ENTREPRENEUR OF THE MONTH: JANUARY 2013
MICHAEL HOULIHAN, Co-Founder, Barefoot Wine
When Michael Houlihan and Bonnie Harvey started Barefoot Wine in their laundry room in 1986, the lifelong domestic partners dreamt that someday their wine would be a national bestseller. In 2005, that dream became a reality when they sold to E. & J. Gallo.
Since then, the couple has helped dozens of other entrepreneurs find ways to expand their brand—often with little money and no industry experience. How?
“We were pioneers in what we termed ‘worthy cause marketing’ and performance-based compensation,” Houlihan explained when I reached him by phone at his California estate. “We held a comprehensive view of customer service, resulting in the National Hot Brand Award for outstanding sales growth in 2003 and 2004.”
Scroll down to learn how Houlihan’s experience and innovative approach to business have made their company an international success.
Be Inkandescent: Tell us what made you and Harvey want to get into the wine business.
Michael Houlihan: We didn’t really want to get into the wine business. What we wanted to do was help out a friend, a grape grower, who wasn’t getting paid for his grapes. We negotiated a trade with the bankrupt winery that owed him money. They couldn’t pay him in cash, but they could pay him in bottling services. So, all of a sudden we had all of this bulk wine grapes, and all of these bottling services, so we created Barefoot to liquidate the debt.
Be Inkandescent: What made you name it Barefoot?
Michael Houlihan: We liked the word Barefoot because it was as far away as humanly possible from nose-in-the-air wine snobbery. Back in the 80s, most of the wines were pretty darn snooty and exclusive. It seemed like you had to have a degree in viticulture just to appreciate wine. But wine is fun, and we wanted to have an image that people could relate to. Barefoot seemed perfect because it is how wine was originally crushed. And when you see a bare footprint in the sand, it is a sign of recreation. You don’t know if it is a man or woman; you don’t know if it is gay or straight; you don’t know if it is Republican or Democrat. All you know is that that is the impression a human being makes on the planet. It is very inclusive, and cool. We wanted to put everything that’s great about California in a bottle.
Be Inkandescent: As a fan of Barefoot since living in San Francisco in 1991, I think you have accomplished that goal. Now, tell us about how you and Bonnie Harvey (pictured right) went from this great brand, to selling to Gallo. Was that always your plan to sell it and have an exit strategy, or did it come about some other way?
Michael Houlihan: That’s a great question because it’s something that entrepreneurs need to know. Basically, people go into business for one of three reasons: They are trying to create a job for themselves that they are going to have their whole life; they are trying to create a legacy that they can give to their kids; or they are trying to create equity in their brand value to monetize it. We were always focused on choice number three.
Be Inkandescent: It is one thing to have a great concept and a cute label and a great product, but it is quite in another to attract a big boy who is going to actually acquire you and monetize your brand value.
Michael Houlihan: That’s right. When you are planning to develop a brand and sell it, you have to get out there and market and merchandise your brand throughout the country before you can ever attract a buyer. And the way you attract a buyer is you take something they don’t have in their portfolio, and achieve the critical mass that they want if they are going to see your value. When Barefoot sold, it was making 600,000 cases a year—and it was only in 18 percent of the market. But we were in all 50 states, 100 supermarket chains, and 28 foreign countries. Now, that was attractive to Gallo.
Be Inkandescent: That’s amazing. How did you accomplish that kind of reach?
Michael Houlihan: Every day, from 7 a.m. to about midnight, seven days a week, we worked. We traveled constantly, and were very hands-on. Too many entrepreneurs get into business and think their ideas are going to carry them. They are kidding themselves. You actually have to get out there and sell it yourself. No one is going to do it—but you. We did it the hard way: we hustled. That is why our book is called, “The Barefoot Spirit: How Hardship, Hustle, and Heart Built a Bestseller.” The key is the hustle part.
Be Inkandescent: Tell us about the book. In it, you and Harvey point out many of the misconceptions that entrepreneurs have when they get into business.
