Walking Barefoot Into America’s Top Wine Brand (part 2)

A continuation of my conversation with the founders of Barefoot Wines

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In our previous post, I spoke with Michael Houlihan and Bonnie Harvey, the founders of Barefoot Wines, on their advice for aspiring entrepreneurs like they once were, as they were about to release their New York Times bestseller, “The Barefoot Spirit: How Hardship, Hustle and Heart Built America’s #1 Wine Brand.” They had so much to share in our time together that I had to share a second helping of their advice in a second post.

 

DAN: I’ve attended events in which entrepreneurs are put into “Shark Tank”-like situations where they have to pitch a venture capitalist on their concept. And they may have only 5 minutes maximum to do that. If you were sitting on a panel listening to this style of pitch, what would you want to hear most from the entrepreneur presenting?

MICHAEL: I’d like to hear them say they have a buyer who is interested in their product. The words, “I have a purchase order” would get my attention. In the wake of our most Recession, so many investors don’t want to throw a lot of money at R&D anymore like they used to. They got burned by that and used up so much money on development that they had no money left for marketing. Today, they prefer to invest in expanding a business that already has some kind of traction in the marketplace.

  

DAN: We often talk about separation of work and play. But so many times your business is your life as it is your passion. How were the two of you able to separate your work and your life so that you didn’t completely lose yourself in Barefoot?

MICHAEL: Bonnie and I were blessed with two different skill sets with great respect for each other because of that, so we meshed and didn’t butt heads. She handled the back office, dealing with leases, compliance, contracts, applying for lines of credit and more. I couldn’t have handled that. I was the front man talking to distributorships, cold calling, negotiating deals and meeting with salespeople. So we both had exactly the same goals but came at it from different tracks.

BONNIE: As far as business, that worked out just fine. As far as our personal lives, we had a rule that there was no business talk at home. We’d commit to setting time aside for a vacation. To ensure we’d have the time to do the things we loved to do, I would even buy non-refundable plane tickets to Hawaii that forced us to go since we couldn’t get our money back! By having that kind of attitude, we’re able to balance both worlds.

 

DAN: In the settings you’ve been speaking at, you’re talking to entrepreneurs at the very beginning of their journey. But you’ve talked about the importance of thinking about the endgame too, which may feel light years away.

MICHAEL: On Day 1, start thinking about what your acquirer’s due diligence looks like. What does he want? He likely wants all your intellectual property, including getting a release from the designer who’s done your a logo now rather than 25 years from now when it’s worth over $100,000. The same is true in working with anyone who does a website for you or performs any writing or social media. You have to have contracts with releases built into them.

Similarly, you have to vehemently protect your trademark. Are most students thinking about that? No, because it seems so distant and removed from where they are now. But trust me, it can become a full-time job when you get popular – and if you get popular in a hurry and haven’t addressed that, it could take you by surprise.

Many of these issues impacting their business tomorrow are crucial to think about today, long before they occur.

 

DAN: Social media shares some similarities to your experience, in that brands are seeing a revolutionary way to tell their story outside of the boundaries of traditional media. What’s your view on the evolution of social media marketing over the last decade?

MICHAEL: Social media has to be used like any tool in the proper way to achieve the desired result. It’s not how many friends you have. It’s whether or not you have the 5 friends who are going to play an influence on who buys your product. Social media as a business tool is only as good as your ability to target. Hits and retweets don’t mean anything if you don’t sell any product. Social media is a great way of communicating with people, finding out what your clientele wants, doing comparison shopping, obtaining endorsements and more.

When it comes to starting relationships, we believe face time trumps Facebook. Ice breaking and rapport building requires face-to-face contact. But once you’ve done that, absolutely go ahead and engage with them on social media. Back when we were launching, our version of social media consisted of bonding with local non-profits who would influence the purchase of our product in the community.

