Américas / September-October 2000
By Larry Luxner
RIO DE JANEIRO -- In 1939, on the eve of World War II, a penniless German Jew named Hans Stern arrived in Brazil with his parents, with no clue as to how he'd make a living.Six years later, as the war was winding down, the enterprising refugee inaugurated a jewelry business with $200 in savings.
Today, H. Stern Comercio e Indústria S.A. is Latin America's leading jewelry conglomerate, with 180 stores in luxury hotels, shopping malls and airports from Belo Horizonte to Bogotá. Hardly a five-star property opens in some Latin capital, it seems, without the obligatory H. Stern outlet and its glittering display of watches, necklaces, rings and bracelets in the hotel lobby.
It's been a long road from Essen to Ipanema, the upscale Rio de Janeiro suburb where Stern's showroom is visited by thousands of tourists a month. Many of them would undoubtedly be surprised to learn how, over the course of half a century, this determined Jewish teenager became one of Brazil's most successful businessmen.
"After Krystallnacht [a violent Nazi uprising] in 1938, my father decided to leave Germany as quickly as possible," Stern told Américas during an interview at his summer home in Teresópolis. "But it was difficult to get visas. I had an uncle living in Brazil who had come here in 1935. He was married to the sister of Roberto Burle Marx, the architect, and they got us visas. I came to Brazil with my parents and grandfather.
"During the war, I had to work. We came here with nothing, so I got a job as a typist in a company exporting and cutting gems. This is how I learned the business," recalled Stern, who speaks Portuguese, English, Spanish, French and a little Yiddish in addition to German.
"First I worked as a broker, going to the interlands, getting stones on consignment. I ended up making some jewelry for friends, then customers. At that time, the export business was all in the hands of non-Jewish Poles. This is when I learned my only sentence in Polish, which translates as 'we don't need any calibrated aquamarines.'"
The young jeweler's big break came in 1951, when he received an order from Nicaraguan dictator Anastasio Somoza for a $20,000 aquamarine necklace. The business continued growing, and in 1956, Rio de Janeiro's city fathers granted him the title of "Honorary Citizen."
Over the years, H. Stern has introduced efficient and permanent research for raw materials, utilizing items of various origins and a variety of precious metals from gold to platinum. The most popular Brazilian gemstone is the aquamarine, which is mined in the state of Minas Gerais, Espirito Santo and Bahia. Emeralds, meanwhile, are found in the states of Goiás and Bahia, while the rare imperial topaz is produced at only one mine in the world, near the colonial city of Ouro Prêto.
And although the country produces only 3-5% of the world's diamonds, the superior beauty and hardness of Brazilian diamonds places them among the world's most desired gemstones.
Stern's special designs for diamonds, Oriental stones, opaque stones and organic materials such as pearls, coral and ebony has given the pieces greater value.
Stern -- who has since opened stores in every major Brazilian city, not to mention shops in the U.S. Virgin Islands, 30 stores in Israel and even a few in his native Germany -- says quality has been the principal factor in his success. All jewelry sold is accompanied by a certificate based on criteria set by the Gemological Institute of America.
"I believe that Brazil, being so rich in gems, should be as known to the world for gemstones as France is for perfumes, as Scotland is for whiskey," says Stern. "The reason we opened stores in all the Latin American capitals is so tourists become familiar with our stones and our name. In Brazil alone, we are now in 18 cities; this helps to dilute our advertising costs. We have become better known than any other jewelry company in Brazil."
Stern, a likeable grandfather who enjoys collecting stamps, swimming, playing his Hammond organ and listening to Bach, still works five days a week, from 8:30 a.m. to 7 p.m., and half a day on Saturdays.
"Being semi-retired means coming into the office half an hour late," he jokes. "I'm on the road two or three months a year, visiting our stores. Until a few years ago, three of my four top executives were of European Jewish descent. Over time, they've been replaced by local executives. Now, of the old people, I'm the only one left."
Day-to-day operations are now being headed by Stern's 40-year-old son Roberto, along with help from Roberto's two brothers, Ricardo and Ronaldo. The fourth sibling, Rafael, recently graduated college and has begun an Internet venture. Stern's wife, Ruth -- to whom he's been married for 41 years -- also helps out whenever possible. But Stern remains founder and president of the company
At the moment, H. Stern employs 3,500 people -- about 2,800 of them in Brazil -- in the business of producing jewelry from gold, diamonds and a dazzling array of local gemstones ranging from aquamarines and amethysts to tourmaline, topaz and tanzanite. Most of these employees work at H. Stern's retail shops in Belo Horizonte, Brasília, Campinas, Curitiba, Fortaleza, Foz do Iguaçu, Manaus, Natal, Niterói, Pôrto Alegre, Recife, Ribeirão Prêto, Rio de Janeiro, Salvador, Santos and São Paulo.
