> 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.
To be fair, even before that acquisition, the quality had been going down. The biggest jump imo was when they went from making the donuts in-house to having them delivered and just heated at the location.
I haven't been to a TH for ages. Their coffee tastes badly and the food is ... merely food. Back in 2005 when I first arrived in Canada TH was the first store I visited.
I went to a TH in Toronto in 2018 after hearing about it from Canadian friends for years… I would describe the food at that time as ‘technically food.’ The coffee, well, I threw that away and went to another shop.
Weird 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.
> Buffett cautioned Huggins to never sacrifice quality for profit.
It might be a good investment, but from my experience See's Candies is only good at packaging their mediocre products made with corn syrup. Before someone cites their FAQ: No, most of their candies do not have "cherry ingredients including glacé whole, glacé halves, and whole dipping cherries" sourced from a 3rd party supplier.
The largest part of their strategy has been cutting central costs (which are, not coincidentally, obscenely large at consumer goods companies). That has been their strategy since the early days.
The cost-cutting that you are seeing across the industry started because 3G exposed the fact that a lot of companies were running with incredible amounts of fat. But during that time, you have also seen massive increases in competition across the sector due to changes in consumer demand that has led to brand-destroying behaviour.
I don't believe it's smart to have people on the payroll just because. If they're not producing value for a business, then a business should remove them. Yes, it does suck for the person getting fired, but that's life, they'll find a different job.
People aren't entitled to their jobs any more than any other business is entitled to their customers. To think that they are is to infantilize salarymen and to perceive them less as free economic agents and more like serfs, incapable of proving their worth in a free, competitive market.
The difference is that Buffett uses subsidiaries to reduce Berkshire's long term cost of capital for other projects, rather than trying to squeeze returns from them directly.
Before the fast food brands revitalized Burger King (and somewhat Carl’s Jr.) were famously a bit of a cut above in quality (and price) but now everyone works on an on-demand model and the difference is harder to notice.
Before the fast food brands revitalized Burger King (and somewhat Carl’s Jr.) were famously a bit of a cut above in quality
Yep. And it put one of my relatives on the unemployment line.
<anecdote>
He was responsible for importing cheap meat from Australia and New Zealand for Burger King and a bunch of prisons.
In the early 90's there was a brief wave of "made in USA" pride that swept America, and Burger King changed suppliers and advertised "Made with all American beef!"
That cut my relative out of the picture, and his prison clients weren't enough to make up for the loss, so he lost his job.
Agreed, tastes like a mix between beef & chicken. Sadly barely any restaurants serve kangaroo.
I would much prefer a variety of meats that are more sustainably farmed with choices varying by season and availability limited by ecological factors with open-market pricing (with a fairly heavy tax) to naturally introduce a premium on delicacies.
With the release of their chicken sandwich, Popeye's had one of the most successful fast food product launches in the past few years. This launch was so successful that nearly every major restaurant chain launched their own chicken sandwich afterward, and it completely turned around the public image of Popeye's.
Popeye's was mentioned in two Grammy-nominated songs in 2022, and dozens of other rap songs in the past few years.
Reviewbrah famously went on a rant about RBI (after they ruined one of his favorite Popeyes items) and how they turn everything into garbage: https://youtu.be/5d5NJgO38AE?t=362
When it was run by Al Copeland, Popeyes was actually very good. He tried to purchase another large fried chicken chain, went bankrupt, and was forced to give up Popeyes, but kept a number of dishes and ingredients. Copeland's restaurants still serve the original biscuits, which are incredible.
Apparently Popeyes reacquired most of the ingredients and dishes in 2014, but they unfortunately didn't bring back the original biscuits.
It's still probably better than McDonald's, but the bar is pretty low there. Full disclosure, I sold the QSR stock I'd had for a few years when everything went to shit in 2020 and bought MCD on the same day... I like that McDonald's goes out of the way to supply locally, it seems like a better model for surviving black swan events. Both garbage, but that's the cafeteria choice you get in late stage capitalism.
