Monthly Archives: June 2014

Special Report: Inside Dairy Queen, Berkshire’s Queen of the Quick-Service Restaurants

(BRK.A), (BRK.B)

For much of the company’s 75-year history, Dairy Queen was a sleepy also-ran that missed out on the explosion of fast food restaurants that began in the 1950s, and became ubiquitous by the 1970s. By that time, McDonald’s and Burger King had become the dominant food purveyors in the Quick-Service Restaurant category (QSR).

In contrast, Dairy Queen served its signature soft-serve ice cream, but it didn’t always place much emphasis on food. It certainly didn’t put a priority on the national promotion of its menu items.

On the plus side, Dairy Queen was one of the first in the QSR category to embrace smoothies, with its 1987 purchase of Orange Julius, and they also own fading popcorn retailer Karmelkorn.

Along Came Berkshire Hathaway

In 1998, Berkshire Hathaway acquired Dairy Queen for $585 million in cash and stock. At the time there were 5,790 locations in the U.S. and internationally.

Today the formerly sleepy ice cream purveyor has found renewed energy and direction. There are more than 6,700 locations in the U.S and Canada, and 28 other countries. 1,495 of the stores are outside the U.S. and Canada, and of the 271 Dairy Queen locations that opened during 2011, some 131 of them were in China. The chain is particularly popular in southern states, with 600+ stores in Texas alone.

Total system wide sales were just under $3 billion in 2014.

McDonald’s, with its 35,000 restaurants in 100 countries, is still the king of the QSR category. According to QSR Magazine, Dairy Queen is ranked #19 on the QSR 50. That puts it behind #18 Little Caesars and ahead of #20 Papa John’s. And, its global sales has it ranked #16, according to Franchise Times. While it may be from the same era as the root beer chain A&W, Dairy Queen’s 6,600 locations make it roughly 6 times larger than A&W’s 1,100 US and international locations.

Dairy Queen’s popularity is more than just a hankering for a taste of nostalgia. It received the #2 ranking in Huffington Post’s “2012 America’s Favorite Fast Food Chains,” while the website declared McDonald’s to be “America’s least favorite.”

A New Strategy

While Dairy Queen’s strength is the heritage of the frozen treat business, the famed “Cone With The Curl On Top,” it now has an increased emphasis on selling food. Dairy Queen wants customers to stay and eat, rather than just get dessert, and a recent national ad campaign touted its $5 Buck Lunch in order to get customers to try its burgers, hot dogs and chicken strips. Upgrades to food quality have been ongoing, and include freshly baked buttered buns and grilling the burgers to order.

There also has been a focus on expanding and updating the menu to reflect changing tastes, and to convince customers it’s not just a seasonal eatery that focuses on summer treats for hot summer nights.

In 2015, Dairy Queen began putting ovens in its stores and debuted its DQ Bakes! menu, which featured nine products across three categories: Hot Desserts à la Mode, Artisan-style Sandwiches and Snack Melts.

The company is also trying to lure customers in at a traditionally slow time of day through a new campaign that focuses on the period between lunch and dinner.

The afternoon-snack daypart is seen by Quick-Service Restaurant experts as one of the major growth opportunities in the category, after competition has heated up for breakfast and late-night business.

DQ’s Efforts are Paying Off

It looks like Dairy Queen’s efforts are paying off. YouGov.com, an internet-based marketing firm that polls thousands of members on a wide variety of issues, is reporting that its YouGov BrandIndex’s is showing positive news for Dairy Queen.

The BrandIndex is billed as a key measurement of potential revenue, and it’s showing an uptick in interest in eating at Dairy Queen for the month of December 2015, as compared to December 2014.

According to their polling, “31% of adults 18 and over who were aware of the brand considered Dairy Queen when making their next fast food purchase. The percentage is now up to 33%.”

The 6% increase in shows that the company is making progress, and what’s more, the 33% is a healthy one, with the “average Purchase Consideration score for the fast food dining sector overall is 22%.”

