Berkshire Hathaway Inc. (NYSE: BRK-A) CEO Warren Buffett has a lesson on the importance of owning a portfolio of brands: more isn't necessarily better.
Brands and retailers have been engaged in a battle for years, as retailers want to buy products at the lowest possible price and can even manufacture their own private label brands when necessary, Buffett said during an interview with CNBC's Becky Quick. Of particular note, packaged good brands have had trouble in gaining market share through advertising over the past few years.
The "struggle" between brands and retailers is now tilting toward the retailer, who is "doing better in this round of the fight," he said — but brand owners who think the solution to regaining the upper hand is to get bigger are wrong.
Consumers love The Coca-Cola Co KO's core Coca-Cola beverage more than they like Sprite, Buffett said. Many consumers aren't even aware that Sprite and Coca-Cola are part of the same corporate family, so at the end of the day The Coca-Cola company isn't necessarily a stronger brand because it owns Sprite, he said.
The same logic applies to Kraft Heinz Co KHC's rumored acquisition of snack maker Mondelez International Inc MDLZ. Buffett, a notable Kraft Heinz shareholder, said, "having a group of brands doesn't translate to that much more bargaining power."
When asked directly if Kraft Heinz should acquire Mondelez, his answer was a straightforward "no."
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