New Berkshire CEO Abel quickly signals troubled Kraft Heinz stake could be toast

CAROL LOOMIS: To what extent are changing dynamics in the consumer food market changing your view of Kraft Heinz’s long-term potential?

WARREN BUFFET: Yeah, actually what I said was, we paid a lot of money for Heinz – I mean Kraft – sorry – we paid a fair price there for the Heinz part of the business, when we owned about half of Heinz to begin with. And we actually did well. We preferred some to be saved, etc.

We paid too much money to Kraft. To some extent, our actions caused prices to rise.

Now, Kraft Heinz, the profit of this business is 6 billion – we’ll put it very, very, very roughly – I don’t predict, I don’t predict – but 6 billion preliminary tax on 7 billion tangible assets is a great business.

But you can pay too much for great work.

We acquired See’s Candy. And as it turned out, we made a great purchase. And we could have paid more. But there was a price at which we could buy even See’s Candy, and it wouldn’t work.

So the business doesn’t know how much you paid for it.

I mean, he’ll win on his fundamentals. We also paid a lot of money to the Kraft side of Kraft Heinz.

In addition, the profitability of these operations has also been fundamentally improved compared to the previous way of operating.

But you’re quite right that Amazon has become a brand itself. Kirkland is a $39 billion brand at Costco. All of Kraft Heinz is worth $26 billion. On the Heinz side, it’s been around for 150 years.

And there have been billions and billions and billions of dollars of advertising for their products. And they pass through tens of thousands of outlets.

And here someone like Costco is starting a brand called Kirkland. And it earns $39 billion, more than almost any food company. And that brand moves from product to product, which is a great thing if a brand travels.

I mean, Coca Cola carries that from Coca-Cola to Cherry Coke to Coke Zero.

But having a brand that can actually move, and Kirkland does more business than Coca Cola. Kirkland operates approximately 775 stores. At Costco they call them warehouses. And Coca Cola is sold through millions of distribution points.

So brands, retailers and brands have always struggled over who will have the upper hand in delivering a product to consumers.

And I think there’s no doubt that the retailer’s positioning relative to brands varies greatly around the world. In different countries, there are 35 percent, maybe even 40 percent private label brands in soft drinks. And it’s never come close to that in the United States. So it varies a lot.

But basically retailers (specific retailers) the retail system has gained some power. Especially Amazon, Walmart and their reactions to them, Costco and Aldi and some other companies I could name have gained power over the brands.

Kraft Heinz is still doing very well operationally. But we paid too much. If we had paid 50 billion, you know, things would have been different. He’d still be making the same money.

By paying too much you can turn any investment into a bad deal. What you can’t do is turn any investment into a good deal by paying little, and that’s how I got started in this world.

However, the idea of ​​purchasing cigar butts that are diminished or in poor condition at a reasonable price is not something we try to do anymore. We try to buy good businesses at affordable prices. We also made mistakes on the Kraft part of Kraft Heinz.