The House that Jess Jackson Built

There won’t be another quite like Jess Jackson. The man who built a wine empire from the ground up and strove to place his Kendall-Jackson Vintner’s Reserve Chardonnay on every retail shelf in the country still casts a long shadow a year and a half after his death. The future of Jackson Family Wines is also emblematic of how a production giant, still family-run, maintains success in an ever more competitive and fragmented winemaking world.

From its humble beginnings in 1982, the Jackson empire now spans four continents and reports annual revenues of $500 million. Barbara Banke, Jackson’s wife and business partner, heads the company. The leadership that Jackson groomed is dedicated to keeping his vision for the company alive. “From a business perspective, I think the transition has gone really well,” Banke says. “Jess knew he was ill, of course. He was very concerned about the family and making sure he left everything in as good a shape as possible for us.” Never quick to show emotion in public, Banke chooses her words with care, adding, “Obviously, it’s personally very, very hard.” Jackson died from skin cancer in April 2011 at age 81.

Rick Tigner, president of Kendall-Jackson winery and a member of Jackson Family Wines’ board, still sometimes refers to Jackson in the present tense, as though he’s working in an office down the hall. “The absence of Jess definitely leaves a void,” he says. “First, there was his charisma. Second, there was his entrepreneurial vision—we haven’t been able to capture that yet.”

Jackson was a force of nature. Tall and strapping, he had Charlton Heston’s good looks and, in his later years, a bold swath of white hair. Interviews with a dozen people who knew him well offer an absorbing portrait of a complex man. A born maverick, he could be outgoing and charming, yet also mercurial and stubbornly private. He was driven, unapologetically competitive and relentless in pursuing his vision. “He was a great contrarian. He found extreme glee in that,” says one former executive, who declined to be identified. “He was certainly a genius at the game of wine.”

A lawyer by training, Jackson also enjoyed a good scrap and wasn’t shy about filing lawsuits. He successfully sued his former winemaker, Jed Steele, for revealing the “secret formula” of Vintner’s Reserve Chardonnay in 1992. But in 1997 he lost a lawsuit seeking $30 million in damages from E. & J. Gallo that claimed its Turning Leaf label copied the look of KJ’s Vintner’s Reserve. “He rocked the boat in a number of areas,” former Beringer executive Walt Klenz says, “mostly to the benefit of the industry.”

The company is just learning to move forward without its founding force. Jackson surrounded himself with talented and smart people, says longtime advisor Don Hartford, who is Jackson’s son-in-law and the owner of Hartford Family Winery, which is part of the Jackson portfolio. But, he adds, “I would say 95 percent of the success of the company is due to Jess.”

The headquarters of Jackson Family Wines is inconspicuous and would be at home in any American business park. Located on a side road near the Sonoma County Airport, north of Santa Rosa, it sports only a modest sign out front. Inside, dozens of wine bottles line the wall of Tigner’s office. They offer a visual cross-section of the company’s bottlings, from its two most important brands, Kendall-Jackson and La Crema, to Australian label Yangarra and California boutique wineries such as Cardinale and Lokoya.

Today, Tigner and Hartford assist Banke in running the company. “This is a family-run business,” Tigner says. “We’re here to let them lead us with their vision, and it’s our job to execute it.”

That straightforward hierarchy belies the company’s complicated structure. As of 2012, Jackson Family Wines was the parent company of 35 different brands that produce 5 million cases annually. Kendall-Jackson accounts for most of the company’s revenue, selling roughly 3 million cases in 2011, with La Crema coming in second by selling nearly 900,000 cases, according to Impact Databank. They are the primary source of Jackson Family Wines’ success, particularly KJ’s Vintner’s Reserve Chardonnay, one of the fastest-selling wines in the history of the business.

By all accounts, Banke, the family’s matriarch, is up to the task of running the company. “She’s very pragmatic, with her feet on the ground about decisions,” says one former senior executive. “Intellectually, Barbara is more than capable of running the business.” Banke was an attorney in San Francisco before joining Jackson in the wine business more than 25 years ago. Much like her late husband, she is reserved and keen on privacy.

