See's Candy

Warren Buffett bought See's Candy in 1972 and still owns it today. In 1972, Warren Buffett paid $us 25 for it. The company made a profit of $us 4 million a year before taxes in 1972. It sold 16 million pounds of candy a year at $us 1.95 per pound, meaning 16 million times $us 1,95 = $us 31.2 million a year in sales. Before buying the company, Warren Buffett and his partner Charlie Munger thought and asked themselves if there was some untapped pricing power at See's Candy, meaning that if that $us 1.95 a pound could sell for a little bit more - up to $us 2.00 or $us 2.25, hence in 16 million pounds sold, that could mean $us 4 million in profit in one year. And there indeed was some untapped pricing power in there.

Charlie Munger and Warren Buffett knew that See's Candy had a very good reputation, especially in the minds of Californians, thus they knew that the prices could indeed be raised. Thus, once they bought the business, they raised the price of the pound of candy every year on the 26th of December - the day after Christmas. In 1998, the pound was sold for $us 11 each, and 30 million pounds were sold, thus sales amounted to $us 330 million. Profit is $us 2 per every $us 11 pound that is sold. Thus, in 1998, the profit was $us 60 million.

$us 55 million out of those $us 60 million are made on the 3 weeks before Christmas. Valentine's Day is the biggest day of sales, and on that day, Warren Buffett runs adds on TV, newspapers, and TV that say "guilt - guilt" to every husband and boyfriend in the West Coast - so if they arrived home on that day without See's Chocolates it would be a big mistake. See´s Chocolates are the expensive and best ones; just like Coke and happiness go together - not RC Cola.