WARREN BUFFETT and Charlie Munger munched through piles of See's Candies Inc. peanut brittle asthey answered questions during Berkshire Hathaway Inc.'s annual shareholders meeting in Omaha, Neb.
"It gets everyone else salivating," said Richard Van Doren, vice president of marketing at the South San Francisco-based maker of chocolates and other candy. "They must go through two boxes each in an hour and a half."
Berkshire Chairman Buffett bought See's in 1972 for $25 million at the urging of Vice Chairman Munger. With its first new chief executive officer in 34 years, See's is taking another run at becoming as familiar across the U.S. as International Dairy Queen Inc., also a Berkshire unit, and Coca-Cola Co., whose biggest shareholder is Berkshire.
Brad Kinstler, CEO since January, is cultivating Internet sales and operating more gift shops during the Christmas season, when See's gets half its revenue. The drive follows a failed effort 30 years ago to put See's black-and-white-tiled stores in malls from St. Louis to Houston. After 85 years in business, See's still has more than three-quarters of its 200 stores in California.
"See's is a very strong regional brand," but doesn't have a lot of national recognition, said Joan Steuer, president of Los Angeles-based consulting firm Chocolate Marketing LLC, who has been following the industry for more than 20 years. "Artisan chocolatiers often use the Internet to sell directly to consumers because of the perishability and short shelf life of their chocolates."
Kinstler, tapped by Buffett to succeed the retired Charles Huggins, wants to sell 1.5 million more pounds of candy this year than in 2005, said Van Doren, a See's employee for 46 years. At $14.10 a pound, that amounts to an increase of $21.2 million, or about 6 percent, to $356 million, twice as big as last year's increase.
Some publicity is helping. Talk show host Ellen DeGeneres featured See's products on her Valentine's Day program. The company also had a two-day spot on the Wheel of Fortune game show, with a year's supply of See's candy offered as a prize.
"The brand has grown across the country, and there are things that have happened recently that have reinforced that," said Kinstler, 53, who started with Berkshire in 1987 at the property-casualty insurance unit. "The opportunities are there for us to expand."
Buffett wasn't available to comment, his assistant Debbie Bosanek said.
See's is one of the top sellers of premium chocolate candy in the U.S., along with Switzerland's Lindt & Spruengli AG, which owns Ghirardelli, and Campbell Soup Co.'s Godiva, said Marcia Mogelonsky, food analyst at Chicago-based Mintel International Group Ltd. Lindt had U.S. sales of $337 million last year, while Campbell doesn't break out Godiva's sales.
Gourmet chocolate sales surged 14 percent in the U.S. last year to $1.6 billion, compared with less thana 1 percent rise for all chocolate to $15.2 billion, Mogelonsky said.
"People want chocolate on every corner right now," Steuer said. "Unless the quality isn't good or unless the price isn't right, you're going to probably be pretty successful. See's is very well poised to take advantage of that."
Kinstler and Van Doren said they're wary of opening stores far from home after the company's past mistakes. In the 1970s, See's put shops in Missouri and Texas, "where they really struggled," Kinstler said.
"There were other candies that were strong at the time, and See's couldn't quite get the tastebuds of those customers," Kinstler said. All stores in both states were closed by the early 1980s.
The more successful strategy has been to operate seasonal gift shops for six weeks during November and December, in more than 30 states from Washington to Maine to Florida. By setting up kiosks in malls, See's attracts holiday shoppers as well as boosting its brand recognition, helping Web and catalog sales.
Kinstler and Van Doren plan to open 100 Christmastime shops this year, an increase from 90 in 2005, and to add 10 every year. See's candy has been sold year-round since 2003 at Lord & Taylor department stores in cities including New York and Boston.
"It's the best candy I've ever had, and I'm not even a sweets person," said Daniel Whitehorn, principal of Pulaski Heights Middle School in Little Rock, Ark. Whitehorn, 51, learned about See's from his wife, a Fresno native. They buy See's chocolates over the Web for gifts "and sometimes just to eat because it's so good," he said.
Customers like Whitehorn have helped See's Internet business surge 25 percent to 30 percent annually the past three years, Van Doren said. A higher profile, along with a new e-mail marketing campaign, may encourage customers to buy more gifts for holidays such as Easter and Mother's Day, he said.
In addition to chocolates, See's sweets include lollypops in flavors such as cafe latte and — Buffett's favorite — peanut brittle, which accompanies him to Berkshire's annual meeting in Omaha. Van Doren said See's sold about $80,000 in candy during the meeting at the Qwest Center two weeks ago. Customers included Whitney Tilson, a hedge fund manager at New York-based T2 Partners LLC.
"Whenever I'm on the West Coast or in Omaha, my wife always asks me to pick up a box of lollypops," said Tilson, whose largest shareholding is Berkshire. "It's a brand that's immensely powerful and has strong emotional connections in California."
