Warren Buffett’s Sweetest Investment: See’s Candies

• Acquisition Year: 1972

• Purchase Price: $25 million

• Annual Revenue at Purchase: $30 million

• Annual Pre-Tax Profit at Purchase: ~$5 million

• Current Revenue: Over $380 million

• Total Profits Generated: Over $2 billion

• Total Return on Investment: More than 8,000%

Buffett has often referred to See’s Candies as the "dream business" because of its high margins, strong brand loyalty, and minimal capital needs. It was one of the most transformational investments of his career, as it marked his shift from buying "cheap" businesses to focusing on high-quality businesses with pricing power.

The History of See’s Candies

See’s Candies was founded in 1921 by Charles See and his family in Los Angeles, California. The company built its reputation on high-quality ingredients, small-batch production, and a commitment to "Quality Without Compromise."

Even during the Great Depression and World War II, See’s refused to lower its quality standards, even when ingredients like butter and sugar were heavily rationed. This commitment to quality helped it build strong brand loyalty, particularly in California, where it became an iconic brand​.

By 1970, the See family was looking to sell the business, partly due to estate tax burdens following Charles See’s death. This created an opportunity for Buffett​.

Why Buffett Bought See’s Candies

1) The Business Had Pricing Power

• Before the purchase, See’s was selling chocolates at $1.96 per pound.

• Buffett and Munger asked: "Can we raise prices without losing customers?"

• They estimated that even a 30-cent increase per pound could significantly boost profits​.

• Over time, prices rose from under $2 per pound to over $20 per pound, without a significant drop in demand​.

Buffett later said: “If customers associate a brand with a positive experience, they will be willing to pay more for it.”

2) Strong Brand and Customer Loyalty

• See’s had "share of mind"—in California, it was synonymous with gift-giving and special occasions.

• Buffett noted:
  "Every person in California has something in mind about See’s Candies, and overwhelmingly it was favorable. They had taken a box on Valentine’s Day to some girl, and she had kissed him. If she slapped him, we would have no business."

• This kind of emotional connection allowed See’s to increase prices while maintaining demand​.

3) Minimal Capital Requirements & High Returns

• Unlike businesses that require constant reinvestment in new equipment, See’s required very little additional capital to grow.

• Only $40 million was needed in additional investment over the years, yet See’s generated over $2 billion in profits​.

• This made it a cash cow that funded other Berkshire Hathaway investments.

Buffett’s Take: “See’s has been able to distribute huge sums that have helped Berkshire buy other businesses that, in turn, have themselves produced large distributable profits. (Envision rabbits breeding.)”​

4) Buffett’s Shift in Investment Philosophy

Before See’s, Buffett followed Benjamin Graham’s "cigar butt" investing approach—buying cheap businesses with undervalued assets and hoping for a turnaround.

See’s taught Buffett the value of quality and pricing power, leading him to focus on long-term, high-quality businesses instead of just cheap stocks.

Charlie Munger later said: "See’s was a slow grower, but its growth was steady and reliable. Once we figured that out, it was like finding money in the street."

How Buffett and Munger Grew See’s Candies

1) Keeping the Brand’s Exclusivity

• Buffett and Munger avoided aggressive expansion.

• See’s grew from 167 stores in 1972 to 207 stores over a decade—a modest 2% annual growth rate.

• Instead of expanding quickly, they focused on keeping quality high and increasing prices gradually​.

2) Increasing Prices Instead of Volume

• Sales volume grew at only 4% per year, but profits soared because of regular price hikes.

• See’s raised prices by an average of 11% per year—far above the inflation rate​.

3) Reinventing Its Cash Flow for Other Investments

• Since See’s required little reinvestment, Buffett used its steady cash flow to acquire other businesses.

• Profits from See’s helped fund investments in Coca-Cola, Geico, and other high-return businesses​.

See’s Candies' Financial Performance Over Time

Lessons from Buffett’s See’s Investment

1) Pricing Power is Key to High Returns

See’s demonstrated that a strong brand allows price increases without losing customers, leading to high margins and strong returns.

2) Quality Beats Cheap Deals

Buffett learned that buying a high-quality business with pricing power is better than buying a cheap company with no competitive advantage.

3) Capital Efficiency Creates Compounding

See’s didn’t require massive reinvestment, allowing Berkshire to redirect profits into other successful investments.

4) Brand Loyalty Builds Moats

See’s didn’t just sell chocolates—it sold tradition, nostalgia, and experiences, which made it hard for competitors to replicate​

Conclusion: The Sweetest Investment Ever

Buffett almost passed on See’s because of the price. The seller originally asked for $30 million, but Buffett refused to go above $25 million. In the end, the seller caved.

“I almost blew the See’s purchase. That $2 billion in profit would have gone to somebody else.” – Warren Buffett

Despite its slow growth, See’s became one of Berkshire Hathaway’s most successful investments, generating over $2 billion in profits on an initial $25 million investment.

The lessons Buffett learned from See’s—pricing power, brand loyalty, and capital efficiency—became fundamental to his future investment strategy.

See’s Candies remains a textbook example of why investing in high-quality businesses pays off in the long run.

The information is provided for educational purposes only and does not constitute financial advice or recommendation and should not be considered as such. Do your own research.