Major layoffs hit K-J workers

<p>Wine mogul Jess Jackson this week unleashed sweeping job cuts across his Santa Rosa-based wine empire in response to the deepening recession and grim forecasts for the fate of high-end wines in the coming year.</p><p>Jackson Family Wines declined to discuss the scope of the layoffs, but several people familiar with the reductions estimated that around 170 employees lost their jobs in all areas of the company over the past two weeks, most on Friday.</p><p>Rumors of a shakeup at his Jackson Family Wines have been swirling for weeks, and many workers learned their fate on what employees were calling "Black Friday." Winemakers, marketing professionals, administrative assistants, accountants and hospitality staff were among the employees axed.</p><p>Jackson Family Wines is the largest wine group in Sonoma County, selling an estimated 5.6 million cases of wine last year made from 14,000 acres of vineyards around the state.</p><p>It owns more than 36 different wineries under the Jackson Family Wines umbrella, the largest by far being the flagship Kendall-Jackson.</p><p>The company had 810 employees in Sonoma County in mid-2008, according to The Press Democrat's Outlook survey. The company has since ceased disclosing employee figures.</p><p>President Clay Gregory referred questions about the layoffs to spokeswoman Caroline Shaw, who confirmed the company was downsizing but declined to provide specifics.</p><p>"There are a variety of factors affecting the economy right now and we needed to adjust our staffing levels beyond our annual seasonal temporary help," Shaw said. "In light of that there was a needed reduction in force today affecting every area of the organization."</p><p>She declined to detail the magnitude of the layoffs, noting the company is privately held. She also declined to discuss how the economy was impacting sales of the company's various wines. She said layoffs are always "a tough decision."</p><p>"No one is immune to layoffs in this economy," Shaw said from New Orleans, where she was traveling promoting the company's Cambria wine brand.</p><p>The economic trends suggest more trouble may lie ahead, said Nick Frey, president of the Sonoma County Winegrape Commission. High-end wine sales, restaurant sales and wine club sales are all down, all of which are likely to impact some Sonoma County producers.</p><p>"There's probably a lot of other people that will be affected," Frey said.</p><p>Many Kendall-Jackson workers who were laid off were given severance packages that were dependent upon them not saying anything negative about the company, according to a current and former employee.</p><p>The move followed earlier orders given by Jackson, a former land use attorney, to cut 20 percent of the company's workforce, according to several wine industry sources who spoke on condition of anonymity.</p><p>Employees knew a shakeup was coming, but many were surprised and upset by the scope of the layoffs.</p><p>"It has been extremely stressful there while this has been going on, especially in the last two weeks," said a friend of one employee who was laid off this week.</p><p>Analyst Jon Fredrikson, of Gomberg Fredrikson &amp; Associates, said the news doesn't surprise him given the state of the economy, a topic he just discussed Wednesday at a Sacramento wine conference.</p><p>Total wine sales increased in 2008 at their lowest rates of the decade, and high-end wine sales have suffered the most as restaurant sales have gone off a cliff, Fredrikson said.</p><p>"It's difficult on people, but I can understand why (Jackson) would do that," Fredrikson said.</p><p>While sales of La Crema and Kendall-Jackson were strong in supermarkets last year, much of that volume was achieved with aggressive discounting in the fall, Fredrikson said. That lowers margins and hurts profits.</p><p>But it's likely Jackson's stable of high-end wine brands like Verite and Cardinale, some of which sell for more than $100 a bottle, have suffered the worst in the downturn, Fredrikson said.</p><p>Jackson has been snapping up luxury wine brands for more than a decade, fueled by ever increasing profits from the success of Kendall-Jackson, the best selling chardonnay in the nation in its category.</p><p>Just a few years ago, Jackson paid $97 million to acquire a portfolio of three luxury wine brands, Arrowood in Sonoma, Byron on the Central Coast, and Freemark Abbey in St. Helena.</p><p>"They've just gotten into so many high-end items," Fredrikson said.</p><p>One of the richest men in the nation, Jackson has also spent hundreds of millions of dollars in the past several years buying thoroughbred racehorses and ranches in Kentucky and Florida. He owns the 2008 horse of the year, Curlin.</p><p>Now 78, he is known for shaking up his organization on occasion, Fredrikson said.</p><p>"He often changes key executives, and perhaps he's using an opportunity like this to reposition the company and prepare it for leaner times and better prepare it for the future," he said.</p><p>You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com.</p>