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See's Candies is Warren Buffett’s ‘dream’ investment
- chrisma0 4y agoI guess being Warren Buffett's "dream" investment isn't a bad marketing pitch either :)
- whatshisface 4y agoIn his letter to the CEO he expressed skepticism that the myth of a geographically unique business had anything to do with the real value of their products, so in a sense it's the opposite of a marketing pitch.
- nikanj 4y agoUnfortunately the small candy company has a very reasonable business model, and generates stable revenues. Generating stable revenue is the worst thing that can happen to a company, because now your company can (and will!) be priced according to multipliers on fundamentals. A pie-in-the-sky business model with 0 launched products will fetch a much higher price on the markets
- cjbgkagh 4y agoSilicon Valley HBO did a skit on the importance of ‘no revenue’ https://youtu.be/BzAdXyPYKQo https://youtu.be/BzAdXyPYKQo
- mistrial9 4y agoa concept of "cancer" comes to mind when you describe that, somehow..
- baersandbowlszs 4y agoNaturally. You may have also noticed that our economy has been growing explosively while providing less and less to most members of society. We can keep extending the analogy by saying that the Fed has belatedly started some long-overdue chemotherapy by raising interest rates, but the late stage and metastasis make for a grim prognosis.
- renewiltord 4y agoWhat’s unfortunate. It looks like someone who valued it appropriately has it and the business is in great shape. This is the whole thing: you can just beat everyone by picking better and running it appropriately. If you can’t find a path to the first, I really can’t believe you can find a path to the second.
- lupire 4y agoit's not the worst at all. it provides good recurring money or a nice exit. Sure, getting a -10 P/E on a money losing business is great, if you can exit, but that is extremely luck driven and friends driven, which is harder to break into than running a good business.
- GoodJokes 4y ago
- finiteseries 4y agoFor an entire book’s worth of this article, I highly recommend Lowenstein’s biography of Buffet. Fantastic, detailed read and I had zero interest in the man beforehand. https://www.goodreads.com/book/show/1155 https://www.goodreads.com/book/show/1155
- 3grlkjlkj35 4y ago
- deleted 4y ago[deleted]
- Animats 4y agoIt's the slow and steady increase in prices that made it so profitable. About 5x over inflation during Buffett ownership. This has happened to far too many items over the last few decades. Most of the things drugstores sell are cheap to make, but have steadily increased in price in the US over the last few decades. Vitamins used to be priced according to manufacturing cost. Slowly, the low-cost vitamins have been up-priced to match the expensive ones. Vitamin C is about $10/Kg in bulk, but about $100/Kg at a US drugstore.
- ackbar03 4y agoSo basically they changed it to a premium product?
- CydeWeys 4y agoIt's always been a premium product. Buffet increased the prices to the cost the market would bear for said product. You could argue they were giving it away too cheaply before that.
- Barrin92 4y agois there branding to this? Because if Vitamin C is 10 bucks in bulk and 100 bucks in drug stores I'm about to open a 50 bucks vitamin C store in the US. Competition generally eliminates these kinds of margins. Quick check here on the German Amazon you can get Vitamin C ranging from 13€/kilogram to 117€/kilogram, they show that ratio explicitly. If people want to pay 10x for the fancy bottle and name they can but I don't think they lack the alternatives.
- Animats 4y agoCompetition generally eliminates these kinds of margins. That's last-century thinking, from when manufacturing cost dominated. Today, it's all about building a monopoly and crushing any new entrants. Comcast. Apple. Google. Facebook. CVS. The US is down to four big banks.
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- shevlinn 4y agoNext week in Berkshire Hathaway investments: Dexcom
- spchampion2 4y agoMy late grandmother loved Sees candies, and I frequently gave her a box for Christmas every year. Personally I always thought they were expensive and not as good as some of the artisanal chocolate you can find these days; like a product for older generations with older tastes. And then I discovered their lollipops and little pops - both chocolate and butterscotch. They're uniquely good as hard candies, and I've never had anything quite like them anywhere else. Now I'm also a Sees candy customer.
- ethbr0 4y ago> uniquely good It feels like so many companies nowadays have forgotten about this and long term branding. Everybody claims to want to be good, but (to crib from the Sees example in the article) isn't dedicated to being good at the expense of short term revenue and profits.
- annoyingnoob 4y ago> like a product for older generations with older tastes Their product is very consistent, as well as the branding. There are very few brands that have been so consistent for so long, See's has always kept things relatively simple, clean, and consistent. It is easy to believe their commitment to quality. The days of going to the butcher shop, the bread shop, having the dairy deliver, are basically over. See's somehow survived supermarkets and mass production. Seems that the See's family had the perfect candy shop model from the start.
- buzzy_hacker 4y agoTheir butterscotch lollipops are so good.
- hm8 4y agoTheir storefront feels dated and retro — probably why it feels something for older tastes. But their lollipops are amazing. I go there just for them. Just today, I bought a box of chocolate-caramel.
