Investing Guidelines: Business Tenets 77way to make a commodity business prof itable, then, is to be the low-
cost provider.
The only other time commodity businesses turn a prof it is during
periods of tight supply—a factor that can be extremely diff icult to
predict. In fact, a key to determining the long-term prof itability of
a commodity business, Buffett notes, is the ratio of “supply-tight to
supply-ample years.” This ratio, however, is often fractional. The most
recent supply-tight period in Berkshire’s textile division, Buffett quips,
lasted the “better part of a morning.”
The Coca-Cola Company
Shortly after Berkshire’s 1989 public announcement that it owned 6.3
percent of the Coca-Cola Company, Buffett was interviewed by Mel-
lisa Turner, a business writer for the Atlanta Constitution.She asked
Buffett a question he has been asked often: Why hadn’t he purchased
shares in the company sooner? By way of answer, Buffett related what
he was thinking at the time he f inally made the decision.
“Let’s say you were going away for ten years,” he explained, “and
you wanted to make one investment and you know everything that you
know now, and you couldn’t change it while you’re gone. What would
you think about?” Of course, the business would have to be simple and
understandable. Of course, the company would have to have demon-
strated a great deal of business consistency over the years. And of
course, the long-term prospects would have to be favorable. “If I came
up with anything in terms of certainty, where I knew the market was
going to continue to grow, where I knew the leader was going to con-
tinue to be the leader—I mean worldwide—and where I knew there
would be big unit growth, I just don’t know anything like Coke. I’d be
relatively sure that when I came back they would be doing a hell of a lot
more business than they do now.”^22
But why purchase at that particular time? Coca-Cola’s business at-
tributes, as described by Buffett, have existed for several decades. What
caught his eye, he confesses, were the changes occurring at Coca-Cola,
during the 1980s, under the leadership of Roberto Goizueta.
Goizueta, raised in Cuba, was Coca-Cola’s f irst foreign chief exec-
utive off icer. In 1980, Robert Woodruff, the company’s 91-year-old
patriarch, brought him in to correct the problems that had plagued the