Dairy Queen Grill & Chill

Dairy Queen has had a number of branding efforts over the decades to give the chain a consistent look and customer experience. In the 1970s, the company launched the Dairy Queen Braziers motif. Today the emphasis is the DQ Grill & Chill concept, which features separate “grill” and “chill” areas, warm lighting, HD televisions, and free Wi-Fi, and it is working with its franchisees to not only build DQ Grill & Chills, but to convert the older Brazier restaurants to DQ Grill & Chills.

There are currently 500 U.S. remodels in the works, with upgrade commitments from 1,100 more. In addition to stand alone stores, Dairy Queen is also proving a good fit for the gas station convenience store business where it serves to draw in customers that otherwise just pay at the pump and skip higher profit margin in-store purchases.

A Dozen Target Markets Nationwide

Dairy Queen has announced that it would be opening hundreds of new locations in Louisiana, Massachusetts and South Carolina, as well as several hundred in Northern California. The company will also be adding 30-35 locations in Chicago.

“We have about a dozen targeted markets throughout the United States. Louisiana is one of the primary ones because of the demand for the combination of the food menu and the treat menu items,” said Jim Kerr, International Dairy Queen Inc.’s VP of Franchise Development.

It’s About Making Money

Why should a potential operator choose to go with the Dairy Queen system? “Because he’s going to make money!” explains Dairy Queen’s president and CEO John Gainor says with a smile.

Dairy Queen is a popular franchise in the QSR category. Its franchise fee and liquid cash requirements are both significantly lower than McDonald’s. To build a prototypical Core 72 location runs $1,030,000 to $1,430,000 for construction and equipment. Most importantly, Dairy Queen’s low SBA loan-failure rate made it one of CNN Money’s 10 Great Franchise Bets for 2011. It was one of only two restaurant chains that made the top ten list, the other being Little Caesars Pizza. Dairy Queen was also ranked #1 in Entrepreneur Magazine’s 2012 Top 500 Ice Cream & Frozen Dessert Category.

Overseas Growth

While U.S. and Canada locations have remained stable, it is overseas where growth is exploding. Between 2011 and 2015 the number of locations expanded over 66-percent from 871 locations to 1,495 locations.

The focus is on emerging market countries, and you can find a Dairy Queen in Gabon, Guyana, Cambodia, Laos, and Vietnam, among others.

In Europe the focus is on Poland and nearby countries. It is avoiding France and other developed European markets where the competition is greater.

“This move is strategic. We are entering the Eastern European market at a time when Western brands are being embraced by a consumer base that is well informed on the importance of global brands,” Dairy Queen’s Jean Champagne, Chief Operations Officer — International Groups explains. “We look forward to working with a strong franchise partner in Poland. We see this as a launching pad for other contiguous countries in the region.”

Caribbean Growth is also in the works. Dairy Queen has announced it will open a total of 24 locations within the next five years in five countries in the Caribbean.

Plans call for the development of DQ Grill & Chill locations in Trinidad and Tobago, DQ Grill & Chill and DQ Treat locations in Jamaica, and DQ Treat locations in St. Lucia, Grenada and St. Maarten.

Currently, there are eight DQ Treat locations in Trinidad, the first of which opened in 2012.

A Hot Brand in The Middle East

The largest DQ Grill & Chill restaurant in the world is in Saudi Arabia, and its quickly becoming a familiar brand throughout the Middle East, including Bahrain, Brunei, Dubai, Egypt, Oman, Qatar, and Saudi Arabia. Jordan, Kuwait, and the United Arab Emirates were added in 2015.

Dairy Queen doesn’t want to do this expansion piece meal, and is looking for franchisees with the strength to take on whole countries.

The China market for Dairy Queen began in 1991, with the first location in Beijing. In 2012, Dairy Queen reached its 500th restaurant in China, and today it has over 600 locations.

I’ll Take Manhattan

U.S. growth is mostly focused on the South and South-East. However, in May 2014 the company launched the first two-story DQ Grill & Chill in the U. S. on 14th Street in Manhattan. The opening generated a wave of press aimed at New Yorkers nostalgic for its popular mix-in treat known as the Blizzard, and additional DQ Grill & Chills are now open in Queens, the Bronx, and at the Staten Island Ferry Terminal on Staten Island. Other 2014 expansion included stores in Phoenix and Tucson, Arizona; Levittown and Watertown, New York; Houston and Fort Worth, Texas; and former NFL quarterback Jeff George opened a store in Westfield, Indiana.

