From Bankruptcy to Barefoot: A Journey Through Wine Industry Hard Knocks

0:00 I got $300,000 worth of wine and bottling services. How do you want it done? And he goes, wow. He says, nobody ever asked me what I wanted. You come in here, you ask me what I want. I'll tell you what I want. He says, take this down. So I'm writing. And he says, he says, give me a salt and pepper act. He says, make it better than Bob, cheaper than Bob, and put it in a pig. You got that? I'm writing it down. Salt, pepper, Bob. I'm looking at it. I'm thinking, what language is this? He says, can you do that? I said, yeah, I can do that. I had no idea. Sit back and grab a glass. It's Wine Talks with Paul Kaye. Hey, welcome to Wine Talks with Paul Kaye, available on your favorite podcast hangout, Google Play, iVoox, Talk Radio, Pandora, and you name it.

0:48 We're on the road today. We are up in the Napa Valley, Sonoma Valley. It's 105 degrees and we are outside today, but it's beautiful, beautiful wind blowing through. But more importantly is the guest list today, and we are with Mike Houlihan and Bonnie Harvey, who established the largest, isn't it the largest wine brand in America? Is that what ended up happening? We built it to be one of the largest wine brands in America, and we had it in 28 states, but it's, when we sold it to E&J Gallo, they made it the largest wine brand of all time. Amazing, so. In the world. In the world. So this is Mike Houlihan and Bonnie Harvey. Now, My first question is, how many podcasts have you guys been on lately?

1:37 Since September, we've been on 75. 75. And how many of these podcasts— I'm setting you up, by the way, just so you know— how many of these podcasts are from a gentleman that Mike actually made a sales call on in 1989? Absolutely zero, Paul, except for this one. Oh, hey, wait a minute. That's the first one, an entree, right? Yeah. Yeah. So I want to talk about those days and what you thought you were doing, and then we're gonna talk about contemporary things that are happening at the Barefoot Spirit, which is a fascinating story as well. But I remember, and I had a small office in Lomita, California, just inside the beach cities of Torrance. I was upstairs in this rickety warehouse. The guy was selling, I think, Knorr Swiss dried cereal outta there, Swiss soups or things. And my dad had rented a small part.

2:26 And I get this call from a Mike Houlihan who has this idea of barefoot sellers. Right. Do you remember this? Yes, I do. I do, Paul. You know, I've been telling Bonnie all along, I said, I know this guy, I know this guy. So yes, we went, I remember it was rickety. It was rickety. It was tiny. And here they are and they have this Wine of the Month Club, you know, and I don't know how old that was at the time. Well, we started '72, but what was different then, and we're gonna talk about what happened in the world of wine 'cause you saw it all. You know, we used to be like, for instance, UPS would pull up and you would handwrite 15 on a page boxes. You could throw 100 boxes on there or 200. They never counted, who cared?

3:10 You just shipped it out of there. But you came to me with this idea. It's called Barefoot Cellars. Right. About how long had you been doing this already? Well, we started at 3 years. We started in '86. We actually had the concept in '85 and we put it in the bottle in '86. And in '87 and '88, we sold it mostly out of the tasting room at Davis Bynum. In winery, um, and we made— we had a deal with him. And, uh, we had a few brokers around the country, but we hadn't really expanded. When you met me, we had two distributors in California, one in the north and one in the south. Really? Yeah.

3:54 Okay, so, and how did— go back, you got to go back a little further. We started in '86. What were you thinking is the question? And how did you guys meet? Well, okay, so, so Bonnie and I Why don't you tell the story, Bonnie? Sure, sure. So Michael and I had moved to Sonoma County independently, and we were both business consultants, but neither of us were really wine drinkers, strangely enough. I had clients in the wine industry, and so did Michael, because that's the major business here. I had a grape grower who hadn't been paid for his grapes in 3 years, I discovered. And so I sent my new boyfriend here. Mr. Michael Houlihan out to collect the funds, which were $300,000. So you're the strongman in this? Well, you know, it's like— Yeah, he's the muscle man.

4:47 Like, did I marry the mob or what? Yeah, right. I just met this gal and she's got me out collecting 300 large. Okay, that's funny. Well, that's a lot of money though, back then, particularly for— Oh gosh, it still is a lot of money. But yes, it was even more in 1985 when this took place. So Michael went to the winery. It was Souveraine Winery at the time. And they had, had coincidentally just declared bankruptcy that morning, just filed for. So there was no money to be paid to anybody. But Michael, being the clever businessman that he is— clever, clever, clever— he, he was looking around for an opportunity. He was looking for some kind of resources, something that he could come home with. He had to bring home the bacon, right?

5:35 So he saw that they had a bottling machine. He asked him if it worked. Yeah, it works. And they had tanks that were full of wine, Cabernet Sauvignon and Sauvignon Blanc. So he was able to turn that $300,000 worth of debt that was owed to my client, the grape grower, into a trade, bulk wine and bottling services. So St. Supéry, St. Supéry? No, Souverine. Oh, Souverine. So. Yeah, it was before it was Château Souverine. It was just Souverine Winery at the time. So the farmer was owed the money or was it the Souverine both? Yes. The farmer was owed the money and Bonnie worked for the farmer. I see, okay. She was doing. So now you find this juice and all this equipment. Well, what I, I wind up getting a trade out of him and I come home, you know, and I'm thinking, well, you know, it's better than a poke in the eye. And we come up with a label, we learn the distribution system, we learn all the laws in the 50 states. Yeah, sure. We get alcoholic beverage licenses. How hard could it be? Yeah, how long could that take, right?

6:47 So Bonnie and I go to work. Let me just interrupt you for a moment. The grape grower, after we'd done all the research, developed the label, and gotten all the licenses for the grape grower, who was owed the money, he said, you know, I'm a full-time winemaker as well as a grape grower, and I can't take on another business. And we said, now wait a minute, we've just spent 5 months putting all this together, and now you say you can't handle it? So Michael quickly said, tell you what, we'll do it. The grape grower says, I guess I'll just have to take the loss. And that was not acceptable. To us. That is— Yeah.

