How come Sees Candy isn't sold wholesale?

[Parsad]

On 7/8/2022 at 8:21 PM, Spekulatius said:

Quite frankly, Lindt or Ghirardelli beats Seas Candy. The company is worked  for in CA had a sale for a discount on Xmas and I bought a box once and wasn’t impressed. I never bought one again.  I don’t think this 3 day rule makes any sense, chocolate sits much longer I bet.

 

I think somewhere along the line, they underinvested in Seas Candy or they might be giant in the Candy business right now. May be the alternative was just better than organic or inorganic investments in this business.

 

I would assume that 90% of people on the message board would state their disdain for McDonald's and its food, yet the company has been a cash cow for nearly 70 years.  Billions and billions of hamburgers sold is the tag line now, because they could no longer count them all. 

 

Good businesses don't necessarily have to mean best quality...just that they make money hand over fist, and See's has done that.  Plus Mary See's was Canadian and does actually make good chocolate!  Cheers!

[greenwave]

11 hours ago, Parsad said:

 

Berkshire's modus operandi is that it will buy your business and never sell it.  It's why it never sold Dexter shoes.  That gave Berkshire a bit of an advantage when hunting for private, family held businesses to acquire.  If Berkshire sold off See's, Dexters, etc it would reduce the opportunities available to it.  

 

So yes, theoretically he could have sold See's and compounded that money quicker, but then he might not have been offered or sold Nebraska Furniture Mart, National Indemnity, Borsheims, NetJets, Marmon and a host of other private businesses.

 

Cheers! 

Agree 100% 

Thankfully ,Warren see's " The Long Term Big Picture "!!

 

greenwave

[ratiman]

Every single reason Buffett proposed for the success of See's turns out to be wrong. Scarcity? Lindt is in every drug store. Geography? Every brand comes from somewhere. Freshness? Nothing fresh about Lindt or Godiva. 

[rkbabang]

On 7/11/2022 at 3:02 AM, Parsad said:

 

I would assume that 90% of people on the message board would state their disdain for McDonald's and its food, yet the company has been a cash cow for nearly 70 years.  Billions and billions of hamburgers sold is the tag line now, because they could no longer count them all. 

 

Good businesses don't necessarily have to mean best quality...just that they make money hand over fist, and See's has done that.  Plus Mary See's was Canadian and does actually make good chocolate!  Cheers!

 

Really?  I think McDonalds's is quite good for what it is.  Insanely consistent no matter where you are (at least in North America), you always know exactly what you are going to get.   The coffee is good, the burgers are great for the speed and price and the fries are excellent.   Wendy's is usually better for burgers, but their fries are no where near as good, and they aren't as fast.   Burger King shouldn't even count as food.  Five Guys doesn't have a drive through.  ....   McDonald's has been around for well over half a century and no one has even been able to copy them.

 

[Spekulatius]

22 minutes ago, rkbabang said:

 

Really?  I think McDonalds's is quite good for what it is.  Insanely consistent no matter where you are (at least in North America), you always know exactly what you are going to get.   The coffee is good, the burgers are great for the speed and price and the fries are excellent.   Wendy's is usually better for burgers, but their fries are no where near as good, and they aren't as fast.   Burger King shouldn't even count as food.  Five Guys doesn't have a drive through.  ....   McDonald's has been around for well over half a century and no one has even been able to copy them.

 

I agree on the coffee and the fries and the consistency.

 

Now do Starbucks - I mostly drink Cappuccino and they are all over the place in terms of what you get with airport franchisees being the worst.

I sort of have given up on Starbucks, as the experience during the pandemic got worse. I usually went there for breaks on long drives but they sort of closed the stores and those that reopened had a lot of issues. It's not a surprise to me that Schultz cam back to salvage his baby - the relatively strong financial numbers withstanding.

[Longnose]

1 hour ago, rkbabang said:

 Burger King shouldn't even count as food.

 

Disagree - I prefer a Whopper over anything on the McDonalds menu any day. 

 

I will agree that McDonalds has incredible consistency and efficiency wherever you go. 

[rkbabang]

26 minutes ago, Longnose said:

 

Disagree - I prefer a Whopper over anything on the McDonalds menu any day. 

 

I will agree that McDonalds has incredible consistency and efficiency wherever you go. 

 

They've been in business a long time, so obviously someone disagrees with me.  I've never been able to eat anything from that place.  Not only do I find the food gross (I won't even mention the coffee, it isn't something I like to think about), but they always seem dirty inside to me.

 

[DooDiligence]

2 hours ago, rkbabang said:

 

Really?  I think McDonalds's is quite good for what it is.  Insanely consistent no matter where you are (at least in North America), you always know exactly what you are going to get.   The coffee is good, the burgers are great for the speed and price and the fries are excellent.   Wendy's is usually better for burgers, but their fries are no where near as good, and they aren't as fast.   Burger King shouldn't even count as food.  Five Guys doesn't have a drive through.  ....   McDonald's has been around for well over half a century and no one has even been able to copy them.

 

 

I skipped McDonalds all through the pandemic & just recently grabbed a McDouble with fries. They're doing something different, the burger actually tasted good.

