Buffett fires Benjamin Moore CEO for lavish spending

[tooskinneejs]

"Warren Buffett Fires CEO For Taking Island Vacation On Company's Dime"

 

http://www.huffingtonpost.com/2012/06/15/warren-buffett-denis-abrams_n_1600382.html#s1103185&title=1964_Investment_In

 

"It's sad to say, but true: Even Warren Buffett fires people.  After Denis Abrams, CEO of Benjamin Moore -- a company owned by Buffett’s Berkshire Hathaway -- used company money to take his corporate staff on a getaway to Bermuda to celebrate the company’s first quarterly sales increase in years, Buffett fired Abrams, the New York Post reports. The island getaway allegedly included a dinner cruise aboard a yacht that some vacation attendees believed was owned by singer Jimmy Buffett."

 

I'm guessing Buffett nearly pukes when reading the recent reports about Aubrey McClendon's spending.

[fareastwarriors]

It's good to see WEB is willing to tighten the screws a bit when necessary.

[Parsad]

Good stuff!  It was the first increase in quarterly sales in years...and he goes and blows some of the company profits on a vacation.  Cheers!

[Guest]

http://www.bloomberg.com/news/2013-09-27/berkshire-s-benjamin-moore-seeks-third-chief-in-two-years.html

 

The newer guy is gone, too.

[Mephistopheles]

Also with the first guy it wasn't because of the vacation. Buffett denied that was the reason back then and it even has an update in the article:

 

UPDATE: Buffett refuted reports that he fired Abrams because of the party, instead saying the decision was "based on a differing view about distribution channels and brand strategy," according to CNBC. Buffett wrote in a letter he sent to Abrams:

The recent story coupling a top management convocation on a boat with the decision to make a management change at Benjamin Moore is completely false.

 

I think the Abrams wanted to sell the paints in stores such as Home Depot and Lowe's whereas Buffett wanted to keep it exclusive to Benjamin Paints stores.

[slkiel]

Buffett spoke at some length about the Abrams firing earlier this year at the annual meeting. When they purchased Benjamin Moore it was with the explicit promise that the dealer system would be preserved. Abrams refused to respect Buffett's decision on it. Apparently Buffett was notified of Abram's actions by the dealers. At the meeting, Buffett said Benjamin Moore would always follow the dealer system and his statements were meant to bind future Berkshire CEOs to Buffett's promise.

[prunes]

Tangential question (as someone who has zero knowledge on any of this): what are the relative merits of the one sales strategy versus the other? How does Abrams' strategy weaken the business / Buffett's maintain its strength? I'm guessing that some how selling through Home Depot somehow weakens the brand and trades near-term sales increases in exchange for diminished competitive power in the future? If so, how?

[cubsfan]

Tangential question (as someone who has zero knowledge on any of this): what are the relative merits of the one sales strategy versus the other? How does Abrams' strategy weaken the business / Buffett's maintain its strength? I'm guessing that some how selling through Home Depot somehow weakens the brand and trades near-term sales increases in exchange for diminished competitive power in the future? If so, how?

 

I dont' think increased profits was the issue at all. Selling through HD, Lowes, etc - likely increases sales and profits.

 

When company was acquired, Buffett promised distributors he wouldn't do that.

He's just keeping his word.

[Green King]

Likely lower margins and higher volume. Long term brand erosion. Selling out the dealers that provides brand image and dependable demand. For quick short term profits. IMHO

[slkiel]

A big part of it is ensuring any potential Berkshire acquisitions (especially family owned) understand that Berkshire will honor its promises, even when Buffett is gone. So, yeah, Benjamin Moore probably would be more profitable selling in a different way, but the issue is bigger than just Benjamin Moore.

[Guest longinvestor]

Also with the first guy it wasn't because of the vacation. Buffett denied that was the reason back then and it even has an update in the article:

I think the Abrams wanted to sell the paints in stores such as Home Depot and Lowe's whereas Buffett wanted to keep it exclusive to Benjamin Paints stores.

 

Fwiw, I worked in the power tool industry in the 90's and they got "Home depot"ed. For the last two decades, brand equity erosion has been real for the industry as Home Depot / Lowes of the world grew bigger and powerful. It is very simple to understand, product displays of all brands next to one another with the enticingly priced store brand thrown in the mix. A race to the bottom ensued, brands got subsumed into one another and Chinese private label manufacturers have played large here. As a consumer, it is all good, decent quality and "more tool" at prices lower than 20 years ago. 

 

Don't know if Paints and power tools are comparable but if direct sale stores or distribution channels work well for Benjamin Moore, I'd keep it that way for as long as possible.

[Kiltacular]

Fwiw, I worked in the power tool industry in the 90's and they got "Home depot"ed. For the last two decades, brand equity erosion has been real for the industry as Home Depot / Lowes of the world grew bigger and powerful. It is very simple to understand, product displays of all brands next to one another with the enticingly priced store brand thrown in the mix. A race to the bottom ensued, brands got subsumed into one another and Chinese private label manufacturers have played large here. As a consumer, it is all good, decent quality and "more tool" at prices lower than 20 years ago. 

 

Don't know if Paints and power tools are comparable but if direct sale stores or distribution channels work well for Benjamin Moore, I'd keep it that way for as long as possible.

 

+1

 

Good insights -- thanks.