7:32 So you're going, wait a minute. Yeah. How did we get ourselves into this already? Yeah. Yeah. So we took advantage of a $300,000 opportunity and with no other money and no knowledge of the industry, we jumped out there and we decided we'd take it over. We'd pay him $0.01 on the dollar and we'd bottle it all up and sell it to a chain and, you know, pay him back. How hard could that be? Yeah. How long could that take? That was plan A. Yeah, that was plan A. And so the name at that point, I kind of remembered that this would, the name was out there already. It had already been used at some point. Well, you know, there's a story behind it. We, when we got started, we went to John Brown, who was the buyer for Lucky Stores at the time in Northern California. Lucky Stores, that name just rolls off the tongue, doesn't it? He's quite a character. In fact, in our audiobook, it's played by— Ed Asner. The Ed Asner. Really?

8:29 And he's just as snarky as John Brown was. So Don, you know, I went into him and I said, look, you know, I mean, I'm hat in hand here and I'm saying, I got $300,000 worth of wine and bottling services. How do you want it, Don? And he goes, wow. He says, nobody ever asked me what I wanted. Everybody comes in here, you know, they've got their logo design, they got their name, you know, they got their prices, they're giving me benefits, they're giving me features, you know, they've got pricing programs. You come in here, you ask me what I want, I'll tell you what I want. He says, take this down. So I'm writing and he says, he says, give me a salt and pepper act.

9:11 He says, make it better than Bob, cheaper than Bob, and put it in a pig. You got that? And I'm writing it down. Salt, pepper, Bob. I'm looking at it. I'm thinking, what language is this? Sounds like an outdoor barbecue. So I— he says, can you do that? I said, "Yeah, I can do that." I had no idea. You didn't know what you're talking about. No. So I went to my friend who'd been in the industry, he's a couple generations, and I said, "Tell me something." I said, "What's a salt and pepper act?" He says, "Oh," he says, "That's like Cabernet Sauvignon, you know, like pepper, and salt like Sauvignon Blanc." I said, "Oh, that's interesting." A red and a white variety. A red and a white varietal under the same— 30 years, I've never heard that comment. Well, you gotta get beyond the warehouses. This is the way they talk.

9:52 Up in the buyer's office. I see. And so— So that's the salt and pepper. I said, so tell me, I said, who's Bob anyway? He said, oh, Bob, you know, that's like Robert Mondavi. You know, Bob Red, Bob White. I said, oh, Robert Mondavi, huh? Make it cheaper than Robert. And better. And better. I said, that's a tall order. No kidding. I said, pray tell me one last thing. I said, what is a pig? He says, oh, a pig. He says, that's the big fat bottle of wine. That's the 1.5 Magnum. That's not the 750 that everybody thinks of as a fifth. Wow. It's twice the size. Yeah. I said, oh, I get it. Salt and Pepper Act. Better than Bob, cheaper than Bob, and put it in a pig. That's where this buyer had room on his shelf. So he needed 1.5s of inexpensive wine. Right. And he didn't care what he called it. No. Well, he did. He said the name has to be the same as the logo, the image. Really? He had that opinion about it? Well, yeah. He said, make it in plain English. I don't want any French. Don't give me any châteaux. And he started getting a little upset about it. He said, no bridges, no hills.

11:03 No ridges, no— Yeah, I've got enough of those. He says, I got enough of those. Yeah. He says, oh, and "You know, make it visible from 4 feet away so she can see it while she's pushing her cart down the aisle." And I thought— This is one merchandiser, this guy. In 37 seconds, this guy's giving me the equivalent of a master's degree in wine merchandise. Totally. And I mean, he's been in the business for about 25 years at this point. This is one of the guys who put together Bottle Barn. That was his business. Oh, I remember that, yeah. So I had a lot of respect for Don even though he was rather snarky and cranky. But he was giving me the straight skinny. And so we went back and we were thinking now the name the same as the logo.

11:47 And then we thought, you know, Davis Bynum used to have a wine years ago called Barefoot Bynum, a screw top. He sold it to the hippies back in Berkeley days. I said, I wonder if he would part with that. So we went to Davis and— He hadn't produced it in 12 years. Yeah, and he says, I want a big number for that, you know? And I said, but Davis, I said, it's sitting there, you haven't used it in 12. He goes, It's worth it because you want it. And so I said, okay, I'll tell you what, we'll buy it from you, but you know, I don't have any money, so you know, we'll have to work it out some way. So we figured out a way to work it out and that's how Barefoot gets started and that's where the label comes from. What a good story. Yeah. I remember Barefoot buying them. Now it might've predated me as a functional thing, but I was working in my dad's store in the '70s.

12:33 Yeah. You know, through '82, so. Yeah, '72. I remember that brand. So now it connects. This is really fascinating. All right, so you got a bunch of juice. You know how to bottle it. You have a— you think you came up with a name and an image. You haven't sold anything yet. No, no. But one of the deals that I got with Davis was that I could pay him by paying him $1 a case for every case that sold through his tasting room. And I would sell it to him. So he was making like 50% margin. You know, and he started selling it and he sold it so well that after about a year and a half, you know, he decided to DC it out of the tasting room. And that forced us to get serious about distribution. So how long did it take to go through that first bunch of, you know, were they 1,500-gallon tanks or, I mean, how much did you have? Well, we got 18,000 cases worth. Oh wow, that's, that was a tall order.

