e & j gallo | The Barefoot Spirit

How the World’s Top Selling Wine Brand Disrupted the US Market

Michael Houlihan & Bonnie Harvey — Tue, 06 Jan 2015 19:12:07 +0000

BTN interviews Michael Houlihan and Bonnie Harvey on how they built the Barefoot Wine brand and took it national.

Barefoot Wines started out as a business idea between a hopeful business couple living in the Sonoma County wine country of California. With little experience in the wine industry, Michael Houlihan and Bonnie Harvey wanted to create a fun, new wine that they could build into a top selling brand across the USA. From their converted laundry room office, they set out with innovative ideas and a willingness to learn from everybody who touched the Barefoot brand.

Michael and Bonnie founded Barefoot in 1986 and it quickly became known as a ‘disruptive’ label. Against traditional stogy and exclusive wine marketing customs, Barefoot was an award winning, non-vintage brand targeted at the female USA consumer with a simple, easy-to-understand label that was bursting with color and fun. Buyers were hesitant to put in what they were offering.

The industry was very resistant, but Michael and Bonnie were relentless in their pursuit and fulfilled their dream. In 2005 they sold Barefoot, which at the time was one of the USA’s top selling brand, to EJ & Gallo. Barefoot has since gone on to become the world’s largest wine brand.

We recently sat down with Michael and Bonnie to discuss the strategies they employed to grow the Barefoot brand into a national icon. Below is the second part of a two part interview.

BTN: Would you say you disrupted the existing market when Barefoot was launched?

Bonnie: We definitely disrupted the existing market and in a number of ways. First of all, we had a fun label. There weren’t any fun labels when Barefoot first came out. We were also non-vintage. There weren’t any non-vintage offerings on the market that were award winning like we were.

We also designed the label specifically for a female buyer and that was really something that was quite different. We found out the major buyer of wine in California, which is where we started out, was a female shopper in chain stores shopping for her weekly staples. We wanted our Barefoot Wine to be one of those items on their list. We made it non-vintage so that we had a consistent flavor and blend, that we matched year after year. Our target female customer wanted something she could depend on week in and week out, and year in and year out. She also wanted a package that was friendly and brightly colored, and easily recognizable, so we gave her that too.

Michael: You can go in and disrupt the US market, but get ready to sweat-it out for a while because it is going to be an uphill battle. Barefoot is one of a number of fun labels right now, but we were the first and only fun label. Can you imagine what that was like? We had buyers who were telling us we couldn’t put a foot on the label because “Wine is a serious business.” There were years of “missionary work.”

The market is very resistant to being disrupted because it is the gatekeepers who are going to say, “No. I’m not going to take on a wine with a silly foot on it geared towards female buyers who want to buy non-‘vin’ wines that taste the same from year to year. I’ve never had anything like that in my store and I’m not going to start today.” Even though we told them that our market research told us that our customers want the same tasting product year after year, they weren’t ready to be a part of our ‘revolution.’

The idea we are trying to get across is that you need to address a very narrow niche. You have to see how it is that you are going to attack the market. Who is your consumer and what do they want that they can’t get now? Wine has become such a commodity that unless you focus on a very narrow segment, at least at first, you really don’t stand a chance. You’ll just be an “also ran” and get beaten up on your pricing. So distinguish yourself and address an under-served market. It’s a great foot in the door.

And don’t overlook American conventions and prejudices. For example, the South Americans thought they could sell wine in tetra-packs (also known as bricks.) We even tried to help them, but you know why they failed at selling bricks in the USA? Americans believe that there is more volume in a 0.75L bottle then there is in a 1.0L brick just because bottles are taller than the squat, compressed tetra-packs. Americans like tall things and just because of their diminutive stature, bricks failed in the US market.

We also have another example of a beautifully bottled Riesling from Germany that tried to do something special with their 17 inch tall, elegant, blue bottle called a Hawk. Guess what? American shelves are only 16 inches tall. They were relegated only to the very top shelf. Even if consumers wanted to buy it, they couldn’t reach it!