- notorandit 4y agoBecause he likes those candies!
- 01100011 4y agoI'm pretty sure the peanut brittle has crack cocaine in it. Avoid at all costs unless you want to spiral into a never ending addiction. Sees is able to transform cheap ingredients into a premium product. It has a strong brand and pricing power. These are good things to have in a company. Still though, it's a luxury good and not something I'd want to own as we head into a recession. Own things people need, not things they want.
- otherme123 4y agoI find that afordable luxuries are good in a recession. People still want to feel that they are buying something more than pure need, and a box of good chocolate or a Coke instead of tap water are more afordable that a tailored suit or an expensive car.
- daniel-cussen 4y agoI replaced buying Coke with tap water, but with a special additive. Incredibly cheap. But it just tastes better than Coke, like why would I buy Coke now that I have water with that additive, Coke just tastes heavy and fattening now.
- _zoltan_ 4y agowhy not name the additive? I for one would like to know
- aaaaaaaaaaab 4y agoMaybe real coke?
- golergka 4y agoIf you want to go all the way to the original recipe, add wine as well.
- daniel-cussen 4y ago
- ww520 4y agoSees sells gift certificates on one pound of candy that can be redeemed whenever, like 10 years from now. I bet they wrap those certificates in NFT their value would quadruple.
- johnday 4y agoPer the end of the attached article, you're wrong - maybe their price would quadruple, but their value would not change at all.
- hamiltonians 4y agoi think it also cannot be ignored that his companies and investments are a contributing factor for diabetes and obesity in america and worldwide. he will be dead soon but future generations will have to deal with it.
- alexb_ 4y ago
- jodrellblank 4y agoOne of Buffett's main investments is (was) CocaCola, and things like https://www.nytimes.com/2018/07/14/world/americas/mexico-coca-cola-diabetes.html https://www.nytimes.com/2018/07/14/world/americas/mexico-coc...
- shrubble 4y agoI know I am "supposed" to like Warren Buffett, but frankly I don't; and this does show why I don't. Buffett buys a discretionary, almost a luxury item, store, and jacks up the prices well above the rate of inflation. The owner of LVMH does the same. This is not the same as a company that is advancing technology or building the same item, but for less money. I value the guy who runs the sriracha sauce company higher than Buffett: https://theweek.com/articles/753620/sriracha-hot-sauce-guy-american-hero https://theweek.com/articles/753620/sriracha-hot-sauce-guy-a...
- daniel-cussen 4y ago
- mikebenfield 4y ago> he says never invest in tech, never ever. He's repeatedly explained that he doesn't invest in tech (well, until recently) because he doesn't understand it will enough, but has he ever told others not to invest in tech?
- nightski 4y agoThey are quite smug and judgmental in their annual meetings towards anything they don’t understand.
- marvin 4y agoThat's good; means the good things they don't understand will be priced lower for those who do.
- daniel-cussen 4y agoIn the long run, like way after they're dead. I don't know. I'm in business for the dividends and raising tax funds for the State. You do both together generally, and because every businessman wants to do the total opposite, he hates paying dividends, hates giving the money he earned to investors, always saying reinvest. Or buybacks, which are strictly dividends. Buybacks are dividends. They just say they're different because they want to dodge taxes. Like there's this whole song and dance they teach in speculation schools, as if you could learn this in schools ("all those Harvard MBA's didn't add up to dogshit" -- Michael Douglas, Wall Street) well those guys, they're like no dividends no. Because then your stock goes down by the amount you paid. Like really? But who cares, if an investor reinvests the dividend his share is the same, call it by another name. Come on. Nomenclature thing. But without dividends, there's no point in investing. I talk about it and pg too, that's the end game, there is no other end game really. https://news.ycombinator.com/item?id=306464 https://news.ycombinator.com/item?id=306464
- boeingUH60 4y ago> “May your new truffles melt in transit, may they sour in people’s mouths, may your costs go up and your profits go down…” That’s a pretty harsh curse for a business :(
- photochemsyn 4y agoWarren Buffett seems to specialize in the kind of monopolistic sectors that many other countries have chosen to nationalize, as there really isn't any 'competitive free-market model' that applies - namely, the power grid and the the railroads.
- s1artibartfast 4y agoWhich country has a nationalized candy industry?
- Drunk_Engineer 4y agoBelarus. https://en.wikipedia.org/wiki/Kommunarka_(confectionery_plant)#A_conflict_with_investors_and_nationalization https://en.wikipedia.org/wiki/Kommunarka_(confectionery_plan...
- danielmarkbruce 4y agoHe still has to buy the assets. He's not the only guy in town who can spot a monopoly. It's a tough game buying obviously good assets.