13:33 We started off as a medium-sized winery. Yeah, like everybody does, right? Right. But the irony of it is, is when you're selling wine for $4.99, $5.99, you better sell a lot. You better sell 18,000 cases just to keep the lights on because the cost of the glass and the foils and the corks is the same for a $90 bottle of wine as it is for a $5 bottle of wine. That's right. Davis Bynum used to say, "Yep, we're losing money on every case, but we're making it up in volume." Yeah, well, I know that side of it. Yeah, yeah. He also said— That's a good business lesson for sure. He said, You know, he said any fool can go into the wine business, but they have to be a tireless fool. Yes. Well, I'm gonna tell you my impressions. This is especially seeing you guys on the different podcasts you've been on in the YouTubes. And I told Sandra, I said, he came in and he was enthusiastic. Maybe that's not the right word. Maybe it was aggressive. What's the word I'm looking for? But you came in, you were convinced. You were convinced you had this product. And I don't remember since it was '89, and where you were in the sales volume. I had never heard of it at that point. But this idea for you was gonna be, this was a serious idea. I didn't know if you were still trying to figure it out at that point, like 3 years into this. Well, we were very sure that we had discovered a market that was unrecognized and unattended. You see, in

15:04 1986, 75% of the wine in California was purchased by women, not men, but 100% of the wine buyers were men. And the men were interested in the vintage date, the appellation, you know, the pedigree and the heritage of the wine. The women were interested in consistent flavor. They wanted a Tuesday night wine that didn't taste funny next year. And they wanted it to be on the shelf when they came back to buy it. Play it a second show. That's important. Yeah. 'Cause Trader Joe's at that point was doing the fearless flyer, 2,000 cases. And when it's gone, it's gone. You can't ever get it again. Right.

15:47 Buy or buys. Yeah. Yeah. So what we did is we started off, you know, the big chains wouldn't take us 'cause we went back, we went back to Don Brown. You know, it's in the audio play. And you know, he said, I can't take this. He says, are you kidding me? He says, you put a foot on it? He says, He said, "Nobody's ever heard of anything called Barefoot." After all this, after all I told you. I said, "But you know, the name is the same as the logo. It's in a pig. She can see it from 3 feet away. What do you want?" He goes, "Yeah," he says, "but are you gonna put $1 million into advertising in this?" And I said, "A million dollars?" I said, "I don't know that I have $1,000." He says, "Well, I'm not gonna take it. No big box store, no chain is gonna take it 'cause it's unknown." I said, "What am I gonna do? I bottle it all up for you." He says, Well, I guess you're just going to have to go out and sell every mom-and-pop and independent and corner grocery store until you make a name for yourself. I think you just answered that question.

16:51 And I said, are you kidding me, Don? I said, that will take years. He said, that's right, whoo-hoo, you better get started. You got a real crash course in how tough this business is. And what I mean, you just literally that one story hit almost every aspect of the wine marketing business, which everyone's had to try and figure out and can't figure it out. And it took your persistence to figure this thing out. 'Cause I remember that the, it wasn't, I wanna say it wasn't desperate. It was just like, I've got this stuff and this is the brand. Passionate. Yeah, it was passion. Oh, I like that. We were passionately convinced that we, well, because we were doing tastings and the women would line up and they would take the bottle and they'd say, I just love this wine. And they would use the love word. And you know, it was— They'd hold it close. They'd hold it close. And where was it tastings? In the stores or? No, this, we entered every competition we could because we needed third party. First time working with the first juice, the first special juice. First juice, yes. In fact, you know, a guy that you know in Southern California at the International Wine Competition, let me see, what's his name?

18:02 He's passed away now. Anyway. Gorman, I mean, the LA Times guy or Balzer or? Yeah, one of those guys. One of those guys. Yeah. Nate Cromen. He said it was the silver lining in the wine business. He said, this is a great bridge. It's gonna increase the size of the wine aficionado envelope. You know, these guys at Barefoot, they're not going after wine drinkers, they're going after beer drinkers. Yeah, what a thing to say to two people that didn't know what they were doing when they got started. And all of a sudden one of the great, you know, judges of LA is telling you, We think you've got something. That's right. And we got, you know, people started writing about us up in Seattle and in other cities in the wine columns. And, you know, we were just hustling. The name of our book is, you know, "Barefoot Spirit: How Hardship, Hustle, and Heart Built America's Number One." Well, hustle is— Hustle, here's an example of hustle. Hustle is when you get the gold medal at the LA Wine Competition and the next day you have gold medal stickers on every bottle in LA. That's hustle.

19:11 Yes, hustle. You guys are out there going for it. So he's out making sales calls and you guys are trying to figure out what to do with all this inventory. Right. You think you have a good idea. What are you doing? Are you hustling too? Are you just calming him down when he gets back? I'm a juggler. Yeah. I'm juggling payables and receivables. And believe me, that was challenging. Yeah, receivables. I was also on the bottling line. I had to learn everything about glass corks, foils, labels. And then I had to make sure that the right product, the right supplies came in for the right varietal on bottling day. Big surprise to find out that, you know, it was the wrong labels. Yeah, or there's a clear glass instead of all the green, dead leaf green or whatever. So I just, I discovered that they were different sized bottles and different shapes and different colors. This is shocking. Wow.

20:10 And I discovered that you had to to coat the paper on the label for this particular bottling machine because it was a wet line. Oh, you find out what happens if you don't coat your label on a wet line real quick. Boy, I had a huge amount of lessons to learn. Yes. So let's fast forward a little bit because this is— that those lessons are invaluable and they can be very expensive. So now you've got the brand. When did you think that maybe there is some traction in this idea? Well, we really thought it was gonna sell like hotcakes before it ever went in the bottle. When we were still thinking about the label, I came up with what the label looks like one night. And I knew it was gonna be a very big seller, a very hot seller immediately. Just like that was— Well, that was it. It was faith. Let me Filter that question. When did sales look like?

