Business empire from nothing: the Hatvany-Deutschs

How did a family build a European conglomerate from scratch? What is the secret behind the fortune? How did Hungarian sugar sweep away the Austrian competition?

The founder, Ignác Deutsch

The founder, Ignác Deutsch

Flour explosion

In the course of only three generations, the Hatvany-Deutsch family set up one of Europe’s largest food businesses from scratch. At the age of 19, Ignác Deutsch founded his agricultural produce trading company in Arad in 1822. In his family biography ’Gentlemen and men’ Ignác’s great grandson Lajos Hatvany quotes his dynasty founding ancestor as saying "Wheat shines like gold because it is worth gold. There is no business like crop business”. Deutch’s adaptive and flexible business strategy manifested itself in offering credit and loan services in addition to trading in crops. As the representative of the Trieste based insurance company ’Generali’ in the town of Arad, Ignác played an important role in laying the foundations of the insurance business in Hungary. During the summer of 1848 he served in the Hungarian Revolutionary Army as a national guard.
The firm Deutsch Ignác és fia (Ignác Deutsch&Son) moved to Pest in 1856. The executives of the company (Ignác and his two sons, Bernát and József) well realized that railroad construction and – benefitting from what the new methods of transportation meant to it – the food industry were to become the leading industries in the days to come. They aided the construction of several railways in Hungary. The most influential contributions of the Hatvany-Deutsch family were however, their investments into the milling and sugar industries.
The milling industry, i.e. industrial scale grinding of corn and the selling of flour was way more than a booming economic activity. Based on competitive edges like strong sustenance scale milling traditions, high quality crops and its location along the Danube River, Pest became one of the global centers of the milling industry by the 1860s. Giant milling plants lined up all along the river produced good quality flour in huge quantities. By the end of the decade Hungary exported more flour than all other European countries combined. Milling industry fueled booming economic growth and development. The Deutsch family played a vital role in all of this - they invested in a number of companies and financed large scale development projects.

Sugar tycoons
The Deutschs however were not primarily known as flour tycoons but much rather as sugar barons. During the early 1880s the dynamic entrepreneurs were seeking new, undiscovered territories. The family purchased and set out to develop a rundown factory in Nagysurány (1881) and founded a sugar factory in Hatvan (1889). By the end of the century this latter investment became Europe’s largest sugar factory and the flagship plant of the family empire. Comparing with annual production figures of other countries the Hatvan plant produced ten times as much sugar as an average French or Belgian, six times as an Austrian or German and three times as a Dutch factory. Products from Hatvan were sought after from England through Japan and Izmir to Shanghai all over the world. Austrian sugar, which had earlier dominated the Hungarian market, virtually disappeared from the country. Essentially, it was the Deutschs who created the Hungarian sugar industry. Their leadership was unquestionable. Sándor Deutsch became the founder-president of the Association of Hungarian Sugar Producers in 1894. He controlled one quarter of Hungary’s total sugar production of the time and by 1911 the Deutschs (called Hatvany-Deutsch by then) had shares in over half of the sugar factories of the country.

In the grip of dictatorships
At the turn of the century the holding was once again quick to explore new business opportunities and turned towards the banking industry. Family members were on the boards of all the major financial institutions in the capital. During the short-lived 1919 communist dictatorship most of their property was nationalized. Due to the Treaty of Trianon the family also lost considerable interests to neighboring countries. The Hatvany-Deutschs reorganized their holding of companies by the very early 1920s and, with their fortune of 20-25 million Pengős they became the fourth wealthiest family in the country after the Weiss’, the Schiffers and the Fellners. Their business strategy however was less dynamic afterwards. It was first the Great Depression during the early 1930s and later the antisemitic policies of Hungary that adversely affected the situation of the family and cautioned the management of the company. Deutsch Ignác és Fia was considered a Jewish company under the discriminatory laws and therefore was seized in 1944. Most of the owners and managers survived the Holocaust. Chief Executive Albert Hirsch and his wife Irén Hatvany however were murdered in Auschwitz. Survivors left the country following the war. The Communist Hungarian state began to liquidate the family business in 1949 but the process took quite a while. One of the most successful companies in Hungarian economic history was finally removed from the company registry in 1978.