Expanding Advertising

With an increased emphasis on promoting its food, Dairy Queen is looking to expand its national advertising, which has been running March through October. Now, the company want to advertise year-round.

Texas, with its over 600 locations, even has its own stand-alone marketing campaign that is run by the Texas Dairy Queen Operators Council. The Council runs its own TV spots and ad campaigns that brand the DQ logo as the “Texas Stop Sign,” and support marketing of special Texas-only menu items such as the Jalitos Ranch Hunger-Buster.

Dairy Queen’s also upgrading its national advertising, and in May of 2015 it launched its first movie tie-in in 20 years with a cross-promotional campaign tied to the blockbuster Jurassic World.

Revamping the Menu, Getting Healthier

In keeping with its increasing emphasis on food, on June 22, 2015, Dairy Queen’s actual 75th anniversary, the company introduced its DQ Bakes!™ menu with nine products across three categories: Hot Desserts à la Mode, Artisan-style Sandwiches and Snack Melts. DQ locations across the U.S (excluding Texas) installed ovens to make the new menu items.

The company introduced funnel cakes, a fried batter staple of fairs and carnivals, into the menu in 2016.

Gainor points out that the funnel cakes fit right in with the “fan food” customer experience that Dairy Queen is known for. It’s a loyalty that gave the company 10,472,082 likes on Facebook.

“A lot of our consumer research focuses on the emotional connection that you take out of the store,” Gainor explains.

Dairy Queen also set a date of September 2015 for getting soda out of its children’s menu, which already offers a choice of a carbonated beverage, Arctic Rush slushy drink, or milk.

The move comes as quick-serve restaurants are under increasing pressure to reduce the fat and sugar content of menu items marketed to children.

On the plus side (not the plus-size), Dairy Queen already offers the choice of a banana or applesauce in place of French fries, and it already markets a Kids Live Well Menu that features a chicken wrap, a banana, and a bottle of water. The meal omits a frozen dessert.

The Kids Live Well program is an initiative of the Nation Restaurant Association, and is a voluntary industry program that now has over 42,000 participating restaurant locations committed to “providing families with a growing selection of healthful children’s menu choices when dining out.”

Billions for Berkshire

Dairy Queen’s U.S. revenues in 2014 were $2.985 billion, according to QSR Magazine. The company produces this huge revenue stream almost entirely from franchises.

Each franchise pays a $35,000 franchise fee, a royalty fee of 4%, and a marketing fee of 5% – 6%. In the aggregate the franchises net Berkshire hundreds of millions a year on its investment of only $585 million.

Low Capital Costs

This huge revenue generator for Berkshire comes without the capital costs of a chain such as Chipotle Mexican Grill, which owns all of its 1,600+ stores. In contrast, Dairy Queen operates only 3 company-owned restaurants, as compared to the roughly 20% of McDonald’s locations that are company-owned.

Reducing the number of corporate owned locations was a big part of Burger King’s turnaround when 3G Capital’s partner Daniel Schwartz took the helm as the Chief Executive Officer and a Director of the company. He quickly put the Burger Kings where they belonged, in the hands of more motivated franchisees.

McDonald’s is planning to sell off half of its company owned locations, and Wendy’s also announced plans to sell 640 restaurants in the U.S. and Canada to franchisees in a move that would “significantly reduce future capital expenditure requirements.”

Fortunately for Berkshire Hathaway’s Dairy Queen System, they already knew that franchisees are highly motivated, hard-working people motivated by the ultimate incentive, ownership.

76 Years and Growing

According to Gainor, Dairy Queen’s internal strategic plan, DQ 2020, focuses squarely on its customers, which it refers to as “fans,” due to their high brand loyalty. He notes that it is Dairy Queen’s “great value and product that creates the demand.”