Still, I watched with some admiration as MCD navigated the local export restrictions on beef in Argentina, and opened cafes there, served only grass fed local beef... then promoted that guy to open cafes in Europe and watched again as they brought hyperlocal beef producers in so you could buy a Charoux burger in Paris. That was deft.
ohhhh... wow. ok. This got my juices going. Next time. Saint-Nectaire is perhaps my favorite cheese... their "Michelin" sounds a lot like the home burger I developed living in Auvergne. Which was: 50% steak hache / 50% ground pork, smashed thin with two patties, rocket, grilled onion, Charroux mustard, mayonnaise, St Nectaire on one patty and Blue d'Auverne on the other, on a hollowed out flattened wide baguette. Monster. Most of the necessary things aren't available in the States... but it's very cool that the King Marcel burger seems to match this flavor profile.
It's been my experience that most "American" foods - and Chinese food too - are much better in France. Like, this is embarrassing, but compared to any roadside chain in America, the Buffalo Grill is incredible. It would be the best restaurant in most cities under 50,000 people in the US. It looks like an Applebee's and then they have freakin steak tartare which would be inconceivable in the US. And it's actually edible.
He, they, may make money doing this but the cost to themselves is one I would be unwilling to give.
He, they, will always be known for this behavior, that will be there legacy. If you are wealthy, why spend the extra effort beyond being comfortable in gaining more wealth at the expense of companies, their customers. Like what relative improvement does 50 extra million mean to someone like that? It's seeking money for money's sake. Why not use the extra time and energy you have to make the world better, be known for something better, leave a positive legacy? Why do people like this choose to trade their dignity, their legacy, for more money that they don't even need?
It'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.
>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.
How does one even know if the Vitamin C is Vitamin C? There is no government agency that confirms supplements and vitamins are what they say they are, nor are there penalties. The only thing I have heard of is the USP branding being a signifier of higher likelihood of the supplement/vitamin being what it says it is.
Sounds like a pretty clever startup idea. Consumer Reports, but for everything. Then a seal that manufacturers can put on their product that certifies the assay of ingredients. Does a Coke actually have 120 calories? Is a Vitamin actually what it says? Is the bottle actually recycled? Consumer Reports is often opinion based with some quantitative data and they don’t review everything. Is you olive oil actually from Italian olives? Are those organic pears actually organic? Products that get “the seal” can market that fact. And if consumers care enough, they’ll pick products that are certified to be what they say they are. If I am buying high end paint, the water content matters to me for example.
The FDA should really focus entirely on consumer safety only. (It’s not a safety issue if your olive oil is Moroccan rather than Spanish or whatever.) And the FDA doesn’t have any mission to test if that 18/10 stainless steel sink is actually 18/10 stainless for example.
Selling something that is not what you say it is is false advertising, and falls under the purview of the FTC. Unfortunately, the testing, enforcement, and penalties are all extremely weak.
Trust in the marketplace is a very valuable asset, one that cannot be bought. It has to be cultivated and maintained over many, many years, and having the government do that makes perfect sense as it is a societal benefit.
We need a UL/Consumer Reports for Internet-connected devices that documents and certifies their use of personal data and bandwidth. The regulators are not going to be able to keep up with the changes.
Computer component manufacturers have already caught on. New products are built to spec and then later on in that product's manufacturing life cycle, the parts it's built with are changed to reduce cost but the SKU is kept the same.
They mean there are third party organizations that perform testing. Consumer Reports and such. Or most supplement companies pay for independent testing (some skepticism is warranted since they're the ones paying).
This is literally how all construction materials are vetted and it works great.
Underwriters Laboratories.
If it were feasible to sue retailers for damages due to fraudulent vitamins, approximately 0% of supplements sold would be fake.
The problem is there isn’t adequate scientific evidence to back the efficacy of any of these supplement which is why they aren’t regulated in the first place.
> The problem is there isn’t adequate scientific evidence to back the efficacy of any of these supplement which is why they aren’t regulated in the first place.
While I would agree that good evidence is generally lacking on supplements, that’s different than “is the product as advertised”. Just because vitamin C isn’t a miracle drug wouldn’t justify selling sugar pills as vitamin C.
