What it's like working with Warren Buffett
At the 2023 Berkshire Hathaway annual meeting See’s Candies CEO Pat Egan spoke with Yahoo Finance’s Executive Editor Brian Sozzi about growth at the candy company, his overall economic outlook, and what it’s like to work with Warren Buffett and the management team at Berkshire Hathaway (BRK-A).
Egan said he doesn’t see a slowdown in consumer spending in the U.S. ‘Our business is up, our traffic is up.. And our e-commerce business has really blown up in the last two years.’ Egan added that See’s Candies has benefitted from the pandemic trend of consumer snacking ‘we all need that special treat. The last few years have been very hard, and it's kind of a respite. It's a way for people to relax,’ he said.
On inflation and increased costs for the chocolate business and for consumers, Egan said he was forced to raise prices due to increased input costs for ingredients like milk, butter, and sugar. ‘Sugar has more than doubled. Sugar is more expensive in the United States of America than any other place on the planet. It's a price controlled kind of a scheme in our view… butter is up over a hundred percent in the last year. So yes, we have to cover all of that,’ Egan added.
Key video moments:
00:01:02 what it’s like to work with Warren Buffett
00:01:24 consumer spending trends
00:03:12 inflation impact
BRIAN SOZZI: All right. Joining me now is See's Candies CEO Pat Egan. Pat, good to see you--
PAT EGAN: Good to see you.
BRIAN SOZZI: --on the floor of the Berkshire Hathaway annual meeting. How do you spend your time at an event like this?
PAT EGAN: Well, for me it's kind of old-home week. I've had the fortune of being part of the Berkshire Hathaway family for-- I don't know, 15, 16 years or so and enjoy seeing some old friends. But for us here, it's about bringing the joy. It's about selling this wonderful product. And yesterday was a crazy day. We sold a lot of great chocolate and peanut brittle.
BRIAN SOZZI: Isn't there a-- isn't there a CEO dinner here that you go to? What is that like?
PAT EGAN: Well, there are a few-- there are a few dinners, different gatherings. And I happened to go to one last night that was just really inspiring and a lot of fun. And I got to hear Charlie share some great wisdom, as he always does, and see some old friends, as well.
BRIAN SOZZI: Interesting. It was-- I think I talked to Amex CEO, Stephen Squeri-- of course, a Berkshire-owned company.
PAT EGAN: Yes.
BRIAN SOZZI: And he's like, it was intimidating the first time I met Warren Buffett. Do you still feel that some way?
PAT EGAN: I mean, always. He's such a towering-- I mean, there's nobody like him. There's nobody like him. There's nobody like Charlie. There's nobody like Greg. There's nobody like Ajit. It's just, being in the presence of that much quality and wisdom is-- isn't-- I mean, it's a little intimidating. It always is.
But they definitely put you at ease. And it's not about their ego always. It's just their accomplishments. And being a part of that-- it's pretty amazing.
BRIAN SOZZI: So tell us about the business of See's Candies. How many stores do you have open? And how's the business doing?
PAT EGAN: Business is doing great. We have a little over 250 year-round shops. We do holiday gift centers, about 130 or so of those. They're all doing great. Our business is up. Our traffic is up. Obviously, coming on the other side of the pandemic, that's very welcome.
And our e-commerce business has really blown up in the last two years. We hit a peak in 2020. And we've maintained it. We haven't dropped off, which is a testament to our marketing team. So our e-commerce business has basically doubled in the last three years.
And then we're growing international locations, small regional high-end grocers, and we're just adding more and more. It's this team. Our team is fantastic.
BRIAN SOZZI: How do you explain the boom we've seen in snacking? And it started during the pandemic, but it has continued. More people are snacking more.
PAT EGAN: Yeah. Yeah they are. Well-- so I mentioned earlier, I'm on the board of the National Confectioners Association. So I've learned a lot from my friends and colleagues. I look at it as, we all need that special treat. The last few years have been very hard. And it's kind of a respite. It's a way for people to relax and get to gatherings.
And for us particularly, we're a part of a lot of family gatherings, a lot of get-togethers. And there's a lot more of that that's happening in the last couple of years.