With its high consumer loyalty and brand awareness, (they boast 95% consumer brand recognition and 4.3 million loyal Blizzard fan club members), Dairy Queen has proved to be a versatile fit for airports, highway travel plazas, military bases and university campuses, in addition to stand-alone locations.

Last but not least, Dairy Queen has long been known for stability. While other restaurants have come and gone, (anyone been to a Chi-Chi’s or ShowBiz Pizza Place lately?), Dairy Queen has a tried-and-true formula that works. Franchisees seek it out, and lenders feel more confident knowing that Berkshire Hathaway is behind scenes.

(Portions of this report have been revised with new information.)

© 2014-2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Vhi Healthcare Inks New 4-Year Reinsurance Deal With Berkshire Hathaway

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Irish government-owned medical insurer Vhi Healthcare has extended its reinsurance accord with Berkshire Hathaway’s Berkshire Hathaway Reinsurance Group.

Vhi Healthcare has submitted an application for authorization to the Central Bank of Ireland.

“Putting in place a long-term reinsurance arrangement and demonstrating that the business was sustainable in the long term was critical in making our submission to the central bank,” explained Vhi Chief Executive Officer John O’Dwyer.

Follow-Up to One-Year Deal

The accord follows a one-year deal in July 2013 that provided reinsurance on half of Vhi Healthcare’s policies.

O’Dwyer pointed to the company’s improving financials and noted that “Vhi Healthcare continued to perform well in a challenging market in 2013.”

He also noted the new accord keeps taxpayers from having to put €200m into the company and will keep down premium hikes for the insurer’s over million customers.

Eliminates EU Reserves Problems

The new reinsurance accord with Berkshire Hathaway should forestall fines from the EU over the failure of Vhi to put up sufficient reserves.

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Hathaway Expands Into Contract Surety Business

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Berkshire Hathaway’s Berkshire Hathaway Specialty Insurance (BHSI) is moving into contract surety, adding it to the company’s builder’s risk and construction casualty risk offerings that serve the construction industry.

BHSI appointed Geoff Delisio as Senior Vice President, Surety, reporting to David Bresnahan, Executive Vice President, BHSI. Delisio was previously a Senior Vice President, Surety, at Zurich. BHSI is headed by Peter Eastwood.

The company has been expanding its specialty insurance offerings.

Other New BHSI Offerings

Last month, BHSI announced a move into travel insurance with AirCare™, which it is offering to travelers, travel agencies, tour operators and travel suppliers.

AirCare™ is billed as a low-cost fixed-benefit flight protection coverage available up to one hour before flight departure. The coverage includes lost luggage, missed connections, and tarmac delays.

The company will be unveiling additional travel insurance offerings over the next few months.

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Makes Big Energy Bet

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Warren Buffet is making big bets that the world’s future energy needs will mean big profits for Berkshire Hathaway.

Buffet Ready to Spend Billions

Speaking at the Edison Electric Institute’s annual convention in Las Vegas, Warren Buffett enthusiastically trumpeted Berkshire’s commitment to renewable energy.

“We’ve poured billions and billions and billions of dollars in retained earnings, and several billion of additional equity, Buffett said. “And we’re going to keep doing that as far as the eye can see.”

Berkshire has already poured $15 billion into acquiring energy companies and Buffet declared “There’s another $15 billion ready to go, as far as I’m concerned.”

Berkshire Hathaway’s Berkshire Hathaway Energy has been aggressively acquiring assets, including last year’s $5.6 billion purchase of NV Energy, and this April’s $2.9 billion purchase of Canadian company AltaLink from SNC-Lavalin Group Inc. (TSX:SNC).

A Growing Energy Portfolio

Berkshire Hathaway Energy currently has $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

Total revenues in 2013 were $12.6 billion, with the total generation capacity owned and contracted exceeding 34,000 MW. 25% of this energy was produced from renewable or noncarbon sources.

Berkshire Hathaway Energy’s combined subsidiaries provide energy to 8.4 million customers and end-users.