21:10 That's a good question. You're looking for proof, are you? Yeah, I'm looking for proof. Wait a minute. When you woke up one morning, you looked at each other, wait a minute, this like, maybe we have something. Okay, I think it was because I was in Los Angeles and I was out there, you know, in the Pasadena area. And the salesperson I was with said, there's a wacky person out here that I want you to meet. He's got a little shop. Everybody thinks he's crazy. He calls the manager captain. He calls the clerks mates. He's got nets on the wall. He's got, you know, beluga, whatever, from Russia. Hawaiian shirts. Hawaiian shirts.

21:52 I said, really? I said, that sounds like a lot of fun. He said, yeah. He says, your wacky label is perfect for him. So we went in there and we made the presentation to him, and he agreed to buy it and put it in two of his stores. He was building his third store. That was Trader Joe's. Joe Cologne. And so here we are. Was it Bob Burney you were talking about? Yeah, Bob Burney. Yeah. Wow. And so Bob takes Barefoot and he blasts it out with Trader Joe's all over the country as they grew. So there's people who live in places like Des Moines, Iowa. Hey, honey, let's go down to the mall. They're opening a Trader Joe's. We'll see what they're doing in California, you know, and the world is coming to us right here. So we would have big stacks, you know, in the Des Moines Trader Joe's. That's phenomenal. Yeah. And so that's how we led out into the United States was by having a strategic alliance with another wacky person. Well, Bob was not an easy buyer. He was a great guy. He passed away years ago, as you know. Oh yeah. His daughter Christina Koulerides is still selling to Trader Joe's. I did not know that that's what happened. And so that's what they had to be the trigger for. When that happened, we said, okay, wow. I mean, we were faced with an awesome reality, which is, wow, if Trader Joe's is gonna be in Des Moines, Iowa, who's gonna go into the stores? Who's gonna check the pricing? Who's gonna make sure it's on the shelf? Who's gonna, you know, pick up the spoils and who's

23:24 gonna be there, you know, to police it? And you know, how are we gonna get people into the Des Moines, Iowa store to buy those products? And what other stores are in Des Moines, Iowa that we could sell? And so that, led to Kroger's. Another huge distillation. Exactly. So here we are and Kroger's goes like this. All right, we're gonna authorize you guys for 5 states and we're gonna put you on sale for $5.99. Can you meet that price in all 5 states? We said, yes, of course. Of course you can. Then we go find out what the taxes are in the 5 states. And in some of those states— Transportation. $1 a bottle. Oh no. Yeah. But it sounded good when you got asked the question because Santa here's in charge of all the excise taxes now. Well, you know exactly what I'm talking about. And it's ridiculous, right? Oh yeah. Well, the cost of doing business, I would say the biggest mistake that people make is they understand the cost of goods, but they don't understand the cost of sales.

24:28 Because the cost of sales are different in every state. And for instance, if you do business in South Carolina, your cost of sales are way less than if you did business in New York. Way less, like half. You know, so we wound up expanding Barefoot in the southeastern United States first. So you had to find a distributor? Found distributors down there. 'Cause how did Bob do it to those stores? Did he ship it himself? No, no, he bought it through distributors in those states. I see, okay. So at that point you've got sort of a distributor network going on and you're sort of sorting it out and it feels like, have you sold through this first 18,000 cases yet? We sold through, yeah, we sold through it in the first year. Less than a year. Less than a year. And we did it with mom and papas mostly in San Francisco and in Santa Barbara. We went to Santa Barbara because, you know, I had gone to college down there and I knew that it was a recreational beach town and I knew I knew that Los Angeles people went there and we thought, well, they could play on the beach and discover Barefoot on the beach. And then they would take a taste for it back to LA. And when we introduced it in LA, they would know it. And so that was the strategy. Yeah.

25:42 'Cause you had, did you have the socks then? 'Cause I think you walked in with socks or something or some kind of sales things. We had a holiday back card. Yeah, that was a stocking with the foot coming out of it. Yes. Knock your socks off. We had it in the store at some point. Point. Yeah, we had the socks. This guy's got a good memory. I almost forgot about the socks. I want to spend some time on the barefoot spirit, so— but this— I had to uncover the, the, the wine part just because we had history together, so to speak. And now that I know that you had Bob Bernie on your side, and he and I were good friends when he was alive, so I just found that— I find that really fascinating. And this is a very difficult business. It's no— it's no easier today.

26:26 It's probably even harder I'd say, yeah. With the types of things that you can do. And I can't imagine what's going to happen to the winery business during COVID here, because so many people are going to find themselves with no cash. And maybe, you know, maybe there's a, hey, wait a minute, maybe there's a $300,000 debt on some juice out there that you start this whole project over again. No, no, no. So once is enough. Did you decide at some point that this was too big, too hard, too busy that you saw got Gallo's involvement or that kind of happened on its own? Well, the profit margin was so low in the first place that we knew that we had to bottle and sell 500,000 cases a year in order to get the attention of a buyer. Yes. Because there's no profit until you've got that volume there. So we admired Gallo because they had merchandisers out there that were working their tails off in the stores and their products were selling faster and had more shelf space than anybody else. So we were watching what they were doing from the beginning and trying to copy them by putting our own salespeople out there in the stores to merchandise the shelves.

27:40 Because we found out pretty quickly the bottle that wouldn't sell was the one that never made it to the shelf. Yeah. And our biggest problem was being a fast seller because when we were, we'd empty the shelf. And then again, you can't sell if there's no product there. So you had to have our salespeople in the stores like Gallo did to be replacing the product. Basically merchandisers who are fronting the merchandise, which was my job at the liquor store. Exactly. You know, so Bonnie and I, we were outsiders, as we say. So we are learning every day. And so when we see how Gallo is operating, we say, oh, there's a lesson. Now people in the industry would kind of reject that idea.

