2015: Is Coca-Cola's moat narrowing because of changing opinions on sugar?

ANDREW ROSS SORKIN: OK, Warren. This question comes from Simone Wallace (PH) in New York, New York.

And she writes, “Over the last 50 years, we Berkshire shareholders have, effectively, been long sugar consumption, through directly owned companies, such as See’s Candies, Dairy Queen, in funding Heinz, and publically-traded investments, such as Coca-Cola today.

“Yet, from improvements in scientific research, we as a society have become increasingly attuned to the true costs of greater sugar consumption, in the form of rising health-care costs.

“We are seeing this awareness of sugar’s impact in changing consumer behavior. Carbonated soft drink volumes are declining, and consumer packaged goods companies, focused on the center aisles of supermarkets, are struggling with organic growth.

“If we have reached — have we reached an inflection point in human behavior in how consumers view sugar consumption? And do you think Coca-Cola’s moat, and potentially that of Heinz’s or Kraft’s, is narrowing? And if not, what news would it take you to be convinced that it is?”

WARREN BUFFETT: Well, I think it’s an enormously wide moat, but I think it’s also true that the trends you described are happening.

But, you know, there will be 1.9 billion eight-ounce servings of Coca-Cola products, not Coca-Cola, but Coca-Cola products, consumed in the world today.

I don’t think you’re going to see anything revolutionary, and I think you will see all food and beverage companies adjust to the expressed preferences of the consumers as they go along.

No company ever does well ignoring its consumers.

But there will be — I would predict — 20 years from now there will be more people — there will be more Coca-Cola cases consumed — than there are now, by some margin.

Back in the late 1930s, Fortune ran an article saying that the growth of Coca-Cola was all over.

And when we bought our Coca-Cola stock in 1988, you know, people were not that enthused about growth possibilities for the product.

I sit here as somebody who, for the — in the last 30 years, one-quarter of all the calories I’ve consumed come from Coca-Cola. (Laughter)

And that is not an exaggeration. I am one-quarter Coca-Cola. I’m not sure which quarter.

But — and, you know, if you really — I don’t think there is this choice. I think there’s a lot to be said about being happy with what you’re doing.

If I’d been eating broccoli and Brussels sprouts, and all that, all my life, I don’t think I’d live as long. You know, I — (Laughter)

Every meal, I would approach, thinking, you know, it’s like going to jail or something. (Laughter)

No. I think — I think — Charlie? (Laughter)

Charlie’s 91, and his habits aren’t that different than mine. They’re slightly better, but —

CHARLIE MUNGER: There’s no question about it. The way I look at it is, sugar is an enormously helpful substance. It prevents premature softening of the arteries. (Laughter)

And the way I look at it, is that, if I die a little sooner that will just be avoiding a few months of drooling in a nursing home. (Laughter)

WARREN BUFFETT: Charlie and I have enjoyed every meal we ever had, virtually, except when I was eating at my grandfather’s and he made me eat those damn green vegetables.

There, obviously, are some shifts in preferences, although it’s remarkable how durable items are in this field.

We — Berkshire Hathaway — I believe, was the largest shareholder of General Foods from about 1981 or thereabouts, to about 1984 when it was bought by Philip Morris.

And, you know, that’s 30-plus years ago, and those same — those same brands — you know, they went through Philip Morris, they got spun out as Kraft, they broke Kraft into two pieces. But now, we’re going to own those brands, and they’re terrific brands.

Heinz — Heinz goes back to 1869. The ketchup came out a little later. They went bankrupt, actually, when they were counting on the horseradish or whatever it was.

But the ketchup came out in the 1870s. Coca-Cola dates to 1886. It’s a pretty good bet that an awful lot of people are going to like the same thing.

And when I compare drinking Coca-Cola, you know, to something that somebody would sell me at Whole Foods —(Laughter)

I don’t know — I don’t see smiles on the faces of people at Whole Foods. (Laughter and applause)

So I like the brands we’re buying, Andrew.