BONNIE: Social media affords a company the opportunity to tell their story easier, that’s for sure. But what is that true brand story? Now more than ever, companies have to stand for more than the service or product that they’re offering. Barefoot is a wine product, but the essence of that product, the “Barefoot Spirit,” is about how to treat people, support your community the right way, how to work with others in your distribution network and so on. Having a great product is one thing. But living up to your brand promise – and keeping it – is another. Because in reality, your brand is owned by your constituents. Always.

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The future of the country lies in the hands of entrepreneurs and I can’t think of two better people to share their wisdom with such an audience on a regular basis than Michael Houlihan and Bonnie Harvey. If you’d like to get some insightful business advice from them weekly, catch up with them on one of the two weekly blogs they write:

www.barefootwinefounders.com

www.thebrandauthority.net

 

 

 

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Walking Barefoot Into America’s Top Wine Brand

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Dan with Bonnie Harvey and Michael Houlihan, founders of Barefoot Wines

A 2-part conversation with the founders of Barefoot Wines

When I first spoke with Michael Houlihan and Bonnie Harvey, founders of the brand we know today as Barefoot Wines, they were about to release their New York Times bestseller, “The Barefoot Spirit: How Hardship, Hustle and Heart Built America’s #1 Wine Brand.

Our conversation at that time was about Michael and Bonnie’s most improbable journey of entrepreneurship, with humble beginnings of running a business out of a laundry room in Sonoma County. Without a lot of capital whatsoever, Michael and Bonnie became the brand of Barefoot Wines – a brand they would ultimately sell in 2005.

These days, Michael and Bonnie are enjoying sharing their experiences via speaking engagements to entrepreneurs across the country, so I caught up with them as they came through Chicago to do just that at an event at McCormick Place.

 

DAN: Michael and Bonnie, when we spoke the first time, we retold the inspiring story of success you enjoyed as founders of Barefoot Wines, bootstrapping the company. I think what would now be fascinating for many to know is the story after the story – what happens once you move on from the company you launched and how do you continue to inspire others while finding your own excitement? What does that next chapter look and feel like?

MICHAEL: Certainly imparting what we’ve learned – good and bad – in our time as entrepreneurs has provided its own kind of excitement for Bonnie and I. Some of the ways we’ve done that is through our book authorship and speaking to aspiring business owners as early in their process as we can.

For “The Barefoot Spirit,” we published the book 1 day after our 30th anniversary and we were thrilled to find it would reach #2 on the list of New York Times bestselling paperbacks in the Business category. We spent a lot of time pre-selling the book with free downloads and approaching the distributors of Barefoot Wines to help promote the brand story.

Our goal is to make the book required reading at colleges and universities that teach entrepreneurship. Some schools were teaching entrepreneurialism in the 1970’s but actual Schools of Entrepreneurship are still a relatively recent thing. At this point, we’re proud to say 12 universities have made “The Barefoot Spirit” required reading and we hope all of them will add it to the course list.

 

DAN: Are there other categories of entrepreneurs than typical young professionals you’ve been speaking to?

BONNIE: Absolutely. We’ve been speaking to the Entrepreneurial Bootcamp for Veterans with Disabilities (EBV), which is a year-long study, the first month of which is spent online preparing vets to go into business on their own, followed by intensive study at the University level, followed by a year of online study with mentors and professors. And some of these vets have already started their own businesses.

When you have a book that includes ‘hardship, hustle and heart’ in the title, it’s very interesting to talk to a vet because they know all about hardship, they know about hustle through their prior experiences and they’ve all got big hearts. So they’re very receptive to what we have to say.

 

DAN: What would you say the both of you offer in speaking that isn’t frequently taught in school?

MICHAEL: Entrepreneurship in school is kind of like automotive engineering in that it teaches you how the car operates. You learn that you’ve got to have a business plan, be able to write a loan application, know how to hire and fire, be familiar with compliance laws, understand all the licensing you have to obtain, etc. These are the technical aspects.

What we offer is the navigation of actually getting the car from here to there – and in the worst of conditions when you face them. What obstacles need to be overcome? The minute you open your doors for business, it’s not the business plan anymore. It’s the cash flow plan and all about paying your bills.