28:24 They'd say, "Oh no, the distributor's gonna take care of that. Don't worry." The retailer will take care of it. Oh, the retailer will take care of it, they would say. We worried. Yeah. 'Cause we had 500,000 cases to sell. We used to give a course up at UC Davis and it was called "Don't Be the Winemaker from the Bankrupt Winery. They'll Blame You." And we gave it at the OIV, which is the organization International Viticulture, a French or international organization. We have about 150 people. It was 4 winemakers. Yeah, in the class. And so we come in there and we tell them about wine merchandising. Now, if you ask a winemaker what the label should look like, they'll step right up to the plate and tell you. Yeah, sure. See, but they have never really dealt with merchandising and will it be visible from 4 feet away and will it stand out from the other 1,000 labels.

29:22 So that's the kind of stuff you learn hard knocks. Like, you make friends with people that have dirt under their fingernails. We say make friends with people in low places. We mean the people that stock the shelves. Sure. People doing the work. People doing the actual work. Truck drivers, forklift operators. They were telling us stuff that was real insightful. And we were going, oh, yeah, that's right. But Gallo, So what they were showing us was he who merchandises wins. Well, that's what I think their guerrilla marketing was known for, was bumping that thing. Because the other day I was in the market, she's like, what are you doing? And so I took my phone, I put it on selfie mode, and I'm looking over my shoulder. I'm telling my customers, look, the reason these wines are at eye height is because of the merchandising. It's like salad dressing and toothpaste. You're not gonna get in the way of Procter Gamble trying to sell Crest, right? I mean, so there's a reason why all of a sudden Snoop Dogg's, you know, criminal wine is right in your eye. He's not in the wine business. Who cares what Snoop Dogg drinks? But he's got the best next to Apothic Red. That doesn't happen by accident, right? Oh, you learned this part. Oh yeah. So you're out there now trying to like, you're colliding with Gallo almost in the sense of you're trying But with a great deal of respect, I remember, this is a true story, I was up in Minnesota and I was in a store up there, I think it's called

30:54 MGM, and it was in St. Paul. And there was this guy in a suit and tie, he was walking down the aisle and he had two other guys walking with him and they were in suits and ties. And I saw him and he was pointing things out and going like this with his finger. And he was very concerned about, you know, what was next to the products that he was selling and whatnot. And I could see that they were Gallo products, but I didn't know who it was. He was asking a lot of questions. About 2 weeks later, I'm in Tallahassee, Florida, in a, in a Publix store down there. And I'm pricing items, right? Taking my own wine out of the box. I'm the I'm the president and CEO of this company, right? You can throw in chairman. It doesn't matter. And merchandiser.

31:37 I'm merchandising, you know, I'm pricing items, right? So I'm pricing my own items 'cause I know if I don't price them, they won't get on the shelf. They don't get on the shelf, they don't sell. They don't sell, scan doesn't show. They don't scan, doesn't show, then you're outta there. So I see the same guy walking down the aisle. And so I say to the salesman that I'm with, I said, who is that guy anyway? I think I just saw him. I saw him up in Minnesota a couple of weeks ago. Wow. He goes, "Oh, that's Joe Gallo." I said, "You gotta be kidding me. Not the Joe Gallo." He says, "Yeah." He says, "He likes to get information on the street. He likes to stay on top of the market." Wow. I went home and I said, "Bonnie, you know, all this work we're doing out in the marketplace, I guess we're not crazy, you know, because I just saw Joe doing this." And Bonnie says— What part of this don't you think is crazy? Yeah. In other words, you guys are both crazy. You're both crazy. That is really fascinating. So a model that you adopted, that you're starting to adopt, and then did you approach Gallo and say, look, we're out there on the street together, we're competing for the shelf space, I've got this brand, we're in however many states you're in, are you interested in us?

32:50 We went to a broker. You never go to the buyer directly. Oh, you went to a broker. Absolutely. That maybe had connections with Gallo prior? Well, they had sold him a product that they, or a business that they were happy with. With. Yes, we already had a good relationship. But fast backwards, long before that, we placed our item in several distributors across the United States where they were selling, and where they were the primary product. Press the pedal to the metal in those distributor ships so that the distributor salespeople would say to their reps, look, this Barefoot is really selling, you know, you guys got to check this out. The sort of a grassroots, you know, response to Gallo's hearing about you guys through non-normal channels, not through a broker, just through, hey, little, you know, hallway water cooler stuff. But you know, we couldn't have sold to a better company. I mean, they are family owned. Their 5-year plan, I mean, I know the industry has some issues, but their 5-year plan lasts 5 years. You know, you go to these publicly traded wine companies, their 5-year plan is 3 months long. Who knows? You know, the industry's rife with all kinds of craziness right now.

34:05 And there's, we just left what would be the exact opposite of what Barefoot might've been at the time. We just left Trombetta, a nice family just up the road here. Oh yeah, the Trombettas. And she makes the beautiful Pinot Noirs. They make 1,200 cases. And it's a similar conversation in that what's happening today in the marketplace is very difficult to understand. There's a billion labels now. Your idea, which I love this concept, Sandra, about like you'll see it from 4 feet away. But it's a tough place right now. So after you sold, because we don't need to— those details aren't important, you created this. I mean, the persistence and let's use the book, the hardship, the hustle, and the heart to do that is a marketable product in itself. That's it.