The inner workings of the company, and even its public image, remain closely guarded. In an industry where many large producers are publicly held, Jackson—like family-owned competitor Gallo—played things close to the chest. As one former senior executive says, “Jess was a fairly secretive guy.” Even Tigner concedes that the company hasn’t always done the best job of telling its back story.

Although he is an industry veteran, Tigner has kept a low profile until this past January, when he was featured on the CBS series Undercover Boss. Fourteen million viewers watched as he donned a disguise and did everything from work in the vineyard to pour samples in the tasting room. “Jess always used to say that a great leader has to fly at 3 feet as often as he flies at 30,000 feet,” Tigner recalls. In other words, sometimes a little hands-on work by the boss makes an organization stronger.

Before his death, Jackson personally oversaw the restructuring of the company to ensure its continued family ownership. It was a challenge given the size and diversity of the holdings, but he had a great desire to leave a legacy. “Jess wanted to create a business like the Antinoris that would go on for generations and generations,” Hartford says. “So a lot of what he did in the organization was designed to allow for that to happen.”

Two trusts control the company’s assets and divide the wineries in various proportions among Jackson’s five children and Banke. There are Jenny, 57, and Laura, 55, from his first marriage, and his younger family with Banke: Katie, 26, Julia, 24, and Christopher, 23. A few of the properties are owned exclusively by specific family members, as is the case with the Hartfords and their winery in Russian River Valley.

In the past year Banke has moved forward on a number of fronts. Several new brands have been launched, including Wind Racer and Mt. Brave. In February, the company bought historic Hickinbotham Vineyard in the McLaren Vale region of Australia. The 207-acre hillside vineyard has supplied grapes for Penfolds Grange and other top wines, and it will now provide grapes for the company’s Australian winery, Yangarra, and perhaps a new brand.

As the company looks to the future, work remains, Tigner says. “The marketing team has sometimes struggled with Jess’ absence. He had great instincts about what the consumer wanted to buy and pay. Jess wasn’t just in charge of the company—Jess was in charge of production and Jess was in charge of finance and Jess was in charge of marketing.” Is it possible to replace a man who was in charge of everything?

While Jackson seemed to come out of nowhere in the 1980s, the roots of his success in wine can be traced to the Great Depression. It was in full swing when Jess Stonestreet Jackson was born, in February 1930. An only child, Jackson was an infant when his family moved from Los Angeles to San Francisco. His father was a teacher who was jobless more than once, so times were often tough. “Jess told stories about rice being the only thing they had to eat for weeks at a time,” Hartford says. Yet even during those harsh times, he was exposed to wine at the tables of his Italian immigrant neighbors, who made hearty jugs of red in their cellars.

Jackson was just a kid when he started his first business, selling eggs and chickens at a trolley stop in San Francisco’s working-class Inner Sunset district. During summers, he helped his grandfather with the family farm in Colorado, picking corn and doing other chores. “A handful of dirt meant something to me after that,” Jackson once said.

Growing up, Jackson worked dozens of odd jobs, from soda jerk to lumberjack to lifeguard at Sonoma Mission Inn. He labored on the docks of San Francisco to put himself through the University of California, Berkeley, and was a policeman while studying law at Berkeley’s Boalt Hall. After dealing with an injured man one day, he was forced to arrive at law school splattered with blood. “He didn’t want to miss that class,” says Hartford. Jackson passed the bar exam in 1955.

Jackson soon became a successful San Francisco attorney, specializing in land use and property rights issues, and earned a reputation as a tough litigator. But by 1974, he was already restless and looking for something new to take on.

With his grandfather’s farm in mind, Jackson and his then-wife, Jane, bought an 82-acre orchard in Lake County just north of Napa Valley. Initially it was just a vacation home, but soon Jackson was replacing the pear and walnut trees with vineyards.

It was about that time that Hartford, who was in law school, first met Jenny Jackson, his future wife. “Jenny told me that she didn’t want to introduce me to [her father] because he would take over my life,” Hartford says, shaking his head and laughing. “She was right.”

While the grapes from Jackson’s new vineyard were initially sold to Fetzer in nearby Mendocino County, by the early 1980s Jackson had more fruit than he could sell at a fair price. Jackson liked to say that he was “forced” into the wine business, but in truth, he had already caught the wine bug, and it was the sort of opportunity he was prepared to run with.

