See's Candies

The $25 million chocolate company that taught Warren Buffett how to build Berkshire Hathaway.

When Berkshire acquired See's Candies in 1972, it was Buffett's first major departure from distressed cigar-butts into quality consumer businesses. The confectionery retailer generated strong cash flows from a powerful regional brand in premium chocolates, and Buffett's critical insight was what NOT to do with that cash: don't reinvest it in more candy stores.

See's demonstrates the biological principle of branching only from strength. The company threw off more cash than could be profitably reinvested in confections, so Berkshire deployed that capital into insurance, utilities, railroads - entirely different branches. Meanwhile, See's itself expanded carefully within its niche, avoiding the temptation to grow beyond its competitive advantage in premium regional chocolates.

The result: See's has generated over $2 billion in cumulative profits from a $25 million investment - a 80x return - while maintaining brand strength for 50+ years. The lesson wasn't about candy; it was about capital allocation. Strong businesses generate excess resources. Weak businesses consume them. Branch from strength, prune weakness, and let capital flow to the highest returns regardless of division.