One of the readers asked me the source of a Warren Buffett (Trades, Portfolio) quote in the comment section of my Coca Cola (KO, Financial) article series. I found out that it was from an OID issue. Then I started reading those old OID issues and found quite a bit quotes on Coca Cola (KO) from Buffett and Munger. Maybe collecting them will be a fun activities, I thought to myself. To share them with the readers will be more fun. Therefore, I went back to 1998 and collected my favorite quotes from Buffett and Munger on Coca Cola (KO) listed below. Enjoy!
Warren Buffett (Trades, Portfolio) on Coca Cola -
1. Coca Cola’s bottling transactions are incidental to the long term strategy which, has been enormously successful to date and which has more success ahead of it. But I ignore them in my evaluation of Coca Cola. ( OID December 1998 issue)
2. The two most important elements in Coke are unit case sales and it shares outstanding. There have been transactions where people have purchased rights to various drinks…And when you see what’s being paid per unit of business – for 1 million cases or 100 million cases – and you think to yourself that coke may add 1-1/2 billion cases per year, that’s a dramatic gain in value. And that what counts in terms of Coke.Coke’s earnings are very easy to figure out. Just figure out what they earn per case from operations. And you’ll see that over the years the earnings per case go up, their cases go up and their shares go down. If you think it’ll sell a multiple of its present volume 15-20 years from now and there’ll be a lot fewer shares outstanding, you’ve gone as far as you need to go- because if shares outstanding go down and unit case sales advance at a good clip, you are going to make money over time in coke. It isn’t much more complicated than that. (OID December 1998 issue)
3. Here’s a product with a share of mind. There are a six billion people in the world. And I don’t know what percentage of them have something in their mind that’s favorable about Coca Cola, but it would be a huge number. (OID December 18th 1999 issue)
4. The question is 10 years from now will that number be even larger and will the impression be just a slight bit more favorable on average for the billions of people that have it? And that’s what the business is all about. If it develops in that manner, you’ve got a great business. (OID December 18th 1999 issue)
5. It’s still selling a product very, very similar to one that was sold 110+ years ago. The fundamentals of distribution, talking to the consumer and all of that sort of thing really haven’t changed at all. (OID December 18th 1999 issue)
6. Well in relation to the strength of the dollar, which means that profits in foreign currencies don’t translate into as many dollars, we don’t have any big feelings on that. So I have nothing in my mind with regard to any decision on buying or selling Coke that would relate to any prediction about the course of the dollar. (OID December 31st 1999 issue)
7. So, I’m concerned about share of market and then what I call “share of mind”: what do people think about KO now compared to 10 years ago or 20 years ago? And what will they think about it 10 years from now? (OID December 31st 1999 issue)
8. But what’s really made Coca Cola strong in Japan over the long run is that the Japanese people have accepted Coca Cola products in a big way. For example, Coca Cola has built a tremendous vending machine presence. So we have this tremendously dominant position- sort of like billboards might be in this country where new sites are very constrained. Plus, we have this terrific product-Georgia coffee- which is huge over there. (OID Year end 2000 issue)
9. And what’s knowable and important about Coca Cola is the fact that more and more people are going to consume soft drinks around the world- and have been doing so year after year- and that KO is going to gain share and that the product’s extraordinarily inexpensive relative to the pleasure it brings people. In the 30’s, I would buy six bottles for a quarter and sell’em for a nickel each. And that was a 6-1/2 ounce bottle for a nickel. Today you can buy a 12 ounce can at a supermarket sale for not much more than twice per ounce what it was selling for then. Not many products have had that kind of value proposition develop over the years.
10. We love the idea of businesses that will travel. And some products travel well and some don’t. It’s an incredible world that way. Soft drinks travel terrifically. But candy bars don’t seem to travel so well. It’s very hard for some items to travel. It’s amazing to me….that the supermarket share of Dr. Pepper in Dallas is 18 and a fraction percent and 6/10ths of 1% in Boston. I mean 18% vs. .6%. That’s 30x the market share. And Dr. Pepper’s been around forever- and people move back and forth and everything. So how can there be that sort of differential in this country? So you get these incredible differences in what people do-even within this country. So its not easy to predict…It’s just very hard to predict how products will travel. (OID December2000 issue)
11.The capital allocation job that I did in 1999 was very, very poor. And it was partly because some of our main businesses did poorly. Coca Cola had a bad year last year. They’ll have good years over time. Several years ago I called Coca Cola’s soft drink business “Inevitable”. And the truth is they’ve got higher market share now than they’ve ever had in history. They’re selling more units than any year in history. But certain other factors hurt their business and therefore, their stock performance. But I would still characterize Coca Cola’s position in the soft drink business as inevitable – they will gain market share over time. (OID December2000 issue)
12. Coca Cola has 50% of the soft drink business in the world. That’s well over a billion eight ounce servings per day. Think about it – more than a billion per day. (OID December2000 issue)
13. We are not unhappy with Coca Cola. It is a very, very good business. Would we buy them at today’s prices? Well, the answer is we’re not. We’ve got money. And we may buy more later on. We’re more likely to buy more later on than we are to sell those sorts of investments. (OID March 2006 issue)
14.Interestingly enough, the average person in this climate drinks about 64 ounces of liquid a day. And I think roughly 27% of that will be carbonated soft drinks. And of that, Coca Cola will be 40-odd percent. So of the 64 ounces of liquid that each American is drinking every day, you can figure out something like 7 ounces, on average, will be Coca Cola product. (OID March 2006 issue)
15.Just imagine taking on Coca Cola. Coca Cola will sell 1.5 billion 8 ounce servings of its products around the world today. There’s something in every person’s mind across the globe about Coca Cola. It’s a product that since 1886 has been associated with happiness and good value and offering refreshment and all of that. It’s just about impossible, to my mind anyway, to take on a product like that. It’s clearly satisfied people in a huge way, everywhere on the globe. (OID August 2008 issue)
Charlie Munger (Trades, Portfolio) on Coca Cola –
1. The business of the Coca-Cola Company is to create and maintain conditioned reflexes. (OID December 1997 issue).
2. Well I would personally bet that Coca Cola will increase its flavoring of the world’s water ingestion from the 2% or so they have now to the 4% its CEO is aiming for. In fact I would consider that overwhelmingly likely to happen. (OID December 1998 issue)
3. If what matters to you is what you think Coca Cola is going to look like 10 years or even further out, you don’t really pay much attention to the short-term economic developments in this country or that or to the currency rates to any other such thing. They don’t really help you in making the 10 or 15 year projection. So we have tuned out all this “noise” as it’s called in communication networks. (OID December 31st 1999 issue)
4. I would be willing to be a lot of money- that over the next 20-30 years, Coca Cola will be selling materially more soft drink and other drink products. And I think they’ll also be able to raise prices moderately during the same period, and if anything, increase margins. (OID December 2000 issue)
5. But moderate advantages projected ahead a long time cause real high values now. That’s just the way the math works out. So what you’re seeing in Coca Cola is a residual prediction in spite of the stumbles of recent years that the underlying strength is still there- and if you blank out these blips, up and down, 20 years from now they’ll be coloring and flavoring a lot more water and earning more per serving, which is the way that I tend to think personally. (OID December 2000 issue)
Disclosure - No position in Coca Cola because while KO is a great business, I do think there are better opportunities out there.
