See's Candies Special Report

Special Report: See’s Candies: Eastward Ho!

(BRK.A), (BRK.B)

If you are reading this on July 20th, it is National Lollypop Day and you can get a free lollypop at your local See’s Candies store.

If you are a Berkshire Hathaway shareholder, you can get something sweet every day from See’s Candies, as the wholly owned Berkshire Hathaway company continues to sweeten Berkshire’s bottom line with a steady stream of profits.

Acquired in 1972 for only $25 million, See’s Candies today has over $400 million in annual revenues with just under a quarter of that as profit. That means it annually produces four times its acquisition cost in profit. Pretty sweet.

See’s Candies was founded in 1921 in Los Angeles by Charles and Florence See, using the recipes of Charles’s mother, Mary See. Over almost a century, the porcelain-white stores with the white-and-black checkerboard floors grew to be West Coast candy icons.

Today, the company produces 26 million pounds of candy annually and employs over 6,000 people.

Recent annual revenue growth has been around 4%, and the company is adding 10-12 new stores per year.

Growing Eastward

Currently there are more than 200 company-owned shops in the western half of the U.S., and limited distribution in department stores, along with a handful internationally in Hong Kong, Macau, Taipei, and Tokyo, and pop-up stores for the holidays all across the country. But until recently, the place you couldn’t find a full-fledged store was east of the Mississippi River.

No wonder generations of Easterners have brought home See’s chocolates from their trips to California.

All of that has begun to change as See’s has looked eastward, opening stores in Ohio (in Cincinnati and Columbus) and two stores in Pittsburgh, Pennsylvania in 2013.


The other big change for See’s is in the size of its stores. See’s shops have long been under 1,500 square-feet and have featured a single candy counter. This works fine most of the year, but as some 50 percent of See’s business is during the end-of-year holiday rush (when customers grow impatient with waiting in line), the company is experimenting with supersizing some of its new stores.

November 2013 saw the debut of a double-sized, 3,000-square-foot store in Orange County, California, that featured two candy counters and four cash registers instead of the usual two.

Buffett’s Crystal Ball

The evolution of See’s was long anticipated by Warren Buffett, who believes that a solid business evolves over time even if it is meeting the same need.

In his 1996 Annual Letter he wrote:

“Today, See’s is different in many ways from what it was in 1972 when we bought it: It offers a different assortment of candy, employs different machinery and sells through different distribution channels. But the reasons why people today buy boxed chocolates, and why they buy them from us rather than from someone else, are virtually unchanged from what they were in the 1920s when the See family was building the business. Moreover, these motivations are not likely to change over the next 20 years, or even 50.”

Almost two decades later it’s clear that Buffett was right about the “next 20 years.”

Now it’s on to the next 30.

© 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.