BONNIE: We came to realize we had seven sales we had to make in order to get our product to market – and for each of those people along the line, we had to figure out what they wanted most so we could get the product on the shelf to be seen by the end consumer. As we’ve been talking to students about this area of distribution management, it seems to be an area that isn’t well addressed at the university level. We thought if we had an award-winning wine at a low price that featured a cute label you could remember, it would fly off the shelf. At first, it didn’t. What we had to learn was the entire distribution network and the series of sales that had to be made. That was a huge lesson for us and a big lesson for any student today.

 

DAN: What are the biggest fears that students express to you?

BONNIE: They’re afraid that they don’t have enough money to start the business and they’re afraid that they don’t have enough knowledge and experience in that industry.

But I can tell you when we were starting our business, Barefoot would not be here today if Michael or I had either one of those things.

If we had money to throw at the problem, that’s exactly what we would have done. And you know what? We would’ve run out of money and still had a problem. We had no paid advertising because we couldn’t afford it, which led us to discover “worthy cause” advertising that led us to support non-profits in our community. The membership of these non-profits understood that we were caring about their concerns, so when they had an option to buy a bottle of wine, they knew ours was the one that supported their fundraisers – and they supported us. It was a great way to get our message out to the greatest number of people in the shortest period of time.

If we’d had experience in the industry, we’d have done things exactly the way they had been done before in the business and there probably wouldn’t have been any great change in the wine industry for a number of years.

For example, when we understood the majority of wine buyers in our area were women, we realized that the quality many of our female buyers wanted was consistency in taste from year to year. Well, when you’re a vintage wine, different vintages taste different. So one of the things we did outside of the norm of the industry was to be a non-vintage wine. Our busy female buyer making all the purchase decisions for her household at the grocery store wouldn’t have to worry about that lack of taste consistency. Our wine gave her that ability.

In addition, while the wine business was generally a bit stuffy and the labels featured fancy French-sounding names, we decided that it should be more fun, with a product that was easy to recognize and easy to pronounce. So our Cabernet Sauvignon was called “Barefoot Cab” and our Zinfandel was called “Barefoot Zin.” I hadn’t been a wine drinker and the whole business to me had been intimidating. What we were creating was a brand that was more approachable, something that, frankly, hadn’t been properly addressed in our industry.

 

In part 2 of our conversation, I speak to Michael and Bonnie on how they advise entrepreneurs to brush up on their “pitch,” why it’s important to think about selling your business on Day 1 and their views on social media in brand building. Stay tuned for that in our next post.

 

Walking Barefoot Into An Entrepreneurial Adventure


A conversation with Michael Houlihan, founder of the Barefoot Wine brand

 

Michael HoulihanFounder, Barefoot Wine

Michael Houlihan
Founder, Barefoot Wine

Michael Houlihan may represent one of the ultimate “pulled up by the bootstraps” stories of entrepreneurialism.

From humble beginnings in the laundry room of a rented farmhouse in the Sonoma County wine country, Houlihan, along with partner Bonnie Harvey, co-founded the Barefoot Wine brand in 1985.

Without much capital, industry knowledge or advertising budget, he built one of the most successful wine brands in the country – selling Barefoot to E&J Gallo 20 years later. He retells the story in a new book titled: The Barefoot Spirit: How Hardship, Hustle, and Heart Built a Bestselling Wine.”

Dan Gershenson: First, what’s your relationship with Barefoot Wine today?

Michael Houlihan: After we sold the brand in 2005, we continued to work with Gallo for a year to keep the entrepreneurial spirit of the brand alive and well. This is important because you’re talking about a mindset of preserving a positive company culture that often gets lost in corporations due to large budgets.

DG: Large budgets, in what way?

MH: When you do have financing and plenty of money, that’s not necessarily as good as you might think because now you can just throw money at every problem – and think that’s going to fix everything. On the other hand, there’s something to be said for the creativity and passion of someone who burns with desire but doesn’t have as much money. You can’t lose that ability to think outside of the box even when success happens – if you lack creativity and don’t keep your customers as the top priority in amazing ways to make them feel like their #1, money won’t make up for that.

