Investing Guidelines: Business Tenets 79computer-assisted printing presses and newsroom electronic systems are
quickly paid for by lower f ixed wage costs. Newspapers also are able to
increase prices relatively easily, thereby generating above-average re-
turns on invested capital and reducing the harmful effects of inf lation.
Buffett f igures that a typical newspaper could double its price and still
retain 90 percent of its readership.
The McLane Company
McLane is perched on the edge of great growth potential. Now that it
is no longer part of Wal-Mart, it is free to pursue arrangements with
Wal-Mart’s competitors, such as Target and other large stores in the
United States. This, combined with the company’s focus on eff iciency
and investment in enterprise-wide software systems, freight manage-
ment, and point-of-sales systems among other automated processes, will
enable McLane to maintain price eff iciency and service quality.
At the time Buffett bought McLane, some of the industry players,
such as Fleming and U.S. Food Service, a division of Royal Ahold,
were going through diff icult times for various reasons. Although it is
doubtful that this inf luenced Buffett’s decision, it was said at the time
that if Fleming did indeed go under, an extra $7 billion worth of busi-
ness would be up for grabs.
The Pampered Chef
The Pampered Chef has demonstrated a consistency that many older
businesses might well envy, with a growth rate of 22 percent each year
from 1995 to 2001. And the long-term outlook is strong. According to
the Direct Selling Association, party plan businesses raked in more than
$7 billion nationwide in 2000, an increase of $2.7 billion since 1996.
Christopher herself is not slowing down. She believes that Ameri-
can cupboards have plenty of room for more products and points out
that Mary Kay, a direct-sell cosmetics company, has a sales force of
600,000 —giving her plenty of room to grow. Christopher is develop-
ing new products, such as ceramic serving ware, and is expanding into
Canada, the United Kingdom, and Germany. Finally, the company is
structured in such a way that it does not need a lot of capital to expand
and it has no sizable competition in its category.