34:50 You had to say, all right, I'm gonna focus on this thing and really explain this And I'm gonna say it this way, the position you took when you called on me is in this book because I remember this telling my dad 'cause he was still hanging around then. He's still alive, but he was working with me. I said, this guy came in today and he was just, he wanted a sale and I hadn't seen that before. And you were anxious to get going, to get working. Look at this idea, what are we doing? And that's what this book's about, I think. That's the spirit. Yeah. Yeah. Yes. And so it's a business book. It is a business book, but it's kind of an exposé of the bowels of the wine industry. It's, you know, it's an outsider's inside view of the wine industry. So the average person can really pick up on what's involved. I mean, you see those 18-wheelers going down the freeway and you don't realize that inside of it could be 22 pallets, 5 layers high, each one of them with 56 cases of 750s, 12 to a box, on its way to a Ralph's store or, you know, a Kroger's or a Publix store. And so you go, oh my God, you know, this is commerce, right? Yeah. And just to get to that scale. So what the book is about about, I guess, Bonnie, why don't you tell them how we got into writing the book and what promoted us to write the book? We wrote the

36:22 book after we had sold the business, and our staff and people that we'd done business with, they were coming to us independently, many of them, and saying, your business philosophies, the way you ran the business and the way you promoted the product were so unique that you've really got to tell other people about it. We had no turnover for the last 5 years. Years of our business. Really? That sounds a lot. And building that kind of loyalty and team players, you know, that spirit, team spirit that these people had, we had to share it. We couldn't just keep it within ourselves. There's so many people out there starting businesses and we all start with popularly held misconceptions. Mm-hmm. And there's a lot of those in the book. The book is all story form. So we give people the lessons we learned as we learned them, not here's the lesson, but you pull out the lesson from the story that we tell you. Oh, that's an interesting approach. People learn better, they're more interested in learning because it's in story form. Now we've been telling stories since the caveman days, right? That's how people learn. Learn. It's about the story anyway, right? It is about the story. This, this industry, and I've said this a few times with, upon this podcast, it's changed considerably. And I'm

37:54 up against, in the retail side of things, €1 per liter wines coming in 20,000-gallon Tetra Tank containers, driving up New Jersey's coast into New York, getting bottled into a bunch of brands, getting shipped out for, on the Groupon for 3, you know, $3 a bottle and it's bad. It's just not good wine. And it's not an experience that I think wine drinkers would say like, oh, I got this for $3. Isn't it great? And they're like, no, it's bad. Right? Or the other day I tasted some wine and I just said this to the Trombetta family with a blogger called punchdrink.com. It's a very famous distilled and wine spirit site. And she did a story on us. She sat with me and tasted and I tasted said this Beaujolais. She goes, this is really bad. I said, yeah, and it came from one of my competitors. They sent me samples. Imagine that, a competitor sending another competitor samples to taste to sell. What's this world come to, right? So I tasted it with her. She goes, this is really bad. I said, yeah, and it's, guess what it is? It's Saturday Night Live Beaujolais, named after the TV show. Oh yeah. Is that, is that, now so what kind of experience is that for a buyer to say, oh, I got the Saturday Night Live, and they put it in front of their friends and they open it and it's had, right? This is a story to tell.

39:08 The barefoot story is a story. The inspiration you guys must be putting out on the street with this book, having this conversation today, to get people to think outside the box a little bit. Yeah. To understand that it doesn't just get handed to you. Amen. You know, you have to— You know, it's hard work, but it's doable. And I think what scares a lot of people is they don't know what the process is. They don't know foot to put in front of the other one. This book really lays out a process. Yes, it's in the wine business, but it's a very fungible process. It can be applied to any business. And the thinking and the reasoning and the spirit is the same. You know, since we wrote the book, Bonnie and I have become speakers. We've spoke all over the world. We've been in Trondheim, Norway. We've had students from Nanyang University in Singapore, all over the United States, probably 60 schools in the United States. They all teach entrepreneurship. They all got Barefoot in their fridge. So the brand has, you know, opened the door for us. There's no question. Thanks to E&J. But here we are talking about entrepreneurship.

40:19 And the questions they always ask is, you know, just tell me two things. Number one, how do you keep going when you run into that wall? Wall. And the other one is, what's the other one? How do you prepare for the unexpected? That's it. Oh, great. How do you prepare for the unexpected? What a question. So those are the two most popular questions, and the answer is the same. You prepare for the unexpected and you handle the walls by actually having a mental attitude about mistakes. By having a mental attitude about your customer, about your employees, about your vendors. You know, we have a talk we give called, you know, How Soft Skills Earn Hard Cash. And we've forgotten soft skills. We got so carried away with technology in the last 25 years that we forgot that if you treat your vendor right, he's liable to give you $300,000 upfront with no no interest for 4 months, and he's liable to warehouse it for you for free just because he likes you and wants to do business with you. So you think that the, I think this particularly with texting and I just, I had a little gym, I used to lease it to young men that wanted to get their little sort of personal training business going, okay? And I consulted many of them. What they couldn't understand was texting was not a methodology of doing business. I still don't believe it is because you can't, We can't have

41:49 this conversation. You can't see my face. You can't see my sincerity in the business we're doing. You just get this raw text and it can be misinterpreted so many ways that the value of the content is gone. And they're millennials, they're like, "No, it's absolutely Mr. Callum Carey and a way to do business." I'm like, "I don't think so." No, the reason is because they wanna believe that it is because it does provide them with a screen They don't have to take personal rejection. They can just ghost out. And so the thing with texting is it sets up this layer of separation between you and the person that you're communicating with. So there's no, you don't have any real skin in the game. But now if you were to physically go talk to that person, you're showing up. You're not doing anything else. You're giving them your undivided attention. That's it. Boy, that's the number one thing that people want. You're demonstrating sincerity. And that's the key. Yeah.

42:56 The sincerity and the humility. The demonstration of sincerity is the key to reducing your costs in business. But you see, Silicon Valley has an answer for that. Borrow more. Yeah. You know, just go into further debt or give up more equity in your company. So, oh, my business failed because I didn't borrow more money. I didn't get funded or my business failed 'cause my second round of financing didn't go through. Well, I'm sorry. That's true. When were you ever resourceful? When did you think about it? You know, it's funny you said that 'cause my side of it, the internet side of sales, Wink, Naked Wines, even Wine.com just went to the street for $50 million. They had already gotten $35 million from Goldman Sachs. I'm like, They do big numbers. And I'm sort of the funny irony of this conversation is, you know, there's that commercial on the radio about, well, two guys started business same time.

