Gillette

Type: Subsidiary (Preferred Investment) Acquired: 1989 ($600 Million Convertible Preferred) Key People: Warren Buffett (Board Member)

📖 Overview

In 1989, Berkshire Hathaway invested $600 million in The Gillette Company in the form of convertible preferred stock. This capital was part of a larger strategy in the late 1980s where Buffett provided "Supportive, Analytical, and Objective" capital to legacy American brands facing various pressures.

🧠 The Investment Logic

Buffett describes Gillette as a company with a powerful Consumer Franchise and a dominant global market share in razors and blades.

• Convertible Preferred Structure: The investment paid a dividend (8.25%) and was convertible into common stock at a later date. This provided downside protection while allowing Berkshire to participate in the "Wonderful Business" economics if the company thrived.
• The "Great Horse": Buffett used the horse/rider analogy to describe Gillette and its management. Unlike USAir or Champion, Gillette was viewed as a "great horse" (high-quality business) rather than just a "good horse."

💬 Direct quotes

• "Gillette is a world-class business with a world-class management team." — 1989 Letter
• "We like the 'Supportive, Analytical, and Objective' role we play with management."

1993 Update

Buffett frequently cited Gillette alongside Coca-Cola as the ultimate example of a company with an impenetrable Moat. In 1993, he noted that Gillette held over a 60% share (by value) of the worldwide blade market, a share that had actually been increasing in recent years. Their brand strength, product attributes, and distribution gave them an enormous global competitive advantage.

🔄 Historical Context

This investment, alongside USAir and Champion International, signaled a shift toward larger-scale equity-linked debt investments in major public corporations.

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1989 Letter | The Coca-Cola Company | Consumer Franchise