Warren Buffett still cites See’s Candies as an acquisition he loves, 48 years after buying it

During Berkshire Hathaway’s 2020 (virtual) annual shareholders meeting on Saturday evening, CEO Warren Buffett fielded a question about which of Berkshire’s subsidiaries (the company had 391,539 total employees at the end of 2019) have been hardest-hit by coronavirus.

Buffett said that there has been only mild employment dips to Berkshire-owned companies so far, and that, “It’s not like we’re in the hotel business.” He also reassured investors when he added, “I’ll put it this way: five years from now, I think Berkshire will be employing considerably more people.”

But then he did think of an example of a Berkshire-owned business temporarily shuttered by coronavirus: See’s Candies, which Berkshire acquired in 1972 for $25 million.

“We were in the midst of our Easter season, and Easter is a big sales period for See’s,” Buffett said. “We weren’t halfway through in terms of the volume that can be delivered, because it comes toward the end. And essentially we were shut down, and we remain shut down. We have 220 or so retail stores, and a lot of [non-See’s] stores that sell our candy, and are closed. So See’s business stopped. It’s a very seasonal business to start with, so we have a lot of seasonal workers too, particularly who come in for the Christmas season. But we have a lot of Easter candy [left over].”

A Berkshire Hathaway shareholder examines, April 30, 2011 Warren Buffett branded peanut brittle at the company’s annual meeting in Omaha, Nebraska. (Andrew BEATTY/AFP via Getty Images)

You probably noticed: Buffett has learned a lot about the candy business. And he loves talking about See’s. “We’ve owned that since 1972, and we love it, and we continue to love it,” he said at this year’s meeting, with a box of See’s famous peanut brittle sitting on the desk next to him.

Buffett mentions See’s most years in his shareholder letter or at the annual meeting, so its small size (about $450 million in revenue) belies the company’s personal significance to Buffett. As Buffett told Fortune in 2012, “We have made a lot more money out of See’s than shows from the earnings of See’s, just by the fact that it’s educated me, and I’m sure it’s educated Charlie, too.”

When Buffett and Charlie Munger decided to buy the company in 1972, See’s had $30 million in annual sales and profit of $4.2 million. By 2014, See’s had annual sales of $400 million, and profits of more than $82 million. (See’s does not publicly share its annual revenue.)

The key to See’s is that it requires low capital investment each year, it’s a reliable seasonal business with devoted customers, and it grows every year at a slow but consistent pace.

“The ideal business is one that takes no capital, and yet, grows,” Buffett said at the 2016 annual meeting. See’s is his favorite example.

See’s is still best-known on the West Coast, with dual headquarters in Los Angeles and San Francisco, and most of its stores are in the state of California. In 2012, the company attempted to map out an East Coast expansion with Berkshire’s blessing, but the demise of brick-and-mortar retail put a stop to that plan.

Daniel Roberts is an editor-at-large at Yahoo Finance. Follow him on Twitter @readDanwrite.

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