BRIAN SOZZI: At this event, what are your top sellers? Of course I see the boxes with Warren Buffett all over them. I mean-- do those move? How do those move?
PAT EGAN: That one's a lot of fun. If you can see this, so this is-- the theme this year is the '70s. And we went right to "Saturday Night Fever." So those are flying off the shelves. Peanut brittle is always popular because that's Charlie and Warren's major treat.
And then this year, we've actually added a couple of new things that are bringing people in. Like I said, the box. We have these Berkshire coins that are always big sellers, because they've got the image of Mary See, Warren, and Charlie. And then just our regular pack. People have their favorites. They come in and they bring them on home.
BRIAN SOZZI: The prices seem attainable to me. And I don't know what they were last year. But have you raised prices because of inflation?
PAT EGAN: Sure.
BRIAN SOZZI: And what does that inflationary outlook look like?
PAT EGAN: Well, certainly we've raised prices. Every business has to. We have to cover our costs. And our ingredients cost, as an example, have gone up 30% year over year. So we have to make sure that we're covering that and labor costs.
BRIAN SOZZI: And that's just sugar, milk--
PAT EGAN: Yeah. Well, sugar has more than doubled. Sugar is more expensive in the United States of America than any other place on the planet. It's a price-controlled kind of a scheme. And in our view, that's doubled just in the last six months. Butter is up over 100% in the last year. So yes, we have to cover all of that.
I believe that we're actually, I hope, at the peak of that. I do see stock starting to build a little bit more. So we have a better buying opportunity for a lot of our wonderful ingredients. But yeah. No, we definitely have seen that hit us.
But we definitely-- our price point is better than anybody else. We look at any competitor and I kind of challenge anybody to find a $30 box of wonderful chocolate and even approach our quality.
BRIAN SOZZI: Chatter is you're dabbling in the coffee business now a little bit. What is that all about?
PAT EGAN: Well, so See's has always had a wonderful coffee line. We have a couple of pieces. Our Kona mocha piece, for example. We have real coffee. So anybody who has any of our coffee flavored, it's not coffee flavor. It's actual coffee that we select and put in.
And about three years ago we actually reached out to Peet's Coffee and said, we want to make a chocolate covered coffee bean with our chocolate and your signature beans. So we have a Brazilian arabica medium roast that is just the perfect blend with our dark chocolate. And they fly off the shelves. We actually sold out of those yesterday here.
BRIAN SOZZI: Wow. That is-- wow. That is pretty impressive. I've talked to a lot of the leaders here. So I've talked to Dairy Queen CEO Troy Bader, Brooks Running CEO Jim Weber, now you. And I've asked them all, when this is not here and when Warren's not running the company--
PAT EGAN: Yeah.
BRIAN SOZZI: What does that look like? And do you report to Greg Abel?
PAT EGAN: Sure. Yes. I report to Greg and to Warren together. And what I like to say about that is, when Mr Buffett says, "I hire good managers, and I expect them to manage," that's what he means. Which means it's on us. We run this business. We take care of the risk. We're the chief risk officers. And it's up to us.
And so I get the pleasure-- I've only been here for 4 and 1/2 years-- of running a candy company that was vastly successful before I ever got here. And I just got to not screw that up.
BRIAN SOZZI: Is it fair to say that Greg is a true disciple of Warren Buffett? Do you see similarities?
PAT EGAN: Absolutely. Yeah. I mean, that level of intellect and the sincerity-- that level of just being a genuine person and being a decent person, which is actually, at this level of business, a little bit unique. And so that's part of what I love about it is just being able to say, we just operate to the right principles-- integrity, respect, making sure you take care of your customers and your employees-- and the results follow.
BRIAN SOZZI: I have to tell you-- I told Dairy Queen this-- I've never had Dairy Queen, never had See's before.
PAT EGAN: You're going to grow as an individual, Brian. We're going to get you-- we're going to get you some of the best chocolate you can find any place.
BRIAN SOZZI: I need to grow. My mom has been telling me that for the past decade. We'll leave it there. Pat Egan, enjoy the rest of this conference. It's good to see you.
PAT EGAN: Listen to your mom. Listen to your mom.
BRIAN SOZZI: That's true Thank you so much. I appreciate it.
PAT EGAN: Thank you, Brian.