It’s little things like this that make a huge difference and you need to be ready to push your idea to the edge and this is why we encourage brands to hire professionals before they enter the market.

BTN: What allowed you to successfully disrupt the market – how did you take advantage of the opportunities that you were given?

Michael: The US market is really influenced by stories and current events. For instance, if you have won the LA County Fair then the next day you have POS material on every shelf and every market place in the LA area. It is really important that it is very fresh, current news.

Big companies can’t work that fast because they need to go through marketing and get it approved by management. You need to have reps that work in LA that are so resourceful that they will make their own signs and put them up on the shelves the next day! When you are working for a commission, then these things become important.

Some really good advice we like to give is to never pay your people on the basis of boxes alone. You have to ask yourself, “What do I really want?” Brian Tracy says that 90% of all behavioral problems in the market place are caused by compensation systems. In other words, people do what they are paid to do, so don’t pay them to do something you don’t want them to do. If you pay them to sell boxes they will sell boxes, but they will spend your entire budget to sell those boxes – they won’t consider profitability. What’s worse is if they sell boxes and make commission, but your company doesn’t grow.

Here’s what we did. We told our teams, “Let’s figure out what this particular territory did same month last year. If you sell 10% more than you did same month last year we’ll give you a dollar a case on every case over that amount.” In other words, if they didn’t grow they didn’t make any commission. We would sweeten the deal by telling them that if they sold 20% more than they did last year we would give them 2 dollars a case back to every case that is over same month last year. So now, that first 10% could be worth $1 or $2. If they made it to thirty, we’d give them $3.

We didn’t figure that strategy out for five years. If they ever argued about last year’s numbers being too high for some market anomaly or another, we’d just average the previous and following month into the calculation to make everybody happy.

BTN: How about your biggest challenge developing Barefoot? What was it and how did you overcome it?

Michael: People are always surprised by our answer, but it’s one of the biggest problems facing any new brand. “Out-of-stocks!” Some people seem to throw up their hands and say, “There’s no way I am responsible for my product once it hits the distribution channel. I have no control over somebody else’s company.” In the wine industry, that is one of the furthest things from the truth. At the very end of the day, your brand is a product and your product is only as good as it’s availability. We’ve seen some really great brands designed to succeed perish soon after they’ve gone to market due to the fact that their products were continually out-of-stock.

Bonnie: The distribution channel is your responsibility and one of the biggest factor that will affect your brand image, your bottom line and your ultimate success is your brand’s perceived convenience – it’s availability to your consumers. Your customers can’t be loyal if your product isn’t even available to buy! You are in deep water if your brand becomes known to your distributors, retailers AND consumers for being hard to find. Your retailers and distributors might love your brand and the pretty margin you offer, but in the end they’ll say, “I love that brand, but I just can’t depend on it.”

Michael: It’s important to be on the ground running when your brand first hits the street. You’ll want to watch inventories at every level of the distribution channel. Typically, if you are marketing a new brand, spend more time out of the office and on the street. Encourage not just sales, but more importantly, reorders from wholesalers and retailers well in advance of stock depletions. Take the extra step and calculate all of your critical turn-around times. That means calculating the time elapsed from the wholesaler purchase order until goods are received, how long it takes wholesale reps to get the retail order, turn over from the wholesaler to the retailer, and how long it takes retailers to get your product back up on their shelves. It takes a lot longer than you think, and knowing all of this will allow you to take full control of your overall stock so that “out-of-stocks” don’t become your number one enemy.

Bonnie: It’s actually a very interesting phenomenon. Out-of-stocks typically aren’t the number one problem for lazy or slow moving brand owners. If they can’t get their product back on the shelf there’s probably a bigger problem that needs to be addressed. It’s the fast moving, successful brands that have to deal with out-of-stocks as a serious problem. Especially new, fast selling brands. Barefoot was moving so fast that our retail partners didn’t have enough back stock to keep Barefoot on the shelves. Do you want to know why? Retailers don’t have enough data on their new brands to justify holding more product. Distributors and retailers don’t ever want to be caught sitting on unsold inventory and Barefoot didn’t have a track record in their markets, so their order volume wasn’t optimized yet. We had to be quick on our toes to make sure that we replenished supply and kept distribution running smoothly, even though it wasn’t technically our ‘fault.’