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Special Report: Cornelius Acquisition Makes Berkshire Hathaway the World Leader in Beverage Dispensing

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Berkshire Hathaway has leapt to the forefront of the beverage dispensing business with the acquisition of Cornelius, Inc.

Cornelius manufactures a complete line of beverage dispensers that are used by leading food service and retail companies, including PepsiCo, Coca Cola, McDonald’s, Yum, Starbucks, and Burger King.

On January 2, 2014, Berkshire Hathaway’s wholly owned Marmon Group closed on the $1.1 billion acquisition of Cornelius, acquiring the company from Birmingham, England-based IMI plc (LON: IMI).

Founded by Richard Cornelius in 1931 in the basement of his Minneapolis home, Cornelius began by making the first diaphragm- type compressor for dispensing beer. Today, the company is headquartered in Osseo, Minnesota, and is the world’s leading supplier of beverage dispensing and cooling equipment.

Cornelius has 4,500 employees, with manufacturing facilities in seven countries, spanning North America, Europe, and China.

Berkshire and Marmon

In 2007, Berkshire Hathaway acquired 60% of Marmon Group for $4.5 billion from the Pritzker Family of Chicago. At the time, Marmon was made up of 125 manufacturing and service businesses that all operated independently within diverse business sectors.

Berkshire has gradually increased its stake in Marmon even as Marmon has grown, and in 2013 it bought the remaining 20% share owned by the Pritzker Family.

Today, Marmon Group has 160 independent manufacturing and service businesses and employs 17,000 people worldwide.

Marmon’s Revenue Growth

According to the 2013 Berkshire Hathaway Annual Report, “Marmon’s consolidated revenues in 2012 were $7.2 billion, an increase of 3.6% over 2011. Consolidated pre-tax earnings were $1.1 billion in 2012, an increase of 14.6% over 2011. In 2012 pre-tax earnings as a percentage of revenues were 15.9% compared to 14.3% in 2011.”

What does the future hold?

The acquisition of Cornelius is all part of the Marmon Group’s continued growth of its Marmon Food Service Equipment businesses, which include Prince Castle, a manufacturer of hot food holding bins, and Silver King, a maker of cold food storage units.

Berkshire and Food Service

One thing is clear, if you are in the fast food business, you are likely dealing with at least one Berkshire holding.

As IMI chief executive Martin Lamb told Bloomberg News “Marmon are in this space, they are buying it to build it, rather than make cuts.”

That buy-hold-build strategy is the heart of the Berkshire Hathaway philosophy.

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Hathaway’s Solar Star Project Reaches One Million Photovoltaic Modules Milestone

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Berkshire Hathaway’s MidAmerican Solar has reaches the million photovoltaic modules milestone on its Solar Star I and 2 projects in Rosamond, California.

Another 700,000 modules will be installed in bringing the 3,200 acre solar project to completion in 2015.

Generating Capacity

When completed Solar Star I and 2 will be the world’s largest photovoltaic power plant. The 579 megawatts of electricity it will produce at peak capacity will be enough to power approximately 255,000 homes.

Designed and constructed by SunPower Corporation (SPWR), Solar Star 1 and 2 use the company’s Oasis® Power Plant technology. The solar panels will track the sun during the day, increasing energy capture by up to 25 percent over fixed panels.

Positive Environmental Impact

The environmental benefits of the Solar Star I and 2 projects will be significant. When completed, it will replace 570,000 tons of carbon dioxide emissions each year that would have been produced by burning fossil fuels– the equivalent to taking over 2 million cars off the road over 20 years.

Committed Power Purchaser

Solar Star I and 2 have a guaranteed customer for its power production. Two long-term power purchase agreements have been signed with Southern California Edison.

Decreasing Cost of Construction

The cost of producing solar power is declining rapidly. According to PV Magazine, the cost of producing solar power fell 60% in just an 18 month period, and the overall cost of producing solar power in 2013 was 60% cheaper than in 2011.

Low Cost of Operation

One of the advantageous of photovoltaic power production is its low cost of operation. Despite the enormous 3,200 acre size of the Solar Star I and 2 projects, only 15 full-time site positions will be needed to run the facility.