 

Whataburger is the absolute gold standard for a great fast burger and always hot fries. Rarely discounts and not racing to the bottom with menu pricing.

 

Byron Trott and Whataburger, the one that Buffett shoulda bought

[LC]

4 hours ago, ratiman said:

Every single reason Buffett proposed for the success of See's turns out to be wrong. Scarcity? Lindt is in every drug store. Geography? Every brand comes from somewhere. Freshness? Nothing fresh about Lindt or Godiva. 

 

I agree - I'd argue it's consumer mindset. I still buy Baci chocolates because that's what we had as kids. They don't taste as good as Ferraro et al but I buy them anyway because nostalgia is the best flavor there is. 

[rkbabang]

56 minutes ago, DooDiligence said:

 

I skipped McDonalds all through the pandemic & just recently grabbed a McDouble with fries. They're doing something different, the burger actually tasted good.

 

Whataburger is the absolute gold standard for a great fast burger and always hot fries. Rarely discounts and not racing to the bottom with menu pricing.

 

Byron Trott and Whataburger, the one that Buffett shoulda bought

 

Yeah, but unlike Whataburger (and Sees Candy for that matter, which I've also never seen or tried), McDonalds is available where I live and almost everywhere else.

 

[Parsad]

7 hours ago, rkbabang said:

 

Really?  I think McDonalds's is quite good for what it is.  Insanely consistent no matter where you are (at least in North America), you always know exactly what you are going to get.   The coffee is good, the burgers are great for the speed and price and the fries are excellent.   Wendy's is usually better for burgers, but their fries are no where near as good, and they aren't as fast.   Burger King shouldn't even count as food.  Five Guys doesn't have a drive through.  ....   McDonald's has been around for well over half a century and no one has even been able to copy them.

 

 

I didn't say I have a disdain for McDonald's.  I eat there at least a couple of times a week...breakfast burrito or a fruit & fiber muffin...sometimes a filet-o-fish, occasionally a Big Mac.  But are you going to tell me that most people don't eschew McDonald's food, quality and taste...especially those that aren't frugal like myself?  And my point was that having the best quality doesn't make you a good business.  Cheers!

[rkbabang]

11 minutes ago, Parsad said:

 

I didn't say I have a disdain for McDonald's.  I eat there at least a couple of times a week...breakfast burrito or a fruit & fiber muffin...sometimes a filet-o-fish, occasionally a Big Mac.  But are you going to tell me that most people don't eschew McDonald's food, quality and taste...especially those that aren't frugal like myself?  And my point was that having the best quality doesn't make you a good business.  Cheers!

 

Maybe I don't hang out with enough snooty people, because I don't know anyone who claims to never eat at McDonald's because it is below them.  Everyone knows that eating too much too often wouldn't be good, but McDonalds is pretty well loved as far as I can tell.

 

EDIT:  I wonder if this has to do with being in New England.  We've really never had a regional fast food burger place like other parts of the country, i.e. whataburger, in-n-out burger, etc.   We have Five Guys now, but that is fairly recent.  I think it was less than 10 years ago the first time I tried it and they are still few and far between.   For us fast food burger has always meant McDs, Wendys, or Burger King.

 

 

Edited July 20, 2022 by rkbabang

[Parsad]

1 hour ago, rkbabang said:

 

Maybe I don't hang out with enough snooty people, because I don't know anyone who claims to never eat at McDonald's because it is below them.  Everyone knows that eating too much too often wouldn't be good, but McDonalds is pretty well loved as far as I can tell.

 

EDIT:  I wonder if this has to do with being in New England.  We've really never had a regional fast food burger place like other parts of the country, i.e. whataburger, in-n-out burger, etc.   We have Five Guys now, but that is fairly recent.  I think it was less than 10 years ago the first time I tried it and they are still few and far between.   For us fast food burger has always meant McDs, Wendys, or Burger King.

 

 

 

There are a ton of people here and elsewhere that I've met, that swear they will not, have not and never will feed their children McDonald's or that they don't eat there.  They prefer Five Guys, In & Out, A&W and other fast food restaurants, where apparently the food is "healthier", or they will not feed their children or themselves any junk food.  Cheers!  

[Cigarbutt]

AFAIK, the real price for a Big Mac has remained stable (or the nominal price may have outpaced inflation slightly; have Big Macs become smaller or is it me growing up?) since the 60s (45 cents in the mid 60s). Of course, the value in MCD has been growth in sales (and scale), not necessarily growth in margins through pricing power.

 

The value in See's was potentially untapped pricing power.

What was the origin of this pricing power? The usual ingredients and likely the perceived 'quality' and consistency of the product. Relative scarcity may have played a role in the wholesale decision. When looking at available numbers (more specific data was likely available around the 1972 purchase) the price of See's one pound of chocolate went from 0.50 cents around 1935 to 1.85$ in 1972, for a CAGR of 3.6% vs 3.1% for CPI. In 1972, one did not necessarily need to understand specifically the underlying moat and pricing power as it had been historically established. A difference of 0.5% doesn't sound like much but this excess pricing power leads to compounding benefits that flow directly to the bottom line (and return on capital numbers). From 1935 to 1972, this small difference in excess pricing resulted in an excess of 20% of extra nominal sales and extra nominal net profits.