43:53 One still has a, you know, his little business. The other one built a career and moved on. And the Wine and Month Club is still this small business. And that's what I did. And Mike called on me in '99 and he built this big business. But the point is I've never borrowed a penny. And we have been less profitable in some years than others, but we've never leaned on that. And there's companies like Wink that have borrowed, have gained $75, $85 million and just turned a profit for the first time like in 15 years. And so I look at that saying, gee, we're doing pretty good, you know, in that regard because I think this lesson that you're talking about here, the sincerity, the humility, we take care of our vendors. We, if I shake somebody's hand on a deal, that's the deal. Except for the small claims court I have Thursday morning, but that was because they defrauded me. But besides that, those lessons can't be learned via email and text and a distant relationship. They have to be learned the way you did it, which is show up, front the merchandise, talk to the people you're trying to sell to and make those deals and live by the ones that you shook your hand. You probably made some bad deals over your career. Oh yeah. But you live through it and you live by the handshake. There's a scene in the book where the Michael Houlihan character walks into Don Brown's office, who's the buyer for Lucky Stores in California, you know, with like hundreds of stores. And he's got a check in his hand

45:25 for $5,000 and he lays it down on Don's desk. Michael Houlihan has the check. Check and he gives it to Don. Yeah, lays it down on Don's desk and Don says, what the hell is that for? I said, we screwed up. We put the $7.50 labels on the $1.50. You've been scanning them at half price. We did the math. We figured out how much you've lost. Wow. We— $5,000 will cover not only your losses, but it will cover, you know, your wear and tear in handling. Our truck is going around to the stores right now and exchanging them all out. And he goes, you did the right thing. He said, who's in charge of labeling then? Then he says, he says, next week you're on ad with mandatory.

46:11 Wow. Mandatory stacks. You know what a mandatory stack is? No. That's when the, the, the buyer of the chain says, listen, manager, I'm telling you that you must put a stack of 20 cases of this product on the floor. You don't get to decide It's mandatory. Oh, so the local store manager doesn't get a chance to decide that? No, he doesn't. But you know— That's amazing. Yeah, so then you get 200 stores times 20 cases. That's amazing. So tell me then this story, this is the written form of the story. There's a podcast of it, there's an audio of it. Audiobook, yes. Yeah, audiobook. Bonnie, tell them why we decided to do the audiobook. Well, we were going into universities speaking to the students about entrepreneurship and conventions and such. Everybody was wearing their earbuds. That's 4 years ago. And so we found out that they were listening to podcasts. They were listening to some kind of self-improvement tape.

47:09 And they said they really liked it because they could walk around and do other things while they were getting this education. And we said, well, our book is extremely educational and we really want to get the word out to more people. So they don't have to suffer the way we did, really, if they're going to start a business. So that's when we decided to make it into an audiobook. And we have some connections in Hollywood and UC Irvine, and we went down there and met Sherwood Players, which is an actor's troupe. And we worked with them and they produced a fabulous audiobook.

47:50 Audiobook version of "The Barefoot Spirit." Actually, the Audiobook Producers of America Association gave "Barefoot Spirit" audiobook one of the top 5 business books of 2020. Wow, that's fascinating. Yes, particularly because it was self-published and that is their business. They're audiobook publishers. Yes. I just wanna add to that, Monica, may I? So I wanna add to that and say this book is not read to you like most business audiobooks. This book is performed for you. So it's kind of like a 1945 radio show that you're listening to. It has sound effects, it has music, it has characters. What a brilliant idea. The scenes are like 2 minutes to 4 minutes. And so then there's like 10 scenes scenes and a segment. Segment is 25 minutes. And so, you know, you can binge and listen to the whole book. It's over 7 hours. If you're gonna drive to Seattle or Denver. That's a project.

48:57 Yeah, it took us over a year. I mean, we got to work with actors and Hollywood. I mean, they say we got 3 things in California, right? We got wine, we got software, and we got Hollywood. So we put 'em all together. So, you know, you hear that. So the entire book's there? Yes. Yes. And is it word for word? Is this a script basically, or is the script— It's been converted. So instead of sort of a screenplay on the bottom. It's very, very much the same. Very close. Where there were dialogues such as he said, she said, those things were dropped. But no, it is the full story of the Barefoot Spirit and how we grew the brand. And if we bring in, uh, this is my controller. If we bring in 50 copies, I ship them up here, sign them for me, for my clients. Absolutely. Because, uh, we just did that with Rex Pickett and the Sideways movie book, sold a bunch of those. And then we— George Tabor with the Judgment of Paris book. I'd love to do it with this. We'd be— I think it'd be interesting for the customers to, to catch that, because part of this podcast— and we're getting on an hour here, so I don't wanna take too much of your time, but part of this podcast is sort of to do what you're talking about. And that is not expose the wine business, but have people understand what it's about because— Make it doable. Yeah, there's so much movement about organic and bio and people are confused and I want them to understand what happens a little bit behind the scenes, how we negotiate. And yesterday, you'll find this fascinating, I had a conversation

50:27 with Alexandre Remy, he's from Atlas Wine. And he actually publishes on his website, he takes a bottle of Chardonnay and he draws a line across it and he says, "This is what it costs me to bottle and ink it. This is what it costs for the juice inside. This is what the margin is for the distributor who's delivering it to the store you're going to. And here's the retailer's margin." And that's what the price comes up. And he's been very transparent about that. And I'm wondering what, I'm wondering if that's not something of the future, but with the way business is going and is so, the digital track is fast, everybody's online, they're moving stuff, is the transparency of the cost something you think might be interesting to the consumer? Or are we sort of dipping our toe into an area we probably shouldn't be doing? You know, I think— That's a good question. I think, yeah, it's a great question because I think that people are looking for sincerity these days, especially since the COVID crisis. They wanna buy real things from real people that stand for real, you know, what do you really stand for? You got a great bottle of wine, but where do you stand on pollution? You know, where do you stand on how you treat people? How do you treat your workers? Where do you stand on women? Where do you stand on all these different issues that are the issues of today? The environment, right? So I think that it's not just here's my cost of goods and here's how little I make. It's also— 'Cause it's the wine business. Here's what I stand for. If you buy a bottle of wine from

