When you miscalculate the value of brands — a rare cautionary tale from Warren Buffett

Some things in strategy are thought to be eternally valuable. Among them? Big global brands with years of mass-market advertising and great name recognition behind them. But as investors 3G and Warren Buffett have learned, advantages can erode without investment. Exhibit A: Kraft-Heinz.

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James L. Kraft grew up in a Canadian farming community, the second of 11 children. He moved to Buffalo, New York in either 1902 or 1903 (sources are inconsistent) where he invested in a cheese company, only to be “pushed out” of the business by his partners after departing to run the Chicago branch. Stranded there with only $65 to his name, he leased a horse and wagon and went into business purchasing cheese and re-selling it to local merchants. The business did well, and by 1909 his brothers Charles, John, Fred and Norman had all joined, and the company was able to open its first manufacturing plant. The big breakthrough was Kraft’s invention of a method for preserving cheese so that it wouldn’t spoil, patented in 1916. Consumption of cheese in America doubled between 1918 and 1945, with Kraft’s company (and the need to transport food over long distances during the two world wars) getting the credit.