funds, to expand our business. So we never really did show a profit that the government could take 50% of the taxes up because we were constantly expanding.
Michael: See, so the thing that you have to remember is if we had stopped, we would have made a profit but we didn’t stop. And the reason we didn’t stop because we knew that we had identified a market. We said, “Oh my gosh, look at this. These beer drinkers will drink wine if it’s easy drinking, if it’s good tasting, if it’s inexpensive, if it’s fun, they will drink wine. And that was a big deal in those days because it was…in the United States, it was like 8:1 beer drinkers over wine drinkers. Now it’s about even.
Nathan: Wow. Okay, interesting. So you sold the company to E & J Gallo Winery in 2005 and you had started it around 1986, would you say?
Nathan: So about 19 years you guys were working on the company like you said, didn’t really turn over a profit. First question, what kept you guys going during that period? And I guess you crushed it with growth and market saturation, and then the second piece was, how did that sale come about?
Michael: Well, I guess, the answer to the first one is what you call sheer grit, okay? That’s what kept us going. We had to get through tight spots where we just had to, like, white-knuckle it and I mean…you know, we had a cash flow projection that showed where the cliff was. In other words, where we were gonna run out of money and for, like, the first 10 or 15 years of that business that cliff was two months away. It was never more than two months away.
Michael: So, you know, and sometimes it was two weeks away, and sometimes we were holding checks that weren’t covered and having them pinned to the wall with dates on them that say, “Do not release this check before May 5th,” right? And sometimes we would have to call up our suppliers and say, “You know that $30,000 that we owe you in two weeks? Well, we just did a cash flow projection and we’re gonna tell you now we’re not gonna make it. We’re calling you because we don’t want you to be, you know, blindsided and we have two or three checks coming in and they’re earmarked for you.”
And most of those vendors would be very reasonable with us and they’d say, “Wow, you know, nobody’s ever called us and told us when they were gonna miss a payment. We always have to call them after they missed the payment, and you’re the kind of people we wanna do business with.” So they actually extended our credit. You know, another thing that we did and a lot of this we were broke, right, and we were in way over our heads, and we were facing bankruptcy almost every day, and so we had to get really clever about how to identify and get people, who were supplying us, to front us goods for, like, long periods of time, you know, with no interest and stuff like that.
So, I mean, that’s as good as money, right? And get them to warehouse for us for free and give it to us as we needed it and things like that. So why did they do that? They did it because they knew they could trust us. We always made good. We warned them when we couldn’t, and we also met with them, like, every two months and sat them down and said, “Okay, here’s our plans. This is what we wanna do and, you know, we’re gonna need more glass and we’re gonna need more wine. But guess what? If we’re successful, we’re gonna buy more wine and glass from you guys.”
Michael: See, so they began to see us as, you know, part and parcel to their own expansion. So that’s pretty much how we got by. I don’t know, what else kept us going besides our friends?
Bonnie: Well, what kept us going was the response we got from the public when we did these various tastings and fundraisers. The public we knew loved the product. They would actually pick up a bottle of Barefoot and hold it close and say, “Oh, I just love the foot.” And they’d taste it and they’d say, “I can’t believe this flavor is so good, and this price is so reasonable,” and also because of how happy they would be that we were supporting the fundraisers in their community. So it was definitely our end user, that we met face to face on a regular basis, that kept us going. We knew we had something that they wanted.
Michael: It’s sort of, like, when you know that your end user wants your product, but you’re frustrated because the middle people or the people between you and them, such as the buyer for the supermarket or the distributor, has never seen anything like it before, or doesn’t believe there’s a market there, or you’re just new and you’ve gotta wait your turn, or all these other reasons. And so that’s what you’re really up against. And what keeps you going is you know that end user really likes your product and wants it to get all the way to them.
Nathan: I see. And did you guys ever feel like giving up?
Bonnie: Well, it was very tough a lot of times, yes it did.
Michael: The idea occurred to us.
Bonnie: But, you know, when you swim halfway across the channel you’re not gonna give up and turn around and go back. So we were kind of stuck in the water, in the deep end so to speak, and we never really felt like we had an opportunity to go back. We kept going. We said, “We’re gonna see this out right to the end.”
Michael: It’s kind of like a surfer, you know, that’s trying to surf on a big wave of debt that’s curling over his head and he’s kind of in the pipeline, and he knows that if he kicks out he’ll get crushed so he has to ride that wave all the way out.
Nathan: Yeah, I know what you’re…I know exactly how you guys are feeling. So I’m curious, you know because your story is an incredible story of an immense amount of patience. So tell us about how the sale of your company came about?