Local authorities in the UK have a legal duty to implement a food product inspection scheme. It's regulated by the Food Standards Agency. And yes, the labs used are independent.
Stick to brands that have a reputation for quality worth defending.
It's no guarantee, but you want a brand that perhaps charges a bit more because of their long track record of quality. The longer and more solid their track record of quality, the more motivation they will have to make sure that reputation stays intact.
> Three to four samples of each supplement purchased in different parts of the state were tested. Each sample was tested five times, for a total of 390 tests on 78 samples. Schneiderman said that only 4 percent of Walmart’s supplements (“Spring Valley” brand) actually contained the ingredients listed on the label, while 18 percent did at Walgreens (“Finest Nutrition” brand), 22 percent at GNC (“Herbal Plus” brand), and 41 percent at Target stores (“Up & Up” brand).
and brands are bought out by private equity and change for the worse all the time. look at the downfall of many historically great brands/names that are no longer what they once where: pyrex vs PYREX. Craftsmen. MEC. Birkenstock. And so many more.
Costco may one day fall too but their brand is what they sell in store and they do actually seem to do due diligence (also they have the Kirkland brand)
Thought the article points out Berkshire Hathaway owns 5.6% of Apple, Apple represents almost a 50% of Berkshire's holdings. If you ask me, quite a concentrated portfolio risk for a fund that is perceived to be stable.
But anyways - in regards to products & inflation...
"...our research shows that Apple have risen iPhone prices 26% higher than local inflation rates. "
From what I understand, insurance companies were/are his cash cows so to speak. The simplified business model of an insurance company is to take the money customers pay for the insurance and invest it safely enough that you can cover the sum of payouts required and make an extra profit. Now in theory this is profitable without high returns from that investment because the sum of payouts is less than the sum of money collected if your risk models are correct. But if you assume that you are above average in investing (which Buffet assumes) then it becomes even better to buy these companies because you are the one who gets to invest said money.
is 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.
Competition 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.
That's not last century thinking. You can't create any monopoly for generic drugs, by definition. You're not even forced to buy an an expensive Apple or Google phone. You can buy a 200-300 dollar phone with more than decent specs. They reason why people are running around with 1k phones is because it's a status symbol.
It's exactly this century where you can buy anything at manufacturing cost from India or China if you want to, there's an entire political class upset about it.
I mean I'll give you Comcast, ISPs in the US in particular seem bad, but otherwise? Digital and electronic goods in particular have been driven down to the marginal cost of production, that's why 90% of the former are free.
Sounds like the perfect start-up plan: just open a 50 bucks vitamin C store, and the dominant player will buy you out for $$$. Rinse and repeat for infinite money.
There's usually a x-year non-compete agreement when this happens... I know a guy that does exactly what you describe, starting a new garbage pickup service every 3 years, when the agreement elapses. He then works for ~3-4 years to build it back up. Sold twice already, and on his third.
Laundromat -> liquor store -> hotel -> retire rich is a common path here. Rinse and repeat a couple times at each point, and because you sell each time to the guy trying to do the same thing behind you instead of to a big competitor, there's never non-compete agreements. Bonus in that the first two are recession proof and cash heavy businesses (if you wish to avail yourself of the possibilities that suggests).
Anecdotally, work from home put a crimp in many laundromat businesses. And liquor stores only work in states that do not let the big stores sell liquor. These days, any half decent hotel brand will require a couple million cash (for the down payment), and more for a new build. At least in the western US.
What if there were no agreement? seems like he is the driving successful factor in these businesses, but I'm guessing he'd rather sell his company than get hired by them.
there are example employees I've seen that have this kind of leverage too
For that to work you first have to scale up production and distribution significantly enough to be on their radar. That requires some investment and then the question is whether is an investment, with higher probability of returns.
You missed out the difficult part of distribution. This isn't exactly easy or cheap. Ask Walmart or any other retailer. Even the direct-to-consumer ones have to spend a lot on distribution.