Other Berkshire Photovoltaic Projects

The Solar Star I and 2 projects are not the only photovoltaic plants Berkshire has under construction. In 2015, it will also complete the Topaz Solar Farms—a 550-megawatt solar photovoltaic project in San Luis Obispo County, California. And, MidAmerican Solar has a 49 percent interest in the Agua Caliente solar farm in Yuma County, Arizona, in partnership with NRG Energy. The 290-megawatt solar photovoltaic power plant came online in 2013.

Berkshire Hathaway and Renewable Energy

Berkshire Hathaway’s Berkshire Hathaway Energy has one of the largest portfolios of renewable energy in the world. It currently has 2,593 megawatts of contract capacity owned and under construction. Its MidAmerican Solar unit is a subsidiary of MidAmerican Renewables, which is owned by Berkshire Hathaway Energy.

MidAmerican Renewables includes MidAmerican Solar, MidAmerican Wind, MidAmerican Geothermal and MidAmerican Hydro. MidAmerican Renewables manages unregulated solar, wind, hydro and geothermal projects.

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Commentary: What a Can of Paint Says About Warren Buffett

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Founded by the Moore brothers in 1883, Benjamin Moore Company has been a leader in indoor and outdoor paint for over a century. The company introduced the popular Regal® Wall Satin interior latex paint in 1957, and in 1982 became the first company to do computerized color matching. The company positions itself as a premium paint manufacturer, and its products consistently rate well. In 2014, it was ranked highest in interior paint customer satisfaction by J.D. Power for the fourth year in a row.

In 2000, Berkshire Hathaway acquired the company for roughly $1 billion in an all cash deal. It’s a deal that has worked out well for Berkshire, and Warren Buffett told CNBC’s “Squawk Box” in October 2013 that Benjamin Moore had generated $1.5 billion in profit over the previous decade.

Independent Dealer Strategy

Since its founding, Benjamin Moore has sold its paint through a network of independent dealers. The dealer network encompasses 6,500 stores coast to coast, and the company sells its paint internationally as well, with a growing presence in China and Russia as the stand outs.

However, the place you won’t find Benjamin Moore paint is in big box stores, such as Lowe’s and Home Depot.

The Growth of the Big Box Store

The big box stores that are leaders in the do-it-yourselfer retail category have undergone explosive growth, with Home Depot claiming the record for fastest growth of a retail outlet. Founded in 1978, Home Depot reached its 100th store in 1998, and by 2011, it had 2,248 locations in the United States, Puerto Rico, Canada, and Mexico. Similarly, Lowe’s operates more than 1,830 stores within the same geographic area. Combined, they represent over 4,000 locations, with each one doing many times the business of a mom-and-pop store.

Where is Benjamin Moore?

The rise of the big box stores would seem to leave Benjamin Moore on the outside looking in, so why isn’t Benjamin Moore on the inside?

The answer is simple.

If Benjamin Moore made its paint available to Lowe’s and Home Depot, it would devastate the independent dealer network. The independent dealers count on their product exclusivity to protect their pricing and sales model. And, Buffett’s promise to protect that dealer network was such that when he got wind of Benjamin Moore’s CEO Denis Abrams plan to start selling to a major retailer, Abrams was fired on the spot.

Keeping a Promise

The move protected the independent dealers, but the deal also did something else. It protected Berkshire Hathaway’s reputation for living up to its word, especially when it comes to acquisitions.

Berkshire Hathaway’s sterling reputation for honoring its word has become another bullet in Warren Buffett’s famed “Elephant Gun.” It helped him land Iscar Metalworking Companies in 2006, when he received an unsolicited letter from Iscar’s Chairman Eitan Wertheimer offering to sell Iscar to Berkshire. Seven years later, Wertheimer cited his great relationship with Buffett and Berkshire as one of the reasons he felt comfortable selling his remaining 20% interest to Berkshire in 2013.

A Priceless Weapon

As Buffett goes on the hunt for the next elephant, he’s got $30 billion in cash in his arsenal. He’s also got the priceless value of keeping his word.

Hopefully, his successors will recognize the power of that weapon too.

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.