Warren Buffett’s Top Plays: #11 General Foods

In the 1980s, General Foods was a major player in American supermarkets, owning brands such as JELL-O, Maxwell House coffee, Birds Eye frozen peas, Cool Whip, and others that were the number 1 in their respective categories. Berkshire Hathaway, owned by Warren Buffett, acquired 9% of the company for $150 million between 1979 and 1983. In 1985, Philip Morris merged with General Foods in a $5.6 billion deal, and Berkshire made $338 million from the investment, including a buyback in 1984, for a return of 240%. In his 1985 letter to Berkshire shareholders, Buffett cited four factors for this successful investment: a low purchase price, a business with good economics, management that focused on shareholder interests, and a buyer willing to pay full business value. This investment highlights the profitability of owning the number 1 brands, even in small niches.