By harvest 1982, Jackson had dubbed his venture Kendall-Jackson, combining his name with Jane’s maiden name. Anticipating the new venture, Jackson built a winery in Lake County, and winemakers such as Paul Dolan and Ric Forman were hired to consult. Immediately there was a problem: One lot of the 1982 Chardonnay refused to finish fermentation, which meant the wine tasted slightly sweet. The winemakers tried everything to jumpstart it, but with little luck.

Ultimately, Jackson decided that he liked the wine, but more importantly, “he recognized that there was an opportunity for a wine like that,” says Tom Selfridge, an industry veteran and one of Jackson’s right-hand men during the 1990s. Wines priced $10 to $15 are big business today, but 25 years ago most of the retail sales action was in the $5 to $10 range—what the industry at the time called “fighting varietals.” By breaking through the $10 barrier, Jackson helped create a whole new wine category.

KJ’s Vintner’s Reserve Chardonnay became the engine of the company’s success. It earned its reputation in the 1980s as a fruit-forward, aromatic and slightly tutti-frutti Chardonnay, validating the old industry adage that people talk dry and drink sweet. Today it’s a more serious wine, certainly more dry than it used to be. While other white varieties were included in the blend early on, it is now 100 percent Chardonnay, and although many large producers routinely use shortcuts like oak chips, Kendall-Jackson has one of the largest barrel fermentation programs in the wine world.

The 18,000 cases produced in 1982 jumped to 1 million 10 years later, catching the competition off guard. The winery that came out of the blue was suddenly one of California’s largest producers of Chardonnay and one of the hottest wine brands in the country. Kendall-Jackson wines were reliably good and generally earned scores in the mid-80s to low 90s on Wine Spectator‘s 100-point scale.

While Jackson was passionate about his second career in wine, Jane didn’t share that enthusiasm. The couple divorced in 1986, and Jackson bought out his wife’s share in the company. “The winery cost us our marriage,” she told Wine Spectator in February 1989. “It’s a mistress, like the law. It’s all time-consuming.”

Jackson spent much of the late 1980s laying the groundwork for a new life in wine, with Banke by his side. The two met in 1980, when Banke was an associate at a San Francisco law firm, and four years later they joined forces with other attorneys to start a new practice. Like Jackson, Banke was a native Californian, having grown up on the San Pedro peninsula near Los Angeles. Her mother was Sicilian, and wine was always a part of her life. After graduating from UCLA in 1975, she decided to go into law. “I like to argue,” Banke says, “so I was a natural.” Three years later she graduated from the law school at UC, Hastings, in San Francisco.

“Jess was the hardest-working person I ever knew,” Banke says, recalling her first impression of Jackson. “He was very intelligent and had a great sense of humor. He was fun to be around and cute. What’s not to like?” Yet even Banke had doubts about Jackson’s expanding wine business. “I thought it was something interesting he would do,” she says now, “but I never imagined it was going to be successful.”

In the early days of Kendall-Jackson, most of the grapes were purchased, and wine was bought in bulk on the market in many years. That has changed dramatically over the years. Today, the company owns or has long-term leases on roughly 11,000 acres of vineyards, although some outside estimates run higher. Most of the land is on benchlands and hillsides, which many believe produces the most intensely flavored fruit. “If you start with great grapes, it’s easier to make a great wine,” Banke says.

One of Jackson’s first major purchases came in 1987 with the 700-acre Tepusquet vineyard, located in Santa Maria Valley on California’s Central Coast. The vineyard was a highly coveted source of Chardonnay for wineries such as Mondavi and Beringer, but Jackson outmaneuvered both wineries. He built a winery there and named it Cambria. “It was really my mom’s project,” says daughter Katie. Banke at the time focused much of her energy on the winery and raising her three children, who spent many carefree days at the property. “We kind of grew up down there,” Katie recalls.

Throughout the 1990s, Jackson and Banke continued to expand production, and the new deals kept coming. Jackson bought Edmeades and La Crema wineries in California and Tenuta di Arceno in Italy, and created new brands such as Stonestreet, Vérité and Lokoya in California, as well as labels in Argentina and Chile. He also moved the company headquarters to Sonoma County and bought or built new production facilities in Geyserville, Santa Rosa, Napa Valley and Monterey.