H. Stern, which accounts for a 65% share of Brazil's gemstone industry, also has outlets in every major Latin American city and in numerous Caribbean ports of call, not to mention Europe and Israel. Wealthy Arabs -- oblivious to Stern's Jewish background even at the height of the Arab world's economic boycott of Israel -- buy regularly from Stern.
"We had a time when Arabs were our best customers," he said. "We've been offered joint ventures in various Middle Eastern countries, but we've been so busy that we never got around to it."
A tour of the H. Stern museum and cutting and polishing factory in Ipanema is almost an obligatory ritual on the itinerary of every visitor to Rio.
In fact, some 10,000 tourists drop by the 17-story headquarters every month. The total area in two buildings comes to 14,000 square meters, of which 5,700 square meters are occupied by workshops for cutting and goldsmith work, creation of jewelry, quality control, administration and a complete gemological laboratory -- the only one in Brazil belonging to a private company -- where tests are carried out to identify and classify gems.
On the third floor of the Ipanema headquarters, visitors may take a 40-step gemological tour, watching through a series of windows while while wearing headphones switched to one of 18 languages including Japanese, Korean, Turkish, Hebrew and Arabic. The 12-minute narrative tour -- accompanied by "The Girl from Ipanema" playing softly in the background -- shows visitors how a jewel is made, beginning with cutting the rough stone, designing, goldsmith work, selection and polishing a gem.
The H. Stern Cultural Center, also on the building's third floor, holds a permanent exhibition of unusual specimens of rough crystals and precious stones, including the world's largest collection of tourmalines -- with more than 1,000 stones in a variety of colors, shapes and sizes.
Of course, the big thrill for tourists is actually buying something -- and since most of the gems are mined locally, prices are often 30% less than what they'd be back home.
Of those who ended up making purchases at H. Stern in 1998, the average expenditure came to $1,300.
"We are not trying to sell diamonds to tourists, because they can buy that anywhere else in the world. We push local gems like aquamarines, emeralds and citrines. We have sold to Kissinger, Shultz, John F. Kennedy and the Shah of Iran. Practically every big shot who's come to South America has bought from us," Stern told Américas. "But we don't only cater to the upper crust. Times have changed. It's now probably less than $1,300 per tourist, because traveling has become cheaper, and you get more quantity than quality."
Even so, tourists represent only 20% of H. Stern's total sales. The remaining 80% come from the domestic market, which Stern says has grown "tremendously" in recent years thanks to a decision by the company to pay closer attention to global fashion trends.
"The idea is, we are creating world collections whereby people recognize the design. It's not necessarily that the stones are so important. Though tourists come to Rio to buy something special, when they get home they want something that's appreciated not so much for the stones but for the design. For this we have consultants in the fashion industry. The key word is branding."
At the moment, H. Stern has a stock of 300,000 pieces. Some 20,000 new items are produced monthly, including the "Sapphire Collection" -- comprised of quartz watches in solid corundum cases, a synthetic material based on the same elements as natural sapphires. These watches run anywhere from $2,500 on up.
Stern says business was humming along nicely until 1999, when the company's Brazilian revenues suddenly tumbled 30% due to the currency devaluation ordered a year ago by President Fernando Henrique Cardoso.
Despite that, Stern says he admires Cardoso.
"I consider him the best president we've had in ages. People very easily forget the bad things that happened before. I think he's on the right track," he said. "The good part of the devaluation is, it will enable Brazil to export more in the medium term because the country becomes more competitive. The bad part is, it's reducing people's purchasing power. But I see a good future for Brazil if the government gets through Congress the basic reforms that have to be made."
Asked to explain his own success story, the jewelry magnate attributed it to "a combination of luck, grabbing the opportunity and ethics."
"You have to be 101% honest with your employees and your suppliers, and think of the medium and long term, not only of making a fast buck," he said. "In our business, where you depend on people trusting you, to give fair value is absolutely essential. If you keep yourself and your employees to a high ethical standard, it pays off. We have an 800 number where people can record their complaints. I personally get a copy of each and every complaint. Sometimes you have to bend over backwards to satisfy your customers."
Nevertheless, Brazil's economic difficulties have taken their toll on the company.
Even though Stern -- who never discusses annual sales or earnings because "we don't want our competitors to know" such details -- has always strictly been in the family's control, he confided that this year he and his sons may take the company public.
"We thought about it before the devaluation," he told us. "But it takes time to prepare. The idea is to become stronger in markets where we already are, and go where we're not. The problem is that Brazilians are not spending that much as before."
At least two years will pass before H. Stern returns to normal sales levels, says the company's founder. "Our target is to increase sales by 10% this year. If it's more than 10%, we'll be very happy."