It happens with a lot of stuff. Chocolate candy bars in gas station kiosks are always the same 5 brands. Anybody _could_ make chocolate bars, but the big players make deals to control retail, so you don't get a choice of other candy bars, in the situation you'd typically buy one.
If I control the conditions under which you buy something, I can control what you are going to buy.
Because small chocolate manufacturers don’t have the scale to supply massive distribution companies. An little retail gas stations don’t have any incentive to go make deals with boutique manufacturers. That would be madness for a gas station owner to go to individual manufacturers for specific items. And the manufacturers would hate it. Dealing with hundreds of thousands of small orders would be a logistical pain. That’s the reason their is a distributor layer for those sorts of products. If customers at gas stations started demanding Valrhona chocolate, they’d ask their distributors to start getting it. I’d buy it, but most people at gas stations aren’t going to care about a $10 chocolate bar.
The monopoly is in the illusion of access to choice on shelves. The pharmacy markets is dominated in the US by 2 players - Walgreens and CVS. Heck they even have their own generic meds competing at the same prices
There has to be more to it. If not, a simple refusal to sell would allow you to move the market. If the sellout bundle is profitable enough, why doesn’t everyone start a generic drug company to be sold and retire rich?
Then the competition moves money from profit markets to undercut you... making it impossible to compete... your competition subsedize the costs and effectively sell for 20% below cost until you agree to sell or close shop
small businesses generally can't launch everywhere. a big drug manufacturer can switch to selling at cost in a region for a few months to kill the profit opportunity of a young competitor. also, once they've done that a few times, it prevents others from trying
The missing key concept here is "regulatory capture". In many industries, companies get enough money and power that they can afford to rewrite the laws to lock themselves in and put up a big barrier to entry to keep competition out.
There is no regulation in supplement selling, except for food safety. You can sell sugar branded as Vitamin C, and if your customers aren't going to sue you for false advertising or something, you won't have any problems.
Speculation: Google Translate says it's "lesson" in Romanian; tsimionescu's name might make that make sense.
Possibly connected to https://en.wiktionary.org/wiki/praelego#Latin and the form praelegere to 'read before' in Latin, either the same kind of lecture/lesson sense, or about the parent comment "reading 'regulatory capture' before should really be 'retail capture'"?
You're right about Romanian, and the best translation is "lecture", but it was just a bilingual predictive keyboard-assisted mistype - the best kind of mistype!
Oops, that's bilingual predictive auto-correct failing, and me not re-reading my comment...
I wanted to say "the problem is retail capture", but somehow it filled in a Romanian word instead... Phone keyboards...
Just for completeness, "prelegeri" would be best translated as "lectures" - it made no sense at all in context, it only happened to match a few letters of what I fat-fingered.
It's a standard feature of many mobile keyboards. I personally use MS SwitfKey, but GBoard has it as well, and I'm sure others have it too. You get to select multiple languages for which they'll do auto-correct, predictive suggestions, and swipe-typing.
It works surprisingly well, but it does sometimes fail pretty spectacularly when you're sloppy and mis-type too many letters. It also can't help much when words are ambiguous (is that an English "in" or a mistyped Romanian "în"?). Still, it's generally a godsend for typing in mixed languages (say, like in Spanglish, where you'll write unas palabras en Ingles, y altras in Spanish). They even include things like names of local politicians or cities or brands.
Windows does seem to have this as well as an option ("Multilingual text suggestions"), but individual apps might not (e.g. I haven't seen it in Outlook).
That seems pretty cool. Maybe one day in the future, after trilingual, quadrilingual, etc., autocorrect, something like Esperanto will be reinvented from the ground up.
>You can buy a 200-300 dollar phone with more than decent specs
Two weeks ago I got a "9.5" (looks brand new, battery too) used Pixel 3a for 100$ on eBay. It's a perfectly fine phone with picture/video quality undersold by it's camera pixel count.
Do you have any idea on how I can avoid the excessive interest rate the bank charges on my mortgage? :) Yes I checked, other banks loans are just as expensive. So it seems I'm not able to buy loans at "manufacturing cost" and neither am I able to buy gas or electricity for minimal cost.