Two of Jackson’s most pioneering moves at the time are little-known to consumers even now. First, he decided his company needed to make its own oak wine barrels from scratch, so he partnered with barrel maker World Cooperage to buy a stave mill in France in 1990. “Nobody was even close to doing something like that at the time,” says Selfridge, who lined up the deal. The long-term cost savings proved significant, and it also assured a high level of quality control.

Second, Jackson launched his own wine distribution system, including Regal Wine Co. in California. While the Kendall-Jackson wines were popular with large national distributors like Southern Wine & Spirits, the other brands weren’t getting a lot of love. The ever-independent Jackson decided to go his own way.

The company also continued to buy vineyards and land throughout California, most prominently the 5,200-acre Gauer Ranch in 1995, which was later expanded from 350 acres of vines to nearly 900. It was also there, at the renamed Alexander Mountain Estate, that Banke and Jackson built a home and raised their family.

By the time the 1990s were coming to an end, Jackson and Banke could have easily settled in and enjoyed the good life, and as the new millennium approached that’s exactly what it looked like they would do. But looks can be deceiving.

Just before the holidays in 1999, Jackson and Banke did something that no one expected: They hired former Hewlett-Packard CEO Lewis Platt to run Kendall-Jackson. This was the height of the dot-com boom, and Platt’s arrival fueled industry speculation. What were Jackson and Banke up to?

Leading up to it, Jackson and Banke had spun most of the wineries except Kendall-Jackson into a new entity named Artisans & Estates, and the couple said they would focus their efforts there. While Jackson initially retained his post as chairman of Kendall-Jackson, about a year later he said he was retiring and Banke would take over as chairperson of the board.

Behind the scenes, two options were being considered: selling the Kendall-Jackson brand or taking it public. “Wall Street thought that it would be desirable to have a year of financials with Lou Platt at the helm if we ever did go public,” says Hartford. “It would be viewed as beneficial to the value of the stock.” At the time, Platt and Jackson were plotting the various possibilities of which winery or division got what vineyard or production facility. In May 2001, the company confirmed that it was considering offers from several firms, and top suitors were reportedly Brown-Forman and Australia’s BRL Hardy, both of which made offers in the range of $1.8 billion, according to multiple sources.

Platt and other senior executives thought that Jackson and Banke would accept the offer. Instead, they left for Italy for 10 days. “We had difficulty contacting them,” a former senior executive recalls. Clearly, they were having second thoughts, and in the end, the couple declined the offer and took Kendall-Jackson off the market. In June 2001, Platt resigned. His job was done.

“I don’t think Jess ever really wanted to sell the winery or go public. I think Wall Street would have been very nervous with Jess,” Hartford laughs. “But he was very curious about what the value of the company was.” As another former executive says, “It certainly wasn’t about the money. At the end of the day, I don’t think Jess could part with it. He had built this company, and it was in his DNA.”

Soon, Jackson and Banke were on the move again. In 2003 they began another winery-buying spree, acquiring Château Lassègue, La Jota and four more wineries, including Arrowood and Byron.

Those were heady days, but insiders who worked for the company at the time said they were also tumultuous. While Jackson could always be impulsive, by some accounts those traits were amplified in later years. Once, a new major wine label was ready to launch and the wines were labeled and in the bottle, but at the last minute Jackson axed the brand entirely. “It was easy for him to throw the baby out with the bathwater,” says one former executive. “He changed direction more than anybody I’ve ever been around.”

During this time, Jackson and Banke were also busy focusing on a new business: thoroughbred horses. Jackson rode horses as a kid on his grandfather’s farm, and he saw the legendary thoroughbred Seabiscuit race when he was 8. Always one to take up a new challenge, he entered the business on a big scale, establishing Stone­street Farm in Lexington, Ky., and eventually investing as much as $200 million, according to the Santa Rosa Press Democrat.

In the process, he became one of the most successful thoroughbred owners in recent history. In 2007, one of his horses, Curlin, won the Preakness Stakes and the Breeder’s Cup, and along the way Jackson shook up the world of thoroughbred racing by successfully suing a group of former advisors for some dubious advice. A second horse, Rachel Alexandra, won the Preakness in 2009.