52:00 me, your money is going to a cause that you can identify with. I think that's the future, not just of the wine business, But of all consumer products. I think that's a great answer because that's true. You're seeing it more and more. And when he showed me in the wine side, I'm like, wow, you know, you're really treading water in the wine business for doing that because no one does it. And he's like, yeah, I don't, you know, I don't mind being controversial about it either. I'll tell you, I mean, we know the margins suck, but our daughter came back from, was it high school? She did a McDonald's report. You know what they're paying for it? And she said, those people are making a profit. I'm like, it's like, well, wait a minute. You know, this house you live in is because, you know, we make a profit. So I don't think that's evil in itself, but I think you're right. I think it's about the humility of the product and what you're preparing, what you're standing for, like the sustainable movement, all that stuff. Yes. That's why we're so excited about producing an audiobook for other founders. We want to help them tell their stories. Everybody's got a story to tell. Well, we have a great story. We're running out of time.

53:07 Yeah, we're offering the service that we used to produce the audiobook of "The Barefoot Spirit" to other founders so they can tell their stories, preserve their legacy, keep engagement of their employees. So production value, soup to nuts as far as what you're offering, just the know-how No, or the actors and the recording and the— Well, yes, we have the actors, we have the producer, and it can all be done at a distance with these conditions now with COVID The whole thing can be done remotely? Yes, it can all be done remotely. So here's what I did. My dad started 19— He was a pharmacist by trade. He had 7, he bought and sold 12 pharmacies. The last pharmacy he bought in 1969, insisted that he buy the liquor store. And then he started the club outta the liquor store in 1972.

53:58 Fast forward, I mean, Jim Barrett was our neighbor. We used to come to the store all the time. Patricia Gallagher, who was part of the, the Taste Judgment of Paris, came into the store. Bruce Nair was in the store. David Stair was in the store. All these famous guys. So I've been taking this story. How do I differentiate the Wine of the Month Club from all these other services? Right. It's our story. We started the industry, which may in itself not mean anything, but the premise of what Wine Month Club does, which is I still taste everything that's sold. So every Tuesday since 1988, since she came to my office, I tasted wine, probably 100,000 wines. So to me, that's a story in the history of my father and the judgment of the parish and all that.

54:42 So I've been trying to write a book and she's been saying, look, why are we gonna spend money on a book? Book when you can tell the story other ways? And I'm like, but the book, it's an interesting book. It's a business book. It's a wine book. It's an immigration— my dad was an immigrant from Cairo, came here with nothing, you know, so to speak. So I think this is a good story. Well, I think stories about businesses are interesting to this new generation. You know, a lot of them are unemployed right now. And they're considering going into business. So there's a big uptick in entrepreneurial education and all kinds of books that have to do with business. And that's why we're excited about the Barefoot Spirit audiobook because it's an opportunity to basically teach some business principles. You know, if you talk to successful business people long enough, you begin to notice that there are these universal principles universal values. You know, there's universal truth. The same guy, you know, or a different guy is saying the same thing as the last guy, but in a different way, you know, maybe in a different vertical, a different industry, but it's the same message.

55:53 And so that's why I think that anything you can do, like Bonnie says, you leave it, it's your legacy. See? It is. So you don't have to be here once it's written. And that actually helps you sleep better But getting the best author, we interviewed for some time to get Rick Kushman, and he worked for the Sacramento Bee for well over a decade being the food and wine writer. And so he knew about wine. He'd written a book, and I picked up his book on a flight that we had, and I started reading it, and I was just in the introduction, and I cracked up, and Michael's looking at me 'cause I'm laughing too loud in the airplane, right? And I said, this is our author. It. He's got humor. He's got love and caring for other people. He's got so many of the qualities just in the introduction I read that we had when we were starting Barefoot and that we hope that we continued to show in the product Barefoot Wines. And I said, this is our author. I've got it. But we'd written a book before that. Michael had worked with an author and I'd given up on Michael went ahead and finished it up, and then we threw the whole thing right in the garbage can. It was terrible. See, that happens, doesn't it? So the person that you use, the author, you've really gotta resonate with them. They've got to understand your subject matter, and they've got to understand

57:24 your personality and what points you wanna get across and who your audience is. That's the key. We lucked out when we found Rick Cushing. 'cause he's excellent. That's why the book is a New York Times bestseller. Has a lot to do with it. We, there's a book out too, which just for your own sake is a very interesting book called Tangled Vines written by Frances Deakinspiel. It's also a New York Times bestseller, but it's the history of wine starting at Rancho Cucamonga in the 1700s. Oh, fantastic. But it's really about, the title is what? Arson, theft, and murder in the wine business. So it's sort of this sort of dark side of the wine business, but it's fascinating story. I talked to her about writing the book.

58:04 She wasn't interested. A gentleman named Patrick Hughes, he was the LA Times Magazine food writer forever, and we know him well. Really good writer, and he's just like, I don't have time to write a book right now. He wrote the book called The Last Days of Haute Cuisine, which is about New York food, French food scene. So I'm fascinated by this story, and I have to wrap this up because I don't want you guys to stick around too long. We'll have to do it again because I think there's enough content here to keep talking, but I'm fascinated by the idea I get to sell this. We'll send you some copies to autograph. We can't wait to read it and listen to it since I have an hour's flight to come home and another hour's drive.

58:45 And just thank you so much for the time and sharing your home with us to come out and have this chat. Well, thanks for being with us. This has been too much fun. Yeah, it's been great. It's really nice to see you after all these years. Yeah, it's good to see you again. It's great to see you again. You, Paul. You know, that would be what, 30 years? No, 40 years. No, 30 years. Amazing. 30 years. You look great. You look— thanks. Thanks. Cheers. So do you. Thank you. All right.