You could get a loan at prime rate if you were a bank. You likely aren’t a bank, so a retail loan is what you get. Prime rate is the interest to the bank. Retail rates are higher because there are costs associated with your loan. Those costs also include the degree of risk to the bank.
Never walk into a BANK and apply for a loan. Use one, or better, a number of mortgage brokers. Make a spreadsheet. Add in all garbage fees. Estimate the life of the loan. Now calculate real APR. Points and garbage fees dominate if you’re going to sell or refinance in a few years.
"Don't say the money is like magnetically charged. It's not the money is attracted to the north. It's the people, an asshole whose idea of invention is coming up with excuses, couldn't come up with shit if he cleaned up after his dog for once. Wants what is rightfully for innovators (creation of wealth that can scale, through thought that can be imprinted many times) and tries to corner a market. It always has a name, it's not an organic thing, there is always a guilty party. Not ISP's, Comcast. Not local banking, Wells Fargo. Not healthcare, Christus.
Say it, corner the market. They're trying to corner the market. The markets have been cornered."
Four big banks, but I don't see much competitive advantage to having such large banks. In fact, many people choose one of the thousands of smaller, regional banks because customer service or services in general are better.
US has more banks than any other country by a factor of 10. Now, they may not all be retail banks, but still, there’s more choice in the US than elsewhere. Then there’s credit unions too.
The branded products (EmergenC and such) come with more of a markup
But Vitamin C in general is an extremely cheap compound. The costs are going to be in things like packaging, shipping, warehousing, shelf space, accounting for lost shipments and returns, and similar overhead. For simple products that overhead can be orders of magnitude more than the core product.
Do you have any evidence that the profit margins of Vitamin C are increasing? At least on Amazon, it looks like the price has been fairly consistent for the past 8 years. I wouldn't be surprised if the largest cost of Vitamin C is the opportunity cost of shelf space. It can't imagine it being a common purchase.
That's a very weird example - the majority of people buying Vitamin C at a US drugstore could just as well light their money on fire to no discernible difference in their health.
Then I'm sure you can get a kilo of the stuff from a supplier at a price much closer to bulk. That is not what they are selling in a US drugstore, however.
They sell NOW supplements in half pound bottles for $6-8. Works for me and lasts a very long time. Much cheaper than the acid blends at brew shops too. I'd have no use for a kilo.
hmm you can differentiate your product via brand and placement to gain revenue OR participate in a commodity market, based on price and volume. There is no "law" to make products one way or the other. Price increases for commodity are a serious concern, but price increases for brand and placement, why not? really..
Public perception of scarcity is a cause for panic, and that is a real concern, regardless of origin.
Controlled scarcity increases profits, as companies are now discovering. If there's some place in the distribution channel where the incumbent can block new entrants, prices can be increased enormously without facing market forces.
It'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.
Here'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.
My 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.
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.
> 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.
Their 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.
I'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.
I 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.
I 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.
Dextrose monohydrate, powder. It tried the syrup from the commodity seller I bought from, but it was too thick, too glassy and I couldn't mix it. Food production facilities get it in that form, however.
But the powder is great, you can get a little 1 pound bag from a brewer to try it, it looks...well it looks like powdered sugar, but fluffier and uses more volume. I buy them bulk, 25 kilo sacks at commodity prices.
Mix like three tablespoons per liter, it mixes easy and produces a foggy, slightly acidic water that eliminates hunger instantly. Promise.
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Now be careful, you have to use a homemade mouthwash immediately afterward to clean your teeth, because this is very yum yum yummy for mouth bacteria. Like a petri dish.
Mouthwash ingredients: xylitol, baking soda, to taste. Like a tablespoon each per liter of tap water. I got it from a dentist online, Dr. Frei or Frey, can't find it anymore on my youtube. But it'll go everywhere the dextrose can go, and your teeth feel so so clean. You can add a drop of bleach to whiten your teeth...and definitely get some mint oil, like for massages, that shit, 100% mint oil. I use peppermint oil, Nature's Truth Essential Oil for aromatherapy. It's taken from the plant, so eh. 5 drops per liter.