It was wealth, not wine, that put Jackson and Banke in the spotlight in 2000, when Forbes magazine listed Jackson as the 218th richest person in America. While it was an honor he begrudged and thought was nobody’s business, he remained on the wealthiest list through 2010. His assets were estimated at $1.85 billion by Forbes.

The triumphs came as Jackson faced a diagnosis few outside the family were aware of: melanoma. Banke had previously won a battle against cancer, and her husband threw himself into beating his own illness. Throughout most of his treatment Jackson continued working, often from his office retreat, with its soothing view of the vineyards of Alexander Valley. Field workers kept noise in the area to a minimum on the days he was in the office. “Work was an obsession with him,” Hartford says.

Jackson was missing from Forbes‘ 2011 list of the world’s wealthiest for a reason. For many years Jackson had said he was slowly transferring ownership of various wineries to his family, and his failing health made that more imperative. The company also went through several rounds of consolidations and layoffs during the lows of the down economy. Up to 170 workers were reportedly laid off at Kendall-Jackson alone, and cutbacks also hit Matanzas Creek and Arrowood, among others. “Jess wanted to leave us with a solid foundation,” Hartford says. “We had quite a bit of debt, and he was going to feel a lot more comfortable paying that down before he died.”

Jackson died at his home on the Alexander Mountain Estate with his family by his side. He is buried there, a tall pole with the American flag marking the spot. “Jess was still involved in making decisions about the wine business and the horse business till the very end. His mind was always sharp,” Tigner says.

The week before Jackson died, he and Banke bought an expensive thoroughbred. “He thought it was a good investment,” says Hartford, “and it was enjoyable for him to think about the future and what the horse could do. Jess was kind of an optimist about things.”

Jackson, in many ways, was the right man at the right time, and the wine industry is different than it was 30 years ago. It’s now a time for consolidation and shoring up business, not for the big dreams that Jackson relished. “He was a builder,” one former executive says. “Actually, I think Jess would be bored today, quite frankly, but there will come another time when we need builders like him.” Klenz adds this perspective: “He relished his role as an outsider. If he had to choose between being remembered as an icon or an outsider who changed the industry, I think he’d prefer the latter.”

The past year has been an adjustment for Banke, the family and Jackson Family Wines, but as the economy continues to recover, the company believes it is positioned to take on the increasingly competitive wine world of the future.

Several of the company’s wineries that were shuttered in 2010 are now scheduled to reopen. Production will soon return to Arrowood in Sonoma Valley after having been moved to the company’s large Oakville facility, and a major renovation of Matanzas Creek Winery will eventually shift production from its current home at Stonestreet Winery back to Bennett Valley.

“We’re still executing what he told us to do last year,” Tigner says. “Hopefully in the next five years—because he was always five years ahead of us—we’ll catch up.” Neither Banke nor Hartford says there are plans to buy or sell wineries or brands. “We’re probably more interested in vineyards than we are brands,” Hartford adds.

The future of the winery will fall squarely on the shoulders of Jackson’s youngest children. “My dad always told us he hoped we would eventually want to work in the business,” Katie says. “He didn’t put a lot of pressure on us, but he always hinted that he hoped we would.” While the children have been only peripherally involved until recent years, they have the passion. “We all have different interests,” Katie says, “and there are a lot of different parts of the company that we can get involved in and make our own.”

Although Christopher is just getting his feet wet, daughter Julia has focused on marketing and is working on various projects related to the company’s business in China and Italy. Katie started off doing social media for Cambria winery and is now working with the company’s government affairs office and sustainability program. All three of the children are increasingly in the public eye as representatives of the winery.

Katie wipes her eyes as she talks about the past year. “It has been kind of bittersweet,” she says. “It’s been good on one hand because by becoming more involved we’re honoring my dad’s memory, and I think we would’ve made him really proud.” She pauses to catch her breath, then continues. “On the other hand, it would be nice if he were here, seeing everything we were doing.”