BTN: Finally, What are your top 5 tips for owners ready to take their brands to the USA market?

Bonnie: Don’t start off with too many SKUs. It will divide the attention of the market, of the distributor, of the retailer and of your sales person. Your “brand-width” can only be so big. In the beginning it’s important to keep it narrow because there is only a certain amount of mind share that each person that is touching your product has. You tend to expect too much from them, particularly as a new brand starting off.
Michael: Start in a small market geographically. Make your mistakes in an area where you can run around personally, hat-in-hand, and apologize to everybody. If you get spread out too wide geographically you are going to make mistakes and they are going to be broadcasted over your entire market. You want to start off with a Beta and just go into one area. Study, learn and apply. Get your act together before you take your show on the road.
Bonnie: Attack where the enemy is not. Do not go to New York first, that’s crazy. Go to some small to mid-sized market where nobody is and make your product a big hit there. They’ll be glad to see you and you’ll make that golden reputation as a fast mover (even if it’s in a very small market).
Bonnie: Learn all of your lessons BEFORE you expand. As you get into a new market there are huge lessons to be learned. Make no mistake about it, you will be making a lot mistakes. Make sure you learn all of them in one territory before you move on to your next territory.
Michael: Make strategic allies. For us, we were a really an odd-ball brand. People really couldn’t understand us, but you know what? They couldn’t understand Trade Joe’s either. So, we went to Trader Joe’s and said, “We should work together.” You need to find people who are already selling what you have defined as your niche.

—

This is the second part of a two part interview with Michael and Bonnie about how they built the Barefoot brand.The first installment discusses how they first found traction in the US market, where they found the most valuable advice and how they took the brand national.

The post How the World’s Top Selling Wine Brand Disrupted the US Market appeared first on The Barefoot Spirit.

Rags-to-Riches Beach Reading Material – Yahoo Small Business Advisor

Michael Houlihan & Bonnie Harvey — Mon, 27 May 2013 17:35:11 +0000

By Adrienne Burke

Looking for a good book to get lost in this Memorial Day weekend? The Barefoot Spirit is an entertaining rags-to-riches story of American entrepreneurship. Released this week, the paperback has already climbed to the top of the Amazon bestsellers list.

It’s the first-hand tale of California rule breakers Michael Houlihan and Bonnie Harvey, founders of the country’s top-selling wine brand. The couple conceived Barefoot Cellars in 1986, three years after they met in a Santa Rosa blues bar. They sold the business to E&J Gallo in 2005 for an undisclosed price that they say left them “satisfied.”

To read the complete interview, please visit Yahoo Small Business

Who We Are

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) to help entrepreneurs become successful. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular brand building site at www.consumerbrandbuilders.com.

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post Rags-to-Riches Beach Reading Material – Yahoo Small Business Advisor appeared first on The Barefoot Spirit.

When Success Means Being Turned Down by the Bank

Michael Houlihan & Bonnie Harvey — Sun, 19 May 2013 17:13:49 +0000

By Ben Steverman

You’d think selling your wine brand to E&J Gallo would put you squarely on Easy Street. As accidental wine merchants Bonnie Harvey and Michael Houlihan found out, personal finance and entrepreneurship can make an awkward pair.

Before the mid-1980s, the married couple’s main experience with wine was drinking it. Then, while working as a consultant on office management to a wine maker without a brand of his own, Harvey learned that a winery owed her client a lot of money. She brought in Houlihan, a business consultant, who discovered that the indebted winery couldn’t pay cash — but could repay the debt with bulk wine and bottling services.

The couple developed a plan for the client to use those resources to set up a brand. When the client passed on the idea, Harvey and Houlihan took over the debt and launched Barefoot Wine in 1986. They sold the company for an undisclosed sum in 2005. Their book about the 20 years spent building the brand, “The Barefoot Spirit: How Hardship, Hustle and Heart Built America’s #1 Wine Brand,” will be published on May 21. Here are excerpts of their reflections on life and money.