Bonnie: We realized that we had a lot of appreciation for the way that Gallo was conducting themselves in the market. They were selling quickly, they were always on the shelf, they were very popular, and they had excellent customer service. They were seen in the marketplaces taking care of the buyers and being aware of what was on the shelf. And Michael, because he would be visiting distributorships, saw their sales reps at distributorships, and saw that they were taking care of the distributors. So they were very active in the marketplace.
So we looked to them first as being our ideal buyer. They had a wonderful network of distributors and retailers already in place, which is one of the things that we were looking for when we were looking for an ideal buyer. They were a family-owned company, which was really important to us because they were able to make plans that extended way into the future, that they could actually keep because they weren’t trying to satisfy the shareholders. And go ahead, Michael, you tell them some more things.
Michael: Well, you know, the thing is when Bonnie and I realized that in order for the business to go to the next level, it was going to require a huge infusion of capital or we were gonna have to monetize it. And you remember, we were trying to monetize it when we started and here we are, you know, later going, “We have to monetize finally.” So, you know, there’s all of these questions, like…and this is what we tell our students and everything else it’s like…the question is how big does your business have to be before you become an acquisition target?
You know, if your purpose in going into business is to get the big check, is to take your idea, wrap your idea in a business, wrap your business in a brand, and build your brand until it becomes an acquisition target, the question is how big do you have to be? And for us, the answer was 500,000 cases a year before anybody would even consider acquiring us because of our price point. So here we are, you know, finally we’re over 500,000 cases a year.
And so we’re thinking, you know, if we sell this brand to one of those stockholder corporate organizations that own a lot of wineries and spirit companies, and everything else, they’ll destroy the brand and then we’ll have no reputation. So we had to pick an acquirer. A lot of people say, “Oh, you know, you’re lucky they bought you.” Well, the fact is we were trying to get them to buy us for years. So we even had, like, the same distributors that they had and we went out of our way to as we say, “Put the peanut in front of the elephant.” And finally, we were able to get to a point where we could come to some terms.
Nathan: Yeah, I see. And I’m curious around in the sense that people often say that the best possible time to sell your company is when people are knocking on your door. When you were knocking on their door, did you think that that changed the mentality from the buyer standpoint?
Bonnie: They were already aware of us and they saw us as growing. So it was pretty obvious in our industry that the top players in our industry were interested in our product and we knew the top players in the industry. And they had talked about, well, our progress, whether we wanted to sell, and that kind of thing. So it wasn’t like a cold call and we didn’t personally go to them but we went through a broker who had a successful business relationship with Gallo previously.
Bonnie: So that’s another lesson that we give young entrepreneurs, is that you really want to talk to a broker who has had experience selling alike business in your industry and ask them about the metrics. Ask them about the volume, the growth potential, ask them about the income level, and ask them all the questions that pertain to your industry about the last sale that this broker had made, and that is exactly what we did. And we told this broker that we felt that Gallo would be the ideal buyer. He agreed. He presented it to Gallo and we took it from there.
Nathan: Yeah, okay. Wow. Gotcha, and let’s switch gears because…what did you guys do? What have you guys been doing since…you know, since building one of the biggest wine brands in the country?
Michael: Well, the first thing that happened was that E & J Gallo hired us as consultants to work with them for a year to, basically as they put it, “Keep the Barefoot spirit alive,” which was their way of identifying the entrepreneurial spirit that was behind the Barefoot brand. So they wanted to keep it alive within their big corporation. So we actually went to work as brand consultants on our own brand and advised them about things they could do to keep the spirit alive. And we’re very happy to say that a lot of the suggestions we made, they carry on.
Like, for instance, they’re big on supporting the charities and, you know, the whole idea of supporting the different groups that we did and so we’re really happy about that. But then we said, “You know this keep the Barefoot spirit alive business,” we thought, you know, “Why don’t we write a book?” because everybody kept saying, well, you guys gotta write a book, you know, that’s gotta be some kind of cliffhanger, you know, where on every chapter we get in trouble and then the next chapter we get out, but we get into more trouble, right?
And so on and so we wrote a book and we called it, “The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand.” And so that book became a New York Times bestseller. And then we got asked to go and travel around the country and speak. So we began to be speakers. And you know, Bonnie had never spoken before, I had spoken because I had to speak to, like, large groups of salespeople and distributorships and get them all hyped up to go out and sell. And you know, she had never done it before but on her first debut, she got a standing ovation.
Nathan: Oh, well, that’s awesome.
Bonnie: So that’s what encouraged me.
Michael: So then we became speakers and so now we travel all around the world and we speak at conventions, we speak for companies, we speak for associations. We spoke in Australia recently at the Gold Coast College there, at Griffith Gold Coast to their school of entrepreneurship and we’ve spoken to the students at Nanyang University in Singapore, and also at places like Trondheim in Norway, and all over the United States, Canada.
