Sonoma Foods sells final stake

Monterey Gourmet Foods announced a deal Thursday to acquire the remaining 20 percent of Sonoma Foods, the popular cheese brand with deep roots in Sonoma County.

The Salinas-based specialty food producer will buy out the remaining stake in Sonoma Foods for $50,000, a paltry sum reflective of the recent tough times facing the cheese industry.

In 2005, Monterey Gourmet paid $3.3 million in cash and $198,000 in stock for an 80 percent stake in the former Sonoma Cheese Factory.

The Viviani family, which co-founded Sonoma Cheese Factory in 1931, retained ownership of the retail store on the Sonoma Plaza. Operations of the store are separate and will not be affected by the deal.

Sonoma Foods, which produces a variety of cheeses under the Sonoma Jack brand, has been unprofitable, said Eric Eddings, chief executive of Monterey Gourmet.

He blamed "production and procurement decisions" for the high operating cost of the brand. Sales of cheese under its Sonoma Foods brand fell 23 percent last year, a $2.5 million decline, according to the company's annual report.

As part of the deal announced Thursday, Monterey Gourmet will release Sonoma Foods' executives from their employment contracts. The deal affects David Viviani, who managed sales, and Marty Adams, the brand's chief executive officer.

The original deal allowed Monterey Gourmet to purchase the remaining stake in the company as early as next April. But after the poor sales results, Monterey Gourmet executives approached Viviani about closing the deal sooner.

"I wanted to do well. For me, it's like my third kid," Viviani said. "We all hoped that it was going to continue growing at the rate it was, but it didn't."

Soaring milk costs forced the company to raise prices, and sales at Costco dropped off when the retailer began selling less expensive "knock-off" brands, he said.

Monterey Gourmet said it plans to consolidate operations, change the packaging and reduce other costs, saving $700,000 a year. This includes saving $100,000 in distribution costs by returning production of certain cheeses from Wisconsin back to California.

The company made cheese in Sonoma for decades, but that ended in 2001 after a Food and Drug Administration inspection found a dangerous bacterium in a cheese sample. The subsequent recall nearly bankrupted the company, said Adams, a veteran executive brought in by Viviani to turn things around.

Most of the cheese is produced today in the Central Valley. One cheese, the creamy Jack, is produced in Wisconsin, Viviani said.

Now that it has full control of Sonoma Cheese, Monterey Gourmet expressed confidence that its turnaround plan would return the brand to profitability. But Adams wonders how long the pasta company will hold onto the brand.

The company's former CEO, Jim Williams, was a "cheese guy" interested in building that side of the business, Adams said.

"The new guy came in and he's not a cheese guy," Adams said. "I don't know if they should be in the dairy business. It's not their core business."

Monterey Gourmet officials did not return a call for comment.

The turnaround plan will "eliminate managerial distractions," increase productivity and improve margins, said Scott Wheeler, Monterey Gourmet chief financial officer.

Viviani said the parting was amicable, and he had no idea what "distractions" Monterey Gourmet was referring to. But Adams said he believed the company was referring to the fact that Sonoma Foods had become a distraction to Monterey Gourmet management.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@

pressdemocrat.com.