Michael Houlihan: Let’s take someone who wants to get into the wine business as an example. They might think that to do so, they need a vineyard, a winery, 100 oak barrels, and all sorts of other expensive supplies. The truth is that they don’t need any of that. What they need first and foremost is purchase orders, so that they can understand what their customers want, and how to deliver it.
Be Inkandescent: And at Barefoot, you were able to realize early on that your customer was primarily female.
Michael Houlihan: Right. Our research showed us that she was buying wine when she bought groceries, that she wanted it to taste the same from year to year, and that she wanted it to be priced right. We started by bringing in a female winemaker, because we knew she’d have insight into our customer. Then, we put together a product that was non-vintage—the opposite of what was happening at other wine businesses at the time; and we priced it right, at $6.99/bottle, based on today’s standards. We wanted to honor the fact that women were buying from us, and we wanted to give them what they told us they wanted—including affordable wine and recipes. [Hungry? Check out this recipe for Barefoot Merlot Glazed Brownies.]
Be Inkandescent: That’s great advice for all entrepreneurs, because it can be applied to every industry. What lesson did you learn the hard way?
Michael Houlihan: Oh, boy. The hardest lesson that we learned was that it doesn’t matter how cute your label is; it doesn’t matter that you have the greatest slogan in the world; it doesn’t matter if your wines are all medal winners; it doesn’t matter if your price is the best price on the shelf. If your product isn’t there, customers can’t buy it.
Be Inkandescent: So distribution is the key. The same was true for Seth Goldman, co-founder of Honest Tea, and our Entrepreneur of the Month in December 2012.
Michael Houlihan: I’m not surprised. When you are selling a product like tea or wine, you have to develop your product with a focus on distribution. That means that initially, at least, you have to go out and make all of the sales yourself. But you can’t be everywhere all the time. So eventually we hired people in every state to monitor sales, monitor the distributors, monitor the grocery stores and the wine shops, and make sure that our product really was always on the shelves, always available for the customer.
Be Inkandescent: Do you think that’s a common mistake for many entrepreneurs—trusting other people to look after their brand and product and make sure it sells?
Michael Houlihan: Yes, and it’s a huge mistake. Too many small business owners think that other people have an interest in selling their product, and that they are going to take care of it. They don’t. There are too many products out there. So the products that win are the products that have been policed by the owner, handled, watched, and loved on a regular basis. We never thought that we would have to spend so much time in distribution. We thought it was going to be on making wine and marketing and coming up with cute slogans. Boy, were we wrong.
Be Inkandescent: What lesson made you say, I love being an entrepreneur?
Michael Houlihan: I think that was when we won the “Hot Brand Award” in 2003. It’s given out by the publishers of Wine Spectator Magazine to wine products that have sold increasingly more over three years. It is a tall order, and we won that two years in a row—and we did it without advertising. Rather, we worked with nonprofits around the country and relied on them to spread the word, and it really paid off.
Be Inkandescent: Working with nonprofits is the essence of your “worthy cause marketing” effort, yes?
Michael Houlihan: Absolutely. We knew that we had to sell a ton of product to survive. Unfortunately, many supermarkets told us they wouldn’t carry Barefoot because they never heard of it. We knew we had to build the brand, but didn’t have millions to spend on advertising. So we got creative. Bonnie and I are humanitarians, and both of us worked with nonprofits before we got into the wine business. So it made sense to let more people know us by offering the wine to nonprofit groups that were fostering causes that we held dear. They used it for their fundraisers and silent auctions, and someone from our staff was always there to help. It worked out great. We got their membership to have a social reason to buy our product, and we liked that Barefoot stood for clean beaches, gay rights, better education, and conservation. It was the best kind of advertising.
Don’t stop now! Learn more about Houlihan’s new book, “The Barefoot Spirit,” his background before Barefoot, and his three decades love affair with his domestic partner Bonnie Harvey on The Inkandescent Radio Show.
Also check out Houlihan’s 11 Ways To Harness Your Barefoot Spirit.