Warren Buffett’s ‘dream’ investment – a small candy company he bought 50 years ago

American investor and business tycoon Warren Buffett is counted among the world's richest people.

Half a century after he bought See’s Candies, Warren Buffett still counts the small company among his favourite investments. As strange as that might sound for the CEO of Berkshire Hathaway, arguably the world's most famous investor, there is a good reason why Buffett loves this candy company. A report in The Hustle dug up the story of Buffett’s long association with See’s Candies, which Berkshire bought in 1972 for $25 million.

A candy company making $450 million in revenue might well be a blip on the radar of Berkshire Hathaway’s lengthy investment portfolio (the company boasts of $969 billion in assets), but See’s Candies has always focussed on quality over quantity – and that is the mantra Buffett adopted when he acquired it.

Started in 1921 in Los Angeles by Mary See and her son Charles, See’s Candies built its brand around making small-batch chocolates using the highest-quality ingredients.

By 1972, the company had grown to making $30 million in sales and See’s descendants were looking for a buyer. By that time, Warren Buffett had cemented his reputation as an investment genius and had become chairman and CEO of Berkshire Hathaway, which he “turned it into a holding company for his growing investments.”

According to The Hustle report, Buffett’s early investment policy was rooted in “value investing” – he looked for companies that were overlooked by Wall Street. When researching See’s, he realised that the numbers did not look exciting on paper (See’s had $8 million in assets, $2 million in post-tax earnings), but it did have a loyal customer base and a strong brand identity.

So Buffett did something unexpected – he bought See’s Candies for $25 million, which is three times what the company was worth at that time. Much later, Buffett would say that the value of See’s came not just from the money they made from it, but also from what he learned through the company.

“It was Buffett’s biggest purchase up to that point, and one of the first companies Berkshire Hathaway bought outright,” The Hustle report stated. In years to come, Buffett would cite this acquisition several times.

One of the first things Buffett did after acquiring the company was to tell its new CEO to never sacrifice on quality to make profit. Instead, he said, See’s should focus on making small-batch chocolates to sell locally.

Over the next few decades, See’s Candies registered slow but consistent growth. According to a 2021 report in Business Insider, Warren Buffett and his investment partner Charles Munger have seen a return of 8000% since investing in the company in 1972.

"We put $25 million into it and it's given us over $2 billion of pretax income, well over $2 billion," Buffett said at Berkshire's annual shareholder meeting in 2019. The Berkshire Hathaway chairman famously keeps a box of See’s peanut brittle on hand at shareholder meetings.

Part of See’s success comes from the fact that the business of chocolate making is not capital intensive. A short production and distribution cycle also minimises the volume of funds tied up in inventory, Buffett said in a 2007 letter. Of course, the brand loyalty it has acquired in decades has also played a huge role in the success of See's.

But even when the coronavirus pandemic temporarily shuttered See’s Candies outlets, Warren Buffett mentioned it at the 2020 annual shareholders meeting. “We've owned that since 1972, and we love it, and we continue to love it,” he said.