So it’s kind of interesting. We’ve spoken at 40 schools that teach entrepreneurship. We love young people. We don’t have kids of our own, so you know, they’re kind of like our kids and we feel like we’ve gotta, you know, pass on what we’ve learned so that they get a big head start. And so that’s what we’ve been doing really since then, is we’ve become teachers and in this whole area of entrepreneurship, but we’re not teachers in an academic way. We’re actually people who really did it, you know, we really got our butts kicked hard.
Nathan: Yeah, I know. I think that’s really key, and you guys you said that you recently launched a course on keeping your stuff on the shelf.
Michael: Yeah, we just got through shooting a five-part course on how to get your product to the shelf and keep it there. So this is for people who are selling real products that, you know, weigh something that are physical products. They can sell them online but they would rather sell them in the stores because they can get notion buys in the stores, and they can get one large check from one large company for one large purchase and get in front of massive customers, which you can’t do online without a huge amount of digital marketing.
So there are some advantages to bricks and mortar, and people who have products know it. So we’re trying to help them get into those stores and let them know what’s involved in getting in, and what their mindset has to be, and the people that they need to satisfy, and what they’re looking for. So we’re trying to demystify. We, you know, Barefoot, we demystified wine and now we call it, “The Barefoot Spirit.” We’re trying to demystify entrepreneurship.
Nathan: Mm, I see. And what are your thoughts on…you know, because there are a lot of e-commerce physical products coming out more than ever now with, you know, companies like Alibaba really opening up the playing field making it easy to distribute physical products and create them and all those kinds of things, what are your thoughts on ongoing, I guess, the wholesaler routes versus selling your B2C, direct to the consumer?
Bonnie: It has a lot to do, Nathan, with the price of your product and the weight of your product. In our case, we had a heavy product, glass and liquid weighs a lot, and it was a low price. So people are not interested in paying, basically, the same amount for shipping as they’re paying for the product. Now, if you have a lightweight product and it’s a big-ticket item, in other words, it costs a good deal of money, then it makes online shopping much more reasonable because the freight is not such a huge consideration. That’s one thing that needs to be taken into account.
Michael: Yeah, and another thing that you wanna take into account is that when you are trying to build a business, you have cashflow crunch big time and you really need to have a massive sale. So you need to sell to a Walmart, or to a home club, or some big-box store thousands of units and get paid, you know, $40,000, $50,000 at a time because that’s what you need to grow, that’s what you need to pay your bills.
Now, if you’re just sitting there and you’re selling on Alibaba or Amazon, you know, the sales will trickle in, that’s for sure, but they’re never going to trickle in in one giant check. And so that’s another consideration that is it is, for some products especially for most physical products, they would much rather be in a bricks and mortar store. In a bricks and mortar store, you get notion buys. There are no notion buys online. People don’t go out and say, “I’m gonna go get a quart of milk and come back with a bottle of wine, and a loaf of bread, and a new can opener, and a bunch of other stuff.”
You see, why did they buy all that extra stuff? They weren’t going there to buy that. It’s because they had a notion to because they saw it on display and it was in their way. It was on their path. Now, yes, you can have pop-ups and stuff online with digital marketing, and try to figure out what the profile of the person is, and show them stuff but it’s not the same. What you really get when you’re in bricks and mortar is you get to feel the product, you get to have it physically demonstrated to you, you get to see the product. How many times have we all bought stuff online and we get it, and we go, “Oh, wow, this looks a lot better in the picture,” right? You see.
Michael: And then they try to make it easy for you to send back because they know that that’s the problem. Now, I don’t know, in the future maybe, the skies will be just filled with drones that are delivering everything to your door but think about it.
Bonnie: And returning if you have products that look a little different than what you thought they were.
Michael: So if you go out to, like, you know, a box store, you’re gonna fill up like 4 or 5 bags with, like, maybe 60 or 70 items. How would you like to have 60 or 70 items separately delivered to your house? See, so at some point there gets to be an efficiency of scale by taking that middle ground and saying, “All right, I’ll compromise. I will drive 5 or 6 blocks and pick up 50 or 60 items, rather than order 50, 60 items online.” And I guess the last thing to consider is that when you’re new when you have a new product and you’re trying to sell it online, it’s really hard to get attention for it. Whereas when you’re in a store, people who are not interested in buying your product at all, will see it.
Nathan: Builds trust.
Michael: Yeah, you build trust. You know, you say, “Well, if the store’s behind it, maybe I should try it.” So, you know, there’s no question that online digital marketing is the way for the future and everything else, but I believe that there will always be some form of bricks and mortar stores.