Michael Houlihan: We like to say we fell backwards into the wine business. We didn’t know enough to realize what was involved.

Bonnie Harvey: Ignorance is bliss.

To read the complete interview, please visit Bloomberg News

Who We Are

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post When Success Means Being Turned Down by the Bank appeared first on The Barefoot Spirit.

Michael Houlihan Awarded Bishop O’Dowd’s Alum of the Month

Michael Houlihan & Bonnie Harvey — Thu, 07 Feb 2013 00:09:11 +0000

Getting Barefoot With Michael Houlihan ’63

When Michael Houlihan ’63 and his partner Bonnie Harvey launched their Barefoot Cellars wine business in 1986, the pair was sorely lacking many things – most significantly knowledge of the wine industry and money.

But that didn’t stop the dynamic duo from building an award-winning national brand, eventually selling well over a half million cases annually in all 50 states and in 28 foreign countries.

“When people are loyal to you because they have a social reason to buy your product, you have customer retention that is much greater than you would get through any form of advertising.”

What makes Houlihan’s story most intriguing, though, is how he and Harvey relied on “worthy cause marketing” instead of conventional advertising to grow a loyal following and promote their favorite causes.

“We were using social networking before the Internet,” Houlihan explains.

In a nutshell, Houlihan and Harvey spread the word about their wine by partnering with non-profits that believed in causes near and dear to them – such as environmentalism and civil rights. “Basically, we gave away wine at fundraising events, we worked festivals, we got out into the community and talked about causes we were passionate about and Barefoot wine in the same breath. It was very much a grassroots effort, and because we worked hard, had fun, and believed in what we were doing, it paid off,” Houlihan said.

Paid off it did. In 2005, Houlihan and Harvey sold the brand to E&J Gallo.

The pair’s incredible story is detailed in their soon-to-be released book “The Barefoot Spirit: How Hardship, Hustle, and Heart Built a Bestseller,” written with Sacramento Bee wine writer Rick Kushman.

A “sample tasting” is currently available at The Barefoot Spirit, in which you can read the book introduction and two chapters for free. Alternately, the entire book can be downloaded as an e-book, with the paperback shipped for free after the book is published, for $15.95.

“You’ll never look at a bottle of wine on the store shelf in the same way again. You’ll have so much more appreciation for how it got there,” Houlihan said.

Today, Houlihan works as a consultant and guest speaker/lecturer, sharing his stories of resourcefulness and ingenuity around brand creation, development and marketing concepts. He also co-authors two weekly business blogs about business principles, and leads webinars and seminars.

Out of Civil Service and Into Wine

After graduating from Long Beach State with a degree in political science, Houlihan worked as an assistant for influential Anaheim City Manager Keith Murdoch, who led the city’s transition from an agricultural community to one of the most important sports, convention, tourist and industrial markets in the United States.

“He’s the guy who got Disneyland and the California Angels ball club there” Houlihan said. “I got a great business education there.”

Houlihan subsequently returned to his native Bay Area to take a position as an administrative assistant for the Oakland Redevelopment Agency.

His advice to “Make it a salt and pepper act, make it better than Bob and cheaper than Bob, and put it in a pig,” stumped Houlihan.

Soon, he began moonlighting after hours, helping businesses being forced to relocate formalize their policies and procedures. “They had to be able to survive in a new environment,” he said. “The best thing that they could do was have everything about the business documented.”

Eventually, Houlihan became frustrated with civil service work because it seemed to have a very limited future for him. “I had to wait for people to get promoted or take a job in another area,” he said.

So one day, with no other job on the horizon, Houlihan up and quit. “I didn’t just quit my job. I quit the idea of having a job,” he said. “Right then and there I committed myself to becoming an entrepreneur.”

Houlihan launched a consulting company focused on helping small and medium sized businesses – from startups to established ventures – with all aspects of their operations.