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Note that the mouthwash contains no dextrose, you first drink your dextrose, then rinse with the mouthwash and spit the mouthwash out, got that? And use your judgment. Your body will tell you what you're doing right or wrong. It knows what this shit is. You should get instant tangible noticeable effects from both, like immediate dissipation of hunger from dexwater as you drink it, and clean clean mouth with hardened stronger teeth (in 6 seconds) from the mouthwash. Great breath too from the mint.
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Both liquids are highly perishable, so you'll never find them retail. Must be homemade. Like they both last 48 hours. Both rot quickly when in water.
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Hey I could totally use affiliate links. Well I won't, except I will say if you're in Santiago de Chile get your dextrose monohydrate at Venser SA in La Cisterna.
I might post it as a main thread, and link to that post here.
Thanks for sharing. Have you considered skipping the "middle man" and just using xylitol to sweeten your drink and skipping the mouthwash?
A brief browse of academic literature makes me wonder if you have a specific blend of gut bacteria which leads to suppressed appetite after consuming dextrose.
I watch the Berkshire annual meetings, and after watching Warren and Charlie eating peanut brittle for 6 hours, I couldn't help but buy/try some, and then you're hooked.
The strong brand, yeah. That's what Warren Buffet looks for most. Really means you're getting a good deal, so he looks for things people psychologically have ingrained are good deals, and then makes them higher-priced deals. Maybe still good deals but I don't know. Because a win-win deal can be made into a win-lose deal simply by negotiating.
This is actually something you'll notice in grocery stores now. The higher price has moved far higher (2x) while the discount price has moved 20%. They're prepping everyone for higher prices if needed.
The article points out their business survived the Great Depression and while I don't think you're entirely wrong, I do think they'll survive a few downturns if they keep to their values.
Unfortunately 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
it'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.
Naturally. 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.
What’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.
Buffett'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.
Basically 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.
Berkshire'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.
“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.”
> 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.
In 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.
They'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.
Sees 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.
A key quote from the article supports what you're saying:
"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.”
Whether that's a reason to admire Buffet, or dislike him, I'll leave to the reader. The impression I have of Buffet is that's not a romantic; he's out to make money in a sustainable, long-term way, and is unapologetic about it.
I’m still trying to understand this quote so pardon me for being thick. Is he saying they raised the price as high as the market would allow or that they waited for a while to do that?
> I value the guy who runs the sriracha sauce company higher than Buffett:
Value him in what sense? The sriracha guy made a terrible commercial mistake. The capitalist in me doesn't value a person who does that and I would hesitate investing in a venture he did over, say, Warren Buffet (hypothetically speaking of course).
People "like" Warren Buffett because he's the ultimate capitalist. Also...
If you value the sriracha guy over Buffett in a "altruistic this is better for the consumer" type of way, then sure you could make that case (as the article does), but also remember that Buffett is giving away all (most) of his profits to charity. The utilitarian could argue that Buffett's value is far greater. He's gobbled up all of the profits from various industries (for example luxury goods which provide little benefit to "the little guy") and is reapportioning those profits to charities that may actually save lives (not just dress up your rice). I don't know, I'm not arguing for Buffett personally, but there's more than whats on the surface.
> What was the 'terrible commercial mistake' that the sriracha guy made?
"He does not bother going after restaurants and other businesses that use his sauce in their dishes and products, even though he could make millions from them in licensing fees. His company's advertising budget is nothing. He hasn't even bothered to trademark the name "sriracha."
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?
In 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 agree with you regarding dividends, returning money to investors, of course.
I was thinking more of things like how e.g. Tesla was not even a decade ago priced at $2 billion dollars when it was pretty frickin' obvious they had a very reasonable chance of growing to a globally dominant manufacturer. Lots of smart people missed that, but quite a few saw it as well.
He has changed his stance recently, and now has billions in tech holdings, including a recent HP bet [1]. IIRC, Berkshire also has big stakes in Apple, IBM, and Nubank.
i 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.
Warren 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.
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.