DG: I’m sure like many entrepreneurs, you made a mistake or two out of the gate. If it’s not too painful to share, what would say one of your big ones was?

MH: You start off with this idea that it’s all about the product and that you’re sure you have the very best product, price and quality. It’s a big mistake many entrepreneurs make. They overvalue the product itself over the distribution of the product. Excellent distribution trumps production every time. What’s more important is to get your product out there. This is hard for some folks to believe, I know. But when you think about it, if it’s not out there, they can’t buy it, can they?

DG: I’m sure some will be shocked to hear you say that about product quality. Especially since we’ve often believed quality is King.

MH: Of course, quality is ultimately king. And I’m not saying that just anything goes. But in our early stages, just because we believed we created the very best wine at the best price didn’t mean instant success. And we got tons of accolades at Barefoot Wine too. So guess what? We got overconfident about distribution. We thought distributors would now just have to present the product to retailers, sell it to them and the retailers would order it repeatedly when it ran out.

We smoked cigars in celebration the first time we sold to a distributor but we should have been working harder to help them sell into the retailers repeatedly. In businesses like ours, the first true buyers are not the general public but the distributor and then, if he picks you up, the retailer. We forgot that side of the equation and it could have been disastrous.

DG: Did you have a team in the field to self-police this better?

MH: We had to. The product can be technically “sold” and yet, the ball can be dropped in all kinds of ways – it’s not often due to the fact that it isn’t selling. It can get hung up in a warehouse. The store could program in the wrong SKU number. The clerk, manager or distributor salesperson just might forget to re-order it. So you need that “cop” who not only sees your product go to the store but checks to make sure it stays on the shelf each week.

DG: What other kind of challenges did you face?

MH: Many stores said they would never carry a wine with a foot on it. They said they would only carry it if we spent millions on advertising. Of course, we couldn’t. We barely had any money at all.

That’s when we decided to sponsor some worthy causes and nonprofits that were in the neighborhoods of where those same stores were. If they used our wine at fundraisers or silent auctions, they would announce our presence in thanks. They would put us in their newsletter. They would give us a story that we could use to promote their cause right on our brand.

Suddenly, those people paying $200-400 a plate were receiving a pitch from us – not a commercial pitch – but why we supported their group or cause. Social reasons can be more powerful than traditional advertising. In fact, even when we had the budget to advertise, we never went there.

I think that was the moment when we realized the Barefoot spirit was more important than the wine. We discovered that worthy cause marketing helps build community, so we found worthy causes to support that resonated with the logo and with us. Many companies forget that in today’s transparent market, they have to stand for more than just the product they sell.

DG: Yet, even when you excluded advertising as a cost and began to build your brand, you still had a lot of other expenses. How did you address those?

MH: We thought hard about who our true strategic allies were. You have to align yourself with people who benefit if you benefit. We realized we had to sell a ton of wine to make a break even early on – This meant more printing, foil, glass, etc. So I went to the glass company and said, “We stand to be your biggest client,” and I explained the volume at which we would sell our wine. We were willing to be honest with them about our sales and make them an exclusive supplier. We laid out a plan with them in advance and treated our strategic partner as if they were our banker. You’re not alone when you’re an entrepreneur – you have to find out who’s running down the street with you.

DG: As your team began to grow, how did your culture grow with it?

MH: Performance of the company plays a huge role and we made sure everybody knew it was how they were compensated, including our strategic allies and other vendors we negotiate with. There are only two divisions in every company whether they know it or not  – Sales and Sales Support. Nobody is outside of those two divisions ultimately. I don’t care if you’re a receptionist or an accountant, everybody works for sales. It’s their job to keep the salespeople up to date with the information, supplies, marketing, and excellent products they need to succeed.

