INTERVIEW: DONALD HESS – Hess is more

As chairman of the Hess Group, Donald Hess amassed a dazzling contemporary art collection and a portfolio of some of the finest wineries in the New World. Clinton Cawood discovers how he turned water into wine

What started out as an attempt to buy a water spring in the US in 1978 resulted in what the Hess Group is today; a globally active wine group with wineries on four continents. Looking back on the days when he had planned to expand the Swiss group’s successful bottled water business to another continent, Donald Hess explains that he had already put in an
offer to buy a spring in Napa, California. The water, however, turned out to be bitter, and the deal was called off. After this, and not knowing much about Californian wine, Hess asked a waiter in a restaurant for the best bottle they had. “I tasted it and said, ‘I’m going to buy a winery’,” he smiles, remembering that important moment in 1978.

This was the beginning of a process that culminated in the founding of the Hess Collection Winery. “I looked for two weeks, then returned and stayed for seven weeks,” Hess says. During that time, in Sonoma, Napa, Monterey, he was determined to learn. “I said, ‘This will be my university.’

I would ask the low worker questions, then the foreman. I couldn’t have gone straight to the general manager. He would have laughed at me.”

Hess was undoubtedly a good student, as his subsequent life in the wine industry demonstrates. Since his retirement as chairman of the Hess Group in 2001, he has been concentrating his efforts on the group’s Colomé winery, applying his expertise to making wine from the highest vineyard in the world, at the oldest winery in Argentina.

Fourth generation
Hess was the fourth generation of his family to head the company, which started out in 1844 focusing primarily on beer. He took over the Hess Group in 1957 at the age of 20, when the company’s attention had turned to the hotel industry. He spent two weeks of every month for the next 20 years building the company’s business in Morocco. He had inherited one small hotel, but was eventually responsible for 1,500 rooms in five hotels. The company’s bottled water operation in Switzerland, started in 1961, had simultaneously experienced great success, and was eventually sold after 40 years.

After the Hess Collection, the next winery that Hess turned his attention to was Glen Carlou in Paarl, South Africa. In 1996

the group purchased 50% of the winery which had been founded by Walter Finlayson. Dr Max Lienhard, the Hess Group’s current chairman and CEO, acknowledges the uncertainty associated with an investment in South Africa at that time. “We were worried, but we were always positive,” he says. Speaking recently at Glen Carlou, Lienhard added that, “South Africa is the country with the biggest growth potential in Africa.” Together with the Hess Group, Glen Carlou plays a significant role in promoting the country’s wine industry, both in terms of wine tourism and in terms of the wine itself. Some 70% of the winery’s production is sold outside South Africa.

Acquisitive nature
Slowly, inexorably, the company’s involvement in wine has continued to grow. In 2001 the remainder of Glen Carlou was purchased, following the founding of Bodega Colomé in 1999. In 2002, in a highly publicised move, the group acquired a majority stake in Peter Lehmann wines in the Barossa Valley in South Australia. A takeover by Allied-Domecq had been imminent, until the Hess group stepped in and bought 86% of the company. Of the remainder, 10% stayed with the Lehmann family, while 4% is still held by individual shareholders.

New gallery

The most recent event in the on-going success story of the Hess Group was the completion of the visitor centre and winery facilities at Glen Carlou in August this year, a manifestation of the group’s investment, and the result of work that began two years previously. One of the most striking aspects of the new visitor’s centre is the 500 square metre exhibition
space that houses elements of the Hess Collection, Donald Hess’s extensive private collection of contemporary art.
The art facility is an embodiment of Hess’s two passions. Like art, he explains, “Wine is an enhancement in life.” He began collecting art more than 30 years ago, and now owns over 1,000 paintings, sculptures and installations, making the Hess
Art Collection one of the most well respected collections of contemporary art in the world.

In addition to the Glen Carlou exhibition space, there is a gallery at the Hess Collection Winery in Napa, with one planned for the near future at Bodega Colomé in Argentina. The space at Glen Carlou features two artists, South African Deryck Healey and Englishman Andy Goldsworthy. The artworks and installations, of which there are currently 35, will be regularly updated, and visitors to the winery are entitled to free entrance to the exhibition. “People pay for the tasting,” Hess explains, “but art is my hobby. And people usually thank me by buying a bottle.”

The exhibition space is not the only feature of the new Glen Carlou visitor centre that promises to make it an important tourist destination in the Cape winelands. The centre also overlooks the first fynbos zen garden in South Africa, linking environment and the country’s unique wild flowers to the art and wine elements.

Since those early days in Napa, the Hess Group has grown under Hess’s leadership, and now employs 500 people around the world. In addition to its wine concerns, the group also owns the third-biggest organic trout farm in Europe, as well as a small number of hotels and restaurants.