- diego_moita 4y ago> Buffett cautioned Huggins to never sacrifice quality for profit. Funny how that's the complete opposite of another celebrated investor: Jorge Paulo Leman from Brazil's 3G Capital Partners (Heinz, Popeye's, Anheuser-Busch, Tim Horton's, Bugger King, etc). Their game is to buy brands with very strong customer loyalty and slash costs (and quality). In the long run they'll destroy the brand but until then will make enough profits to more than compensate for the investment.
- hackernewds 4y ago> Bugger King
- catgary 4y agoWhat that company did to Tim Horton’s was basically an act of war against Canada.
- themitigating 4y agoI'm from NY so I consider myself a bagel snob. The bagels at Tim Hortons in Ontario are worse quality than anything I've ever had in the states. They are similar to packaged bagels from the supermarket
- kevin_thibedeau 4y agoTims has gone downhill since they got bought out by an American holding company.
- BoorishBears 4y agoFun fact: there's a few Tim Hortons locations in NYC
- VBprogrammer 4y agoWeird fact: there are dozens in Glasgow, Scotland. There was a recent announcement that they will be opening the first one in London soon. We don't visit for the quality of the food or coffee. When we RVed around Canada a Tim Hortons was a great opportunity to get online and plan our next steps. It now had a kind of sentimental attachment which reminds us of the trip.
- john-tells-all 4y agoThey're down the street from me (Los Angeles) -- See's candy is literally the best I've ever had. Lots of variety, reasonable prices. Recommended for yourself or a gift for a friend. Yum <3
- throwaway892238 4y agoFrom http://csinvesting.org/wp-content/uploads/2015/01/Sees_Candies_Case_Study.pdf http://csinvesting.org/wp-content/uploads/2015/01/Sees_Candi... “Warren and I raised the prices of See’s Candies a little faster than others might have. There are actually people out there who don’t price everything as high as the market will easily stand. And once you figure that out, it’s like finding money in the street.” [...] During the same period, the Retail Clerk’s Union attempted to organize the sales force in the stores. See’s since has triumphed in four attempts to organize by the Retail Clerk’s Union, mainly by paying higher than union-scale wages. [...] At one time, See’s came under attack by a major candy producer from the Midwest. [...] They duplicated our identity and tried to grab out market. Of course, I informed Charlie and Warren about that fact.” Munger said, “If they are infringing on our trade mark in any way, we can go after them.” Stover’s eventually backed off. Part of See’s competitive advantage is that it is a leader in its market. “In some businesses, the very nature of things is a sort of cascade toward the overwhelming dominance of one firm,” said Munger. [...] Thus our first lesson: businesses logically are worth far more than net tangible assets when they can be expected to produce earnings on such assets considerably in excess of market rates of return. [...] “Jack was a life-time friend of mine and an excellent, but somewhat eccentric, businessman... When we were due to close the purchase at Charlie’s office, Jack was late. Finally arriving, he explained that he had been driving around looking for a parking meter with unexpired time.” Far from being annoyed at the delay, says Buffett, he was delighted: “That was a magic moment for me. I knew then that Jack was going to be my kind of manager.”
- slavboj 4y agoBuffett's MO for subsidiaries is businesses that generate low cost free cash flow that can be leveraged to fund more speculative paper investments. It's very similar to the conglomerate model - arranging for an internal cost of capital lower than you can get on the open market, to fund capital intensive longer term projects. Interestingly Berkshire has never tried to develop any "synergies" whatsoever between its businesses, other than perhaps Dilly Bars at corporate events.
- zie 4y agoBasically all true, except every other conglomerate generally wanders into debt, then acts like it's candy, gets hooked and then runs into untold troubles for a while, when the debt and bad deals eventually catch up with them. BRK noticeably avoids debt, prefers all cash deals and keeps a very strong pile of cash laying around just in case.
- slavboj 4y agoBerkshire's ability to commit to long-term planning (at least currently) instead of levering up to boost short term returns to equity gives them an advantage over the traditional conglomerate model.
- kaycebasques 4y agoHere's a little history family history related to See's. My great grandpa was a chocolatier. Had his own store in San Francisco in the 30s. WWII hits and chocolate gets rationed. He has to close down his store. See's stays open because they have contracts with the military to provide chocolate for soldiers. See's hires my great grandpa as chocolatier.
- DrewRWx 4y agoThe military-industrial complex strikes again!
- interestica 4y agoMilitary-grade chocolate.
- deleted 4y ago[deleted]
- 1-6 4y agoIs it me or is Warren Buffett obsessed with companies dealing with sugar?
- 9991 4y agoLook at how fat you Americans are. It’s a safe bet.
- musicale 4y ago> There are actually people out there who don’t price everything as high as the market will easily stand. And once you figure that out, it’s like finding money in the street :( IIRC candy is also recession-resistant since people eat more of it for emotional support. Be that as it may, See's candies are still tasty. And the factory smells amazing if you ever drive past it.
- kurupt213 4y agoThe molasses chips from sees are so good