See's Candies

See's Candies is the legendary California confectioner that has become the benchmark for quality businesses in the Berkshire Hathaway portfolio.

The Acquisition

Berkshire acquired See's Candies in 1972 for $25 million. At the time, this seemed like a steep price for a small candy company. It turned out to be one of Buffett's best investments.

The Business

See's sells premium boxed chocolates through its retail stores, primarily on the West Coast. The business has several attractive characteristics:

Pricing Power

See's has been able to raise prices consistently over the decades without losing customers. Consumers don't comparison shop for See's—they buy it for the quality and brand.

Low Capital Requirements

The business requires minimal reinvestment. Profits can be distributed to Berkshire rather than being reinvested in the business.

Brand Loyalty

See's has built enormous brand loyalty over its 100+ year history. Customers associate See's with quality and tradition.

The Lesson

See's taught Buffett an important lesson: it's better to buy a wonderful company at a fair price than a fair company at a wonderful price. Before See's, Buffett focused on buying cheap businesses ("cigar butts"). See's showed him the power of quality.

Conclusion

See's Candies remains the benchmark against which Berkshire evaluates potential acquisitions. Its combination of pricing power, low capital requirements, and brand loyalty represents the ideal business.