Nathan: Yeah, I agree. And that makes sense. I definitely understand when you guys say around the, you know, the relationship when someone feels and has something in their hand is a different kind of relationship as opposed to buying something digital or even buying it online where it’s not what you thought. So much to the point that we’re actually, you know, working on a physical book. A physical beautifully designed coffee table book with the best of our interviews from the past 45, 50 back issues of the magazine since we’ve been running.
Nathan: And I’m really excited about that product and I think people are gonna love it. But there’s so much more complications that come with having a physical product.
Michael: Oh, yeah, yeah, yeah.
Bonnie: Oh, yes. And you don’t know what’s coming until you get in there and really start doing it. That’s how you find out, no matter what the business is.
Michael: But, you know, the thing is you have to take a look on both sides of the equation. Yes, it’s a lot more work. It’s a lot more merchandising and a lot more, you know, oversight on the one hand, but on the other hand you can build your brand about 10 times faster and you’re more likely to get to a point of being an acquisition product. So it’s how you look at it. You know, if you’re willing to do the work, sure, go for it. We did. I don’t think that we would have done it if we had known the work.
But I think of young people who are starting out, you know, with physical products and we hope that we are demystifying the work, and they’re saying, “Oh, well, you know, Michael and Bonnie said this was the work.” It’s sort of, like, when you’re diagnosed. You know, you’re better off diagnosed and know what’s wrong with you, right?
Michael: Than not knowing what’s wrong with you.
Nathan: Yeah, that’s so true. Well, look, guys, this has been awesome conversation. We have to work towards wrapping up. A couple of questions in regards to…you know, you guys have been entrepreneurs for such a long time, if you both could share your number one piece of advice for young aspiring or novice stage entrepreneurs and startup founders that would be awesome. And then the last question is, just please tell us the best place people can find you.
Bonnie: Okay, I’d be happy to start off with one of the prime lessons that any new company should really consider. If you really want to start small, you wanna start in a small place and get out there and understand your industry, understand that all the people who will be touching your products or using your service, and understand how to best relate to them and communicate with them to make sure that your product is getting the attention that you know it deserves. And the lessons that you’ll learn by starting in a small place will be invaluable.
Once you learn those lessons then you can take your show on the road, then you can expand. But if you’re trying to expand before you’ve learned your lessons, you’re just gonna be making bigger mistakes in a bigger territory and you don’t want to be learning and developing your brand and your delicate precious product or service that way. So give it some time. Give yourself some time to learn the lessons that you need to learn to be successful before you expand.
Michael: We like to say, “Don’t sell your product any further away from your house when you start than you’re willing to drive to apologize.” And so, with that said, if people would like to get a hold of us, there’s a couple things you can do. “The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand,” is a book you can get it on Amazon or online anywhere. You’ll enjoy it, it’s a fun book, it’s about Bonnie and I. It’s not a prescriptive text, it’s not, you know, patronizing or a list.
Bonnie: It’s a business adventure story.
Michael: So that’s “The Barefoot Spirit.” And then if you wanna reach us you can go to thebarefootspirit.com. And thebarefootspirit.com has all kinds of cool stuff on it. It’s got lots of resources about business and whatnot and you can register for our weekly blog posts. So that’s www.thebarefootspirit.com.
Nathan: Awesome. And we need to get your number one piece of advice too, Michael.
Michael: Oh, my number one piece of advice is to make your mistakes right. Okay, so you’re going to make mistakes. We made them, you’re gonna make them. The question is, do you say, “Oh, no. Got it. Figured it out, you know, and took care of it,” and then rub your hands behind you like it never happened, don’t do that. If you make a mistake, bring it out on the table and think about how you made the mistake. When we say make mistakes right, we don’t mean to right the mistake, which is certainly we have to. But we mean to write it down W-R-I-T-E.
So you write down the mistake, “This is a mistake I made. Here’s how it happened.” And then you make a list of all the documents that need changing. Maybe it’s a sign, maybe it’s a label, maybe it’s a checklist,maybe it’s a sign-up sheet, maybe it’s a clause in a contract. Maybe it’s a policy, or a procedure, or a job description but it’s something that is written in your business, and the more you do that, the less those mistakes happen, the stronger your business gets. We built our business on the backs of our mistakes.
Nathan: Love it. Awesome. Well, look, thank you so much for your time, guys. This has been an amazing interview and I look forward to meeting you in person soon.
Bonnie: Excellent, Nathan, so do we.
Michael: Thank you, Nathan. It’s been a pleasure.
- Explore Barefoot Wine
- Check out Barefoot Wine’s blog page
- Learn more about their Bonnie and Michael’s book: The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand
- Follow Barefoot Wine on Twitter