From 1972 to 1984, room for more pricing power was explored (trial and error may be the only way to find out). The price per pound of chocolate grew (CAGR) at 9.5% versus 7.9% for CPI. Without this excess pricing being exercised, the price per pound would have ended up at 4.61 instead of 5.49 as reported. 5.49 being 20% higher than 4.61, from 1972-84, See's exploited its pricing power over 12 years instead of over 37 years after the great depression.*

For those interested (educated guesses from various reported sources):

CAGR See's price per pound of chocolate from 1984 to 2022: 4.3%

CPI from 1984 to 2022: 2.8%

Of course, this can't go on forever as eventually See's may occupy the full 5% share of disposable income for food away from home.

*Purists will signal that cocoa price behaved like a typical commodity in the 70s but cocoa input price had come down in 1984 to some degree and the cocoa's share of the price for the pound of chocolate is likely around 10% of total price so..

 

[Morgan]

12 hours ago, Spekulatius said:

I agree on the coffee and the fries and the consistency.

 

Now do Starbucks - I mostly drink Cappuccino and they are all over the place in terms of what you get with airport franchisees being the worst.

I sort of have given up on Starbucks, as the experience during the pandemic got worse. I usually went there for breaks on long drives but they sort of closed the stores and those that reopened had a lot of issues. It's not a surprise to me that Schultz cam back to salvage his baby - the relatively strong financial numbers withstanding.

 

This second or third time Schultz has come back to revitalize Starbucks right? It's not a particularly good sign that things deteriorate when he's gone. Something is working properly if it can't survive without him. It's such a huge company and they should have a solid roster of managers and executives to keep everything going without him.  

[ratiman]

8 hours ago, Cigarbutt said:

AFAIK, the real price for a Big Mac has remained stable (or the nominal price may have outpaced inflation slightly; have Big Macs become smaller or is it me growing up?) since the 60s (45 cents in the mid 60s). Of course, the value in MCD has been growth in sales (and scale), not necessarily growth in margins through pricing power.

 

The value in See's was potentially untapped pricing power.

What was the origin of this pricing power? The usual ingredients and likely the perceived 'quality' and consistency of the product. Relative scarcity may have played a role in the wholesale decision. When looking at available numbers (more specific data was likely available around the 1972 purchase) the price of See's one pound of chocolate went from 0.50 cents around 1935 to 1.85$ in 1972, for a CAGR of 3.6% vs 3.1% for CPI. In 1972, one did not necessarily need to understand specifically the underlying moat and pricing power as it had been historically established. A difference of 0.5% doesn't sound like much but this excess pricing power leads to compounding benefits that flow directly to the bottom line (and return on capital numbers). From 1935 to 1972, this small difference in excess pricing resulted in an excess of 20% of extra nominal sales and extra nominal net profits.

From 1972 to 1984, room for more pricing power was explored (trial and error may be the only way to find out). The price per pound of chocolate grew (CAGR) at 9.5% versus 7.9% for CPI. Without this excess pricing being exercised, the price per pound would have ended up at 4.61 instead of 5.49 as reported. 5.49 being 20% higher than 4.61, from 1972-84, See's exploited its pricing power over 12 years instead of over 37 years after the great depression.*

For those interested (educated guesses from various reported sources):

CAGR See's price per pound of chocolate from 1984 to 2022: 4.3%

CPI from 1984 to 2022: 2.8%

Of course, this can't go on forever as eventually See's may occupy the full 5% share of disposable income for food away from home.

*Purists will signal that cocoa price behaved like a typical commodity in the 70s but cocoa input price had come down in 1984 to some degree and the cocoa's share of the price for the pound of chocolate is likely around 10% of total price so..

 

Interesting, thanks. I think a lot of investors would pass on that business because there's no unit growth and the price hikes are unsustainable. Every high-margin consumer brand attracts very persuasive critics who make some really good points about the margins. In this very thread there is somebody saying that Starbucks relies on the genius of Howard Schultz. It is very hard to get over that skepticism. Maybe the explanation is that the chocolate business is a really good business to be in when everybody in America is gaining an extra 20 pounds.

Edited July 21, 2022 by ratiman

[boilermaker75]

I was in a mall yesterday in Indianapolis and saw a See's candies. I don't believe I have ever seen one in Indiana before

 

Edit: I don't know why the photo is upside down. It isn't that way on my MacBook.

 

Edited November 2, 2022 by boilermaker75

[DooDiligence]

2 hours ago, boilermaker75 said:

I was in a mall yesterday in Indianapolis and saw a See's candies. I don't believe I have ever seen one in Indiana before

 

Edit: I don't know why the photo is upside down. It isn't that way on my MacBook.

 

 

It's an analogy for WEB turning See's upside down to shake all the cash out.

[boilermaker75]

4 hours ago, DooDiligence said:

 

It's an analogy for WEB turning See's upside down to shake all the cash out.