A singular vision, as well as the group’s private ownership, have primarily contributed to its patient, steady growth. “Many companies want to get too big too fast,” explains Hess. “The main thing is that we can make good money if we restrain ourselves.” Without shareholders to please, the company has been able to expand at a comfortable pace. “One rule
is that we only ever have one company that loses money. It takes 10 to 12 years until you don’t need to put money in, so we only have one start-up business at a time,” he says.

Accordingly, Hess has always been very clear on which position in the market he wants to operate in. “We didn’t want to fight the big corporations,” he explains. This was also a major motivation in selling its Swiss mineral water concern, Valser Mineralquellen, to Coca-Cola when the business reached a certain size. For this reason, fine wine was a natural direction to take, and has been a priority since the early days of the Hess Collection Winery.

At first glance, the geographical layout of the Hess Group’s empire seems haphazard, with operations in far-flung locations in the New World, on four separate continents, all run from a fifth continent in Berne, Switzerland. This is, however, a measured strategy. For one thing, as Hess explains, “We have always wanted to be international to spread the risk.” Lienhard confirms this, saying, “We’re able to balance our risks by being in these different countries.”

Organic growth
Another reason for the unpredictable location of the Hess Group’s wineries is that the company has grown organically and intuitively, taking advantage of opportunities as they’ve arisen. Hess frequently speaks about intuition, both in terms of wineries and collecting art. Sleepless nights after encountering an artwork, he says, are a good indication that it is a worthwhile acquisition. “I’ve learned to rely on my eyes and my ears,” he says. The group’s focus on quality wines has resulted in an emphasis being placed on the quality of the location of the wineries. “All of our wineries are always in good places. If you don’t get a good location, even the best winemaker cannot make good wine,” he says.

Hess learnt about the importance of quality location early on. He inherited a small vineyard in Switzerland that his father had bought, he explains, primarily for the farmhouse on the land. The grapes produced by this vineyard were apparently not fine wine material, to put it mildly. Hess’s advice, therefore, is, “Don’t look at the house, look at the vineyards.”

Family affair
Another important feature of the Hess Group, which sets it apart even more from what Hess refers to as the “big corporations”, is its emphasis on family business. Not only has the group itself been run by successive generations, but so are many of the companies in its portfolio. Doug Lehmann is the managing director of Peter Lehmann wines, and David Finlayson now serves as cellarmaster and managing director of Glen Carlou, continuing Walter Finlayson’s legacy.

In addition to the obvious impact this has on quality, it provides more character than a corporate entity would. “We have less distribution and sales,” says Leinhard, “so we need fascinating stories and uniqueness.” The wineries within the group are given a significant amount of autonomy, while still benefiting from the resources and expertise of the group.

Despite considerations of art, intuition and family, the Hess Group is ultimately a business, and a successful one at that. “We need to be crisp and lean,” says Hess. “We never allow stocks of our wine to be kept.” His emphasis is on “good prices, good PR and good marketing”. According to Hess, “Selling is the most important part.”

He dismisses questions about the difficulty of making a profit from fine wine. “In water you have to be big to make a small profit – you have to sell something like 130 million bottles. In wine there’s a bigger margin.”

In addition to the potential for profit, Hess’s passion results in a concern for the future of fine wine. “Wine shouldn’t ever become a commodity. It should stay a liquid art form,” says Hess. Leinhard supports this, saying, “If the industry aims for quality over mass-produced wine, then this is good.”

Small but beautiful
The future looks promising for what Leinhard calls “a small but rather beautiful company”. Bodega Colomé’s production of unique, fine wines will continue to expand under Hess’s guidance. With the other wineries in the group close to capacity (by fine wine standards), future expansion of the Hess Group will be by acquiring a new winery. Given the group’s
track record, whatever it purchases next will undoubtedly become one to watch. 

Donald Hess CV

1937   Born in Berne, Switzerland
1957   Took over Hess Group
1957–77   Worked two weeks of every month in Tangier, Morocco, running the group’s hotel business
1961   Started Valser Mineralquellen, a bottled water business in Switzerland
1978   Started the Hess Collection Winery
1996   Purchased 50% of the Glen Carlou winery in South Africa
1999   Started Bodega Colomé in northwest Argentina
2001   Purchased the remaining 50% of Glen Carlou
2001   Retired as chairman of the Hess Group, with Dr Max Lienhard as his successor
2002   Purchased 86% of Peter Lehmann Wines in the Barossa Valley, South Australia
2006…Visitor centre and exhibition space at Glen Carlou completeddb

© db November 2006