In 1983 he relocated to Sonoma County and began to gain clients who were in the wine business. He met Harvey, also a business consultant, at around the same time and their personal and professional relationship blossomed. In fact, it was Harvey who asked Houlihan to assist one of her clients, a grape grower, who was seeking payment from a winery that had just filed for bankruptcy.

“If they are selling fishing poles, they should be supporting Wild Rivers because if Wild Rivers has its way the dams will go away and there will be more fish. Then there will be more reason for the fishing poles.”

“Sure enough, he was on the short end of the stick. It didn’t look like he was going to get paid,” Houlihan said.

So Houlihan negotiated a trade – bulk wine and bottling services instead of the money owed – with the thought of bottling some wine, selling it, paying the grape grower back and having a little money left over.

Building a Brand

Having the equivalent of 18,000 cases of wine was one thing. Knowing what to do with it was something else altogether.

So Houlihan sought out the wine buyer for a major grocery store chain to get some insight as to how to sell and market the wine. “He was a very gruff man and he didn’t have a lot of time for me,” Houlihan said.

His advice to “Make it a salt and pepper act, make it better than Bob and cheaper than Bob, and put it in a pig,” stumped Houlihan.

The translation from a friend in the industry proved invaluable: salt and pepper meant red and white wine; Bob referred to Robert Mondavi; and a pig is a magnum – a 1.5-liter bottle that is big and round like a pig.

With knowledge of the kind of product wine buyers were seeking, Houlihan and Harvey next focused on their label.

Another source had told them to stay away from names that included hill, leap, run, valley, creek, and especially chateau, and make the logo the same as the name – “something familiar that people will recognize and remember.”

Houlihan and Harvey bought the name “Barefoot” from an associate in the wine industry, and created a new logo and label based on an image of Harvey’s foot, then set out to make an approachable, affordable and accessible wine. “Wine was really snobby at that time. We wanted to go after people who were drinking beer,” Houlihan said. “Our slogan was ‘Get Barefoot and Have a Great Time’.”

Working out of the laundry room of their rented farmhouse, Houlihan and Harvey overcame seemingly insurmountable hurdles by employing their worthy cause marketing concept and utilizing “Barefooters” – merchandisers in every single market in the U.S. “They were responsible for keeping our product on the shelf in that market, and were charged with going into the neighborhoods and finding out what the worthy cause was that we could support to help with sales,” Houlihan said.

Giving Back

Today Houlihan advises young entrepreneurs to find non-profits that meld with their product. “If they are selling fishing poles, they should be supporting Wild Rivers because if Wild Rivers has its way the dams will go away and there will be more fish. Then there will be more reason for the fishing poles,” he said.

“We advise our clients today to consider what their company stands for – beside the mercantile product that they are producing – and to talk about that as much, or more, than the benefit of their product,” Houlihan said. “When people are loyal to you because they have a social reason to buy your product, you have customer retention that is much greater than you would get through any form of advertising.”

Houlihan says “The Barefoot Spirit” is not a prescriptive text. “It’s business adventure story in which you are a passenger on a roller coaster ride with Michael and Bonnie, while they go from the laundry room to the board room and build this best-selling brand while running into all kinds of challenges that they have to overcome,” he said. “It’s an uncommon, behind the scenes view of the wine industry.”

In today’s job market, the only form of employment for many college grads is self-employment, Houlihan says. “Jobs simply aren’t there and college graduates are not prepared for bootstrapping,” he said. “We want to give young people an opportunity to avoid some of the pain we went through. We’re giving them 19 years of head start on the real world. This is not stuff you’ll learn in school.”

And, most importantly, says Houlihan, young people need to understand that overnight success is a fallacy. “It’s a get rich slow scheme for most of us. That’s how business is in the real world,” he said.

For more information about Houlihan and worthy cause marketing visitwww.barefootwinefounders.com and www.thebrandauthority.net.

Who We Are

To make inquiries for keynote speaking, trainings or consulting, please contact sales@thebarefootspirit.com.

The post Michael Houlihan Awarded Bishop O’Dowd’s Alum of the Month appeared first on The Barefoot Spirit.