Warren Buffett See’s Candy is one of the best examples of how a slow-growing business can generate high returns over time.
When Berkshire Hathaway acquired See’s Candy, Buffett recognized its ability to produce strong cash flows despite limited expansion. Unlike rapid-growth companies, See’s focused on maintaining pricing power, brand loyalty, and disciplined capital allocation.
The high-margin nature of the business allowed reinvestment into other ventures, demonstrating Buffett’s approach to compounding wealth. Investors looking for stable, cash-generating businesses can learn valuable lessons from See's Candy stock and its role in Berkshire Hathaway’s long-term success.
Ever wonder if Buffett still owns this perennial compounder?
Does Buffett still own See’s Candy?
Yes, Warren Buffett still owns See’s Candy through Berkshire Hathaway, which acquired the company in 1972.
The question is… why?
Buffett, known for his long-term investment philosophy, saw See’s as a perfect example of a business with strong pricing power, loyal customers, and high returns on invested capital (ROIC).
While the company’s growth has been modest, its ability to generate consistent cash flow has made it one of Berkshire’s most valuable investments, reinforcing Buffett’s preference for businesses with durable competitive advantages, known as moats.
The late Charlie Munger, Buffett’s business partner for over 60 years, and See’s changed his perspective. This shift in Buffett’s thinking led to one of his most famous acquisitions, a company he purchased for what seemed like a steep price at the time.
How Much did Berkshire Pay for See’s Candy?
Berkshire Hathaway paid $25 million to acquire See’s Candy in 1972, a price that initially seemed ridiculous given the company's tangible assets. But Munger urged Buffett to recognize that sometimes, paying a premium for a wonderful business is better than buying cheap companies with mediocre prospects.
See’s strong brand loyalty and ability to raise prices without losing customers proved it was worth the premium, generating hundreds of millions in cash flow over five decades. What the See’s investment taught me was the importance of valuing quality in terms of a long-term horizon rather than just focusing on discounted asset prices.
See’s Candy is a slow-as-molasses growth company with a 50-year history of consistent profitability. So, what did Buffett see and why buy this company?
Why Did Berkshire Hathaway Acquire See’s Candy?
Berkshire Hathaway acquired See’s Candy for its strong brand loyalty, pricing power, and minimal reinvestment needs, making it a reliable cash generator. Despite slow growth, its ability to raise prices without losing customers ensured steady returns.
Since the acquisition, See’s has delivered over $2 billion in earnings, yielding an 80x return and 15-20% annualized growth over 50+ years, exemplifying Buffett’s strategy of investing in businesses with durable advantages.
As investors, we understand all businesses have systematic and idiosyncratic risks, but what is going on with See’s Candy and the State of California?
Is Sees Going Out of Business in California?
No, See’s Candy is not going out of business. The firm has maintained steady growth, with revenue reaching $410 million in 2024 at a 3% annualized rate. Despite shifts in the retail environment, the company remains profitable, with pretax earnings exceeding $80 million annually, growing at 5% to 7% CAGR. Free cash flow has risen from $65 million in 2022 to $80 million in 2024, reflecting a 7% annualized growth, driven by strong pricing power, stable demand, and minimal capital expenditure.
How is See’s Doing Now?
See’s Candy has maintained steady growth, with revenue reaching $410 million in 2024 at a 3% annualized rate of return. Despite shifts in the retail environment, the company remains profitable, with pretax earnings exceeding $80 million annually, growing at a 5% to 7% CAGR. Free cash flow has risen from $65 million in 2022 to $80 million in 2024, reflecting a 7% annualized growth, driven by strong pricing power, stable demand, and minimal capital expenditure.
Warren Buffett See’s Candy: Key Takeaways
See’s Candy is one of Warren Buffett’s most successful investments, illustrating the value of paying a premium for a high-quality business with strong pricing power, solid fundamentals, and a sturdy balance sheet. Since its acquisition, the company has generated over $2 billion in cumulative earnings while maintaining high returns on invested capital.
With an average return on invested capital of 60% and capital expenditures under $10 million annually, See’s continues to produce stable free cash flow, growing at an estimated 7% compound annual growth rate over the last three years.
My key investing lessons from this case study: value businesses based on long-term cash generation, recognize pricing power as a crucial advantage, and seek consistently high returns on invested capital with minimal capital reinvestment have all served me well.
