Interview, Part 2: Hess Family Wine Estates’ Tim PerssonJanuary 19, 2021
In the second part of our interview, Hess Family Wine Estates chairman Tim Persson discusses the impact of California’s latest wildfires on the 2020 vintage, and his vision for the Hess portfolio over the next few years.
SND: What’s been the impact of smoke taint from last year’s fires on the 2020 vintage?
Persson: We’ve had quite a lot of experience with smoke taint between 2008, 2017, and, to a lesser extent, 2018 in the North Coast. In our experience, it’s virtually impossible to deal with smoke taint where it’s a significant component of a blend and where the relevant compounds are above certain thresholds. The other concern is the volatility of smoke taint during a wine’s lifespan, often expressing itself more prominently later on. Based on that experience and what we saw in the vineyards, we decided not to harvest fruit from our estates in Napa. It was a very difficult decision, but we’ve been investing heavily in the redevelopment of our Napa estates and in our higher end luxury wines, and we didn’t want to compromise these long-term efforts by making an imprudent decision on one vintage. While it’s not an ideal situation from any perspective, we’re relatively fortunate to have strong inventory positions due to larger than usual 2018 and 2019 vintages. Outside of Napa, we brought in about half of the fruit we had contracted for; and I was so impressed by the collaboration and pragmatism displayed by the vast majority of our grower partners as they sought to help us work through an extremely challenging and uncertain harvest. More than anything, the past year has shown the strength of collaborative spirit that exists within our industry, and for that we are grateful.
SND: Hess has been reshaping its portfolio in recent years. What’s the overall volume currently, and what are your top priorities as you look to position the business for the future?
Persson: Our priority is to continue to change the shape of our portfolio, with our center of gravity in profit terms increasingly shifting towards red wines in the $20-plus sphere. We sold a little over 600,000 cases last year with some volume losses due to the pandemic. Our focus is on building our red wine business above $20 with an emphasis on developing net revenue with healthy margin structures that allow for long-term investments in quality. In that sense, I don’t anticipate significant volume growth over the coming years, but I do anticipate decent growth in net revenue terms. We realize this growth will come through the shared success of our partners, particularly in the on-premise channel, and we hope that together we can find a route to success in the pandemic age.
SND: Have the fires or pandemic impacted how you approach your estate vineyard development?
Persson: With a large estate vineyard program, it’s hard to make quick adjustments in production because we’re dealing with longer planning cycles. But in anticipation of decreased demand for higher-end, on-premise dependent wines during the pandemic, we accelerated the decommissioning of vineyard blocks that had reached the end of their lifecycles. Given the subsequent fires in Napa, that proved to be a good decision on two fronts. All things considered, I feel we’ve been relatively fortunate amid these unprecedented circumstances.Subscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.