On Day 1 of their employment, we gave our people a “Money Map” that showed the money trail from the customer who bought our product from their local store, who bought it from the distributor in their city, who bought it from our company, and then all the people our company paid with that money and the portion that went to their check, benefits and bonuses. When they saw the big picture, they understand how they fit in and how they share in the cash flow. Without that early warning system, they may think the boss has a Big Rock Candy Mountain out behind his house where he can just grab more money any time he wants. Not so. All the money really does come from the customer. The more they appreciate that fact, the less they see their job as somehow isolated from the process.

In the Spring, Houlihan is releasing his new book on building Barefoot Wine and the lessons for entrepreneurs. He describes it as a “business adventure” story in how he and his partner faced failure in many ways but always found solutions in of a variety of surprising places – whether out of thin air, his allies, his own people or practically anybody else. You can go to Amazon and pre-order it if you like. But for readers of our blog, the CEO is giving us a special deal. Go to: http://www.barefootwinefounders.com/sample-tasting/

There, you can order the book from the Barefoot Wine Founders directly and download the book right now. Why? True to his philosophy of inviting feedback from every corner of his company, Houlihan wants to get people’s opinions on the book even before it gets formally reviewed. He’ll put several reviews online, with people sharing their opinions of the book ahead of time. It’s available right now at the link above for just $15.95. Go get it. I know I will.

Panera Cares baking up an evolved business model

“Being an entrepreneur is about seeing opportunity. It’s easy to write a check. But the real challenge for corporations like us is…what if we could solve some of these core problems too?”

– Ron Shaich, Founder, Chairman and Co-CEO, Panera Bread Co.

Sometimes when entrepreneurs talk about giving back to the community, it can feel as though it’s a convenient extra that’s good for PR or a team bonding day. Is it a nice gesture from that company? Absolutely. But it’s not exactly baked into the fabric of what the brand is all about either.

Which is what makes Panera Cares Café, the pay-by-donation restaurant concept from Panera Bread Company, so intriguing to me as a template for other businesses to potentially follow.

I had the opportunity last week to sit down with Panera’s Founder, Chairman and co-CEO, Ron Shaich, to learn more about the idea when he came to Chicago to open a Panera Cares in Lakeview (formerly a regular Panera Bread Co. restaurant), the 4th of its kind within the Panera restaurant system.

What I really wanted to find out was: Can a company find success and profit from a business model that expects people to do the right thing?

At first, I wasn’t certain. Sure, when you first learn about a restaurant that lets people pay what they want so that someone who has only small amount of money can buy anything on the menu, your first thought is, “Wow, that’s so nice of them to donate food to the community like that.” But as Shaich explains, there’s something deeper at work here.

“(Panera Cares) comes out of a view of the world in which the way in which businesses most succeed is when they make a difference for lots of different people. That’s the guts of Panera’s success since I founded it 25 years ago.”

Corporations give money and Panera is no different – franchisees included, the company has given near $100 million in donations to its surrounding communities. Still, Shaich says this method of donation felt a bit disconnected from Panera’s everyday work.

“One of the things that became clear to me is that a food shelter can be a dehumanizing experience. What we want to bring is a whole lot of positive energy out there.”

Are there lessons from Panera Cares that other businesses might apply to their brands if they’re trying to evolve their model for greater community tie-in and profitability? Start with these ideas:

 

See yours as more than an office/retail location.

Normally we refer to places like Panera as restaurants, but Shaich used the term, “Community centers.” With thousands of locations around the country, Panera supports the places where people gather and build community. And having witnessed it firsthand myself as a member of the neighborhood Panera Cares belongs to, you can see it’s a statement that’s entirely credible. These are places where everyone is meeting from networking businesspeople to running associations to seniors getting together for their regularly scheduled breakfast.

There certainly are other coffee shops that could offer this type of environment, but those tend to be people zoned in on the laptop in front of them. The difference I see at Panera (and now Panera Cares) is that community conversations are more likely and often to occur here.

Is there a vision you see for your place of business that transcends the traditional setting people expect of it in a unique way?

How is this baked into your brand?

Again, Panera Cares doesn’t feel like a special case outside of the Panera brand but more of something natural to do for the community. Part of that to me is due to the fact that nothing here is sacrificed or stripped down from what people have come to appreciate about Panera.

