In his 1989 Berkshire Hathaway Letter, Warren Buffett explains why he should have bought Coca-Cola 50 years earlier than he did. Here’s an excerpt from the letter:
This Coca-Cola investment provides yet another example of the incredible speed with which your Chairman responds to investment opportunities, no matter how obscure or well-disguised they may be.
I believe I had my first Coca-Cola in either 1935 or 1936. Of a certainty, it was in 1936 that I started buying Cokes at the rate of six for 25 cents from Buffett & Son, the family grocery store, to sell around the neighborhood for 5 cents each.
In this excursion into high-margin retailing, I duly observed the extraordinary consumer attractiveness and commercial possibilities of the product. I continued to note these qualities for the next 52 years as Coke blanketed the world.
During this period, however, I carefully avoided buying even a single share, instead allocating major portions of my net worth to street railway companies, windmill manufacturers, anthracite producers, textile businesses, trading-stamp issuers, and the like. (If you think I’m making this up, I can supply the names.)
Only in the summer of 1988 did my brain finally establish contact with my eyes. What I then perceived was both clear and fascinating.
After drifting somewhat in the 1970’s, Coca-Cola had in 1981 become a new company with the move of Roberto Goizueta to CEO. Roberto, along with Don Keough, once my across-the-street neighbor in Omaha, first rethought and focused the company’s policies and then energetically carried them out.
What was already the world’s most ubiquitous product gained new momentum, with sales overseas virtually exploding. Through a truly rare blend of marketing and financial skills, Roberto has maximized both the growth of his product and the rewards that this growth brings to shareholders.
Normally, the CEO of a consumer products company, drawing on his natural inclinations or experience, will cause either marketing or finance to dominate the business at the expense of the other discipline. With Roberto, the mesh of marketing and finance is perfect and the result is a shareholder’s dream.
Of course, we should have started buying Coke much earlier, soon after Roberto and Don began running things. In fact, if I had been thinking straight I would have persuaded my grandfather to sell the grocery store back in 1936 and put all of the proceeds into Coca-Cola stock. I’ve learned my lesson: My response time to the next glaringly attractive idea will be slashed to well under 50 years.
You can read the entire letter here:
Berkshire Hathaway 1989 Letter
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