Supported by Greenhaven Road Capital, finding value off the beaten path.
Wine, like movies and restaurants, is a difficult business. If potential profits weren’t enough, social glamour sweetens the pot. Of course, that’s our 2019 view. Michael Houlihan and Bonnie Harvey founded Barefoot Wine in 1986 and the conditions were quite different. French wines ruled the day and American wines were viewed with disdain.
Bonnie and Michael didn’t mean to start a winery but instead when a client couldn’t get paid in dollars and was offered payment in wine the couple took the payment because it was better than nothing. “People say to ‘follow your passion'”, Michael said, “but we followed our opportunity passionately.”
With more wine than experience, Bonnie and Michael started to ask anyone who might know anything about wine. They talked to their customers.
I was reminded of a joke while listening to this episode. An aspiring entrepreneur walks into an old-time general store and sees stacks of bagged of rice. It’s almost to the ceiling. The budding business boss looks at the store owner and says, ‘Wow, I’d never thought you sell that much rice.’ The owner looks back and replies, ‘Well, we don’t but the salesman who brings it by is really good.’
“The best information we got,” Bonnie explained, “was from Don Brown who was a chain store buyer in California.” He explained that their wine needed to be a salt and pepper act, in a pig, and better and cheaper than Bob. The label should be simple, but not common, and visible from four feet away. In thirty seconds they had everything they needed.
Barefoot is a good name, it makes the consumer SMILE. “At the time wine was intimidating. People couldn’t pronounce the name on the labels,” said Bonnie.
Michael and Bonnie had an opportunity because the consumers had a latent need. Wine at the time “was a Saturday night wine where the men would sit around and talk about things like mid-notes. But it turned out the majority of wine buyers were a thirty-seven-year-old mom with two-and-a-half kids pushing a cart down the supermarket aisle and she wanted a Tuesday night wine.” Channeling Rory Sutherland, we can say she didn’t want something good, she wanted something not-bad.
Barefoot’s marketing discovery was to start small. The first distributor Michael and Bonnie approached said he wouldn’t carry their wine without a large advertising campaign attached. They couldn’t afford that and instead caught a lucky break when two months later their phone rang with a donation request.
The caller wanted to raise funds for a children’s park. Bonnie and Michael still had more wine than money so they offered a few cases and the organizer, presumably begrudgingly, accepted. Then something unexpected happened.
In the month after the fundraiser, the store sales in the area immediately around the fundraiser shot up. Bingo. Their marketing plan wasn’t going to be national but local and it was going to be a page right out of Getting to Yes.
One main idea from this classic on negotiation (published in 1981) is to offer things that are cheap to you but valuable to the other person and vice versa. My kids request breakfast for dinner and that’s fine by me because it’s cheap, quick, and healthy. Win-win. That’s what wine donations did too. Barefoot got exposure and fundraisers got another perk, some panache, and a possibly pricy basket for bidding. Win-win.
Barefoot broke through. The world is, and always has been, busy. Even in 1961 when Rosser Reeves wrote that the world will not beat a path to your door for a better mousetrap, “for if the world does not know it is a better mousetrap, no one is going to make a beaten path to anybody’s door.”
Michael and Bonnie, as well as entrepreneurs today, face the TiVo problem; can innovators get distribution before distributors get innovation. Asking this question can help founders decide when to sell their business. It did for Lara of Lärabar. And from early on Michael and Bonnie wanted to sell. Selling is a Messy Marketplace and today Michael suggests people meet with brokers for lunch to talk, plan, and get a lay of the land.
Thanks for reading and thanks to Tim for passing this along.