One of the largest global manufacturers of confectionery, pet food and other food products is a privately owned company. We’re talking about Mars Incorporated, the 6th largest privately held company in the United States, which is owned by the Mars family; the 3rd wealthiest family “dynasty” in the US.
The company was founded in 1911, about 108 years ago, and since its origin it has revolved itself around easy to understand products and businesses. It is known for its confectionery product brands such as Snickers, M&M’s, Twix, Milky Way, and Skittles. They also own well known pet food brands as Pedigree, Whiskas, Nutro and Royal Canin. They even own the food brand Uncle Ben’s Rice.
Needless to say all of these brands have dominant market positions, and together Mars Inc. has established a leading market share globally.
How is it that this company has grown from relatively small origins in 1911 with two men in a kitchen, to its size to day, while keeping ownership intact for the Mars family? It’s quite an achievement. If they started with lets say $100.000*, and the family currently holds $90 billion, their net worth has grown by more than 13% annually for more than 100 years! How could they grow at this pace organically, without having new investors or capital join the company? (* The starting value is an estimate.)
Warren Buffett took note of the achievements of the Mars Family a long while back, and he invested in a minority ownership in the same business as the Mars family owned as a subsidiary, namely the Wrigleys chewing gum company. Another simple business you might think? Warren has a long history as well for being attracted to wonderful companies, and I wonder if he would buy shares of Snickers if he could!
What is it with the companies that they own that make them so wonderful and earn such a high long term return for their owners? Warren Buffett might call it their durable competitive advantage. Their brands own a piece of the consumers minds, who gladly pay a premium for the product’s brand and quality.
As the observant reader took note of in the start of this post, Mars Inc is a privately owned company. The shares of the business is not listed on a stock exchange. Do you think the owners miss the opportunity of being able to look at what the market would bid for their shares every 15 minutes? How would they think about the value of their business when there’s no listed price for their shares? Do they fear a market correction or a stock market crash? I hardly think they try to figure out the value of their business more than a few times a year at max.
As Warren Buffett would put it: Stock market prices don’t tell you anything about a business. Business figures themselves tell you something about the value of a business.