THE WORLD OF JACKSON FAMILY WINES

The holdings of the Jackson Family Wine empire span four continents. Properties of JFW, based in California’s Sonoma County, include two Bordeaux châteaus (Vignot and Lassegue in St.-Emilion) as well as wineries in Chile (Calina), Australia (Yangarra) and Italy (Tenuta di Arceno).

California remains the company’s focus, with vineyards and wineries up and down the state. JFW’s powerhouses are Kendall-Jackson Wine Estates, making 3 million cases, and La Crema, with 900,000 cases last year.

Wineries in the portfolio have various levels of autonomy. Most have their own general managers and winemakers. Many have their own vineyards, but also draw on mutual grape sources such as Alexander Mountain Estate, above Alexander Valley, and Annapolis Vineyard on the Sonoma Coast. “The wineries exercise their own personalities and their own preferences,” says company chairman Barbara Banke. “If you want to have artistry you have to have unique winemakers.”

JFW has several large, centralized production facilities. One of the largest, Vinwood Cellars, is near Geyserville in northern Sonoma County.

Other interests include wine distributorships in California, Arizona and Canada; the company is also a partner in Merrain International, an oak barrel stave mill in the Vosges district of France.

LEADING WINERIES IN THE CALIFORNIA PORTFOLIO

ARROWOOD VINEYARDS
Date founded: 1986
Acquired by Kendall-Jackson: 2006
Varieties produced: Cabernet Sauvignon, Chardonnay, Merlot, Syrah, Riesling, red and white Rhônes
Appellation focus: Sonoma County, Sonoma Valley

BYRON VINEYARD
Date founded: 1984
Acquired by Kendall-Jackson: 2006
Varieties produced: Chardonnay, Pinot Noir
Appellation focus: Santa Barbara County, Santa Maria Valley

CAMBRIA WINERY
Date founded: 1987
Varieties produced: Chardonnay, Pinot Gris, Pinot Noir, Syrah, Viognier
Appellation focus: Santa Maria Valley

CARDINALE
Date founded: 1983
Varieties produced: Cabernet Sauvignon
Appellation focus: Napa Valley

HARTFORD FAMILY WINERY
Date founded: 1994
Varieties produced: Chardonnay, Pinot Noir, Zinfandel
Appellation focus: Russian River Valley, Sonoma Coast

KENDALL-JACKSON WINE ESTATES
Date founded: 1982
Varieties produced: Cabernet Sauvignon, Chardonnay, Merlot, Pinot Gris, Pinot Noir, Sauvignon Blanc, Syrah, Zinfandel
Appellation focus: Alexander Valley, Anderson Valley, Arroyo Seco, Bennett Valley, Knights Valley, Mt. Veeder, Monterey, Santa Barbara and Sonoma counties

LA CREMA WINERY
Date founded: 1979
Acquired by Kendall-Jackson: 1993
Varieties produced: Chardonnay, Pinot Gris, Pinot Noir, Viognier
Appellation focus: Anderson Valley, Arroyo Seco, Carneros, Monterey, Russian River Valley, Sonoma Coast

LOKOYA
Date founded: 1995
Varieties produced: Cabernet Sauvignon
Appellation focus: Diamond Mountain, Howell Mountain, Mt. Veeder, Spring Mountain

MATANZAS CREEK WINERY
Date founded: 1977
Acquired by Kendall-Jackson: 2000
Varieties produced: Bordeaux red blend, Chardonnay, Merlot, Sauvignon Blanc, Syrah
Appellation focus: Sonoma County

STONESTREET
Date founded: 1989
Varieties produced: Cabernet Sauvignon, Chardonnay, Sauvignon Blanc
Appellation focus: Alexander Valley

VERÍTÉ
Date founded: 1998
Varieties produced: Cabernet Franc, Cabernet Sauvignon, Merlot
Appellation focus: Sonoma County

JACKSON FAMILY WINES, A 2012 OVERVIEW

Wineries and labels: 35
Annual revenue: $500 million
Annual production: 5 million cases
Acres of vineyards internationally: 11,055
Acres of vineyards in California: 10,159
Number of full-time employees: 1,000
California vineyards by variety: 54 percent Chardonnay, 23 percent Pinot Noir, 10 percent Cabernet Sauvignon, 6 percent Merlot, 4 percent Sauvignon Blanc, 3 percent other