“We said if we were going to do this and put the Panera name on it, we were going to keep all the good stuff and leave nothing out,” Shaich says. “The whole menu would have to stay as is. There’s no abbreviated version.”

There’s also no altered version of the environment. For all intents and purposes, the soul of the Panera brand looks and feels the same but with an even more amplified mission behind it.

Without sacrificing anything that your customers have come to know and love about you, how can your business model flow into a natural community benefit?

 

Do customers clearly understand your mission?

Since Panera Cares is different from the traditional restaurant concept, Shaich recognized that people would need to understand how the payment system works and the overall “big picture” of what Panera Cares is aiming to accomplish. That’s why every Panera Cares also features an employee “ambassador” stationed at the front of the customer line who explains the pay-by-donation method and other customer questions. Had Panera Cares not had this, you can imagine how it might create a bottleneck of questions once each person arrived to pay and make for a frustrating experience. With one simple addition, that challenge is largely solved.

Don’t just expect a creative business model to tell your story for you. How can you help customers down the tracks with greater clarity so they get where you’re trying to go?

Where is your “ambassador” stationed within your brand to explain your model’s purpose? Is it a physical presence like this one or an online one? Consider how essential that might be, especially as you’re trying to turn customers into advocates.

 

What discussion are you elevating?

The distinction here is elevating a discussion, not trying to deliver a solution to the world’s problems. “(Panera Cares) isn’t about solving the hunger issue or solving poverty,” Shaich says. “It’s about food insecurity. Food insecurity happens when people who don’t know where their next meal is coming from or how to pay for it.

Shaich says that 1 in 6 Americans have experienced food insecurity in the last year. But while the assumption by some may be that these people are largely homeless, it’s actually a small percentage of the overall amount. In fact, of the people who do experience food insecurity, 1 in 3 are college educated.

What is the issue that you’re trying to elevate for greater awareness in the community? And rather than trying to singlehandedly eradicate a problem on your own, how is your brand involving that community – offline and online – so you can work on it together?

Get everyone involved from the top down

When he opened the first Panera Cares, Shaich didn’t just tell someone to report back to him how the business was going. He worked there for the first few weeks just like other employees. In the process, he got to not only see how well the system was working firsthand but also how customers were responding to the new concept.

A great idea on paper can have hiccups in reality. So for internal and external customers, it’s vital for management to get out from behind the desk, out of the office and into the “trenches” with employees so you can see what’s working and what needs to be tweaked. Not to mention it provides a greater perspective on the impact of the brand.

 

Be transparent

As Shaich explains, “If people feel like they’re being gamed, they’ll reject it. So it’s about transparency, not taking advantage of people in some way. It’s about showing people how to pay it forward.”

Don’t present something as a gift for the community and have motives that community isn’t aware about. Put it all out there and be clear about what you’re taking in from the effort financially. Lack of transparency clouds the message of your true purpose and becomes a competing factor you don’t need.

 

Don’t just give a handout. 

Panera Cares may appear like a gift to the community but the community also has to sustain it. There’s still a business to be run with real costs. But anything Panera Cares generates in excess of covering its operating expenses is given back to the community in training at-risk kids. “We work with social services to give kids the life and work skills they need, promising them a job when they get done,” Shaich says. Panera Cares has put dozens of young people through this program.

Plus, while you don’t have to leave any money if you can’t afford a Panera Cares item, they do ask that if you do that regularly that you volunteer your time with them. So there’s real training for someone’s benefit, not mere goodwill gestures.

Remember, you’re not running a charity. You’re running a community-based business model. So while you’re giving, don’t be afraid to express the expectations you have of your customers in return.

Maybe if this economy of ours is going to continue to recover with the help of healthier corporations, the answer won’t just come from increased hiring but also from a whole new business model that benefits the community and brand alike in a way that’s also quite profitable. It’s not a big departure but as a natural evolution of what the brand stands for. I like what Panera’s doing with Panera Cares toward that end. I’d love to know others who have bright ideas like this too.