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It's the slow and steady increase in prices that made it so profitable. About 5x over inflation during Buffett ownership.

This has happened to far too many items over the last few decades. Most of the things drugstores sell are cheap to make, but have steadily increased in price in the US over the last few decades. Vitamins used to be priced according to manufacturing cost. Slowly, the low-cost vitamins have been up-priced to match the expensive ones. Vitamin C is about $10/Kg in bulk, but about $100/Kg at a US drugstore.

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>Vitamins used to be priced according to manufacturing cost. Slowly, the low-cost vitamins have been up-priced to match the expensive ones. Vitamin C is about $10/Kg in bulk, but about $100/Kg at a US drugstore.

How does one even know if the Vitamin C is Vitamin C? There is no government agency that confirms supplements and vitamins are what they say they are, nor are there penalties. The only thing I have heard of is the USP branding being a signifier of higher likelihood of the supplement/vitamin being what it says it is.

The US is very bad at ensuring our food supply is what it claims to be.... you have to trust companies, basically.

Or do your research with companies that have independently assess products

not very many people can afford to do their own research... lab tests for everything you buy?

Not you personally, but there can be third parties companies reviewing products

while that may be true (and better then nothing), you still have to rely on companies like I said originally

You always have to rely on somebody if you don't do it yourself.

well, of course, but the Gov. would hopefully have goals better aligned with the population....

Maybe, I personally would trust the 3rd party more, but understand that opinions differ.

I think that the 3rd parties have both more at stake to get it right and are less influenced than the gov.

They mean there are third party organizations that perform testing. Consumer Reports and such. Or most supplement companies pay for independent testing (some skepticism is warranted since they're the ones paying).

https://labdoor.com/

if we can't trust a company's label, how can we test another company's testing? the incentives to deceive still exist

This is literally how all construction materials are vetted and it works great.

Underwriters Laboratories.

If it were feasible to sue retailers for damages due to fraudulent vitamins, approximately 0% of supplements sold would be fake.

The problem is there isn’t adequate scientific evidence to back the efficacy of any of these supplement which is why they aren’t regulated in the first place.

> The problem is there isn’t adequate scientific evidence to back the efficacy of any of these supplement which is why they aren’t regulated in the first place.

While I would agree that good evidence is generally lacking on supplements, that’s different than “is the product as advertised”. Just because vitamin C isn’t a miracle drug wouldn’t justify selling sugar pills as vitamin C.

Sounds like a pretty clever startup idea. Consumer Reports, but for everything. Then a seal that manufacturers can put on their product that certifies the assay of ingredients. Does a Coke actually have 120 calories? Is a Vitamin actually what it says? Is the bottle actually recycled? Consumer Reports is often opinion based with some quantitative data and they don’t review everything. Is you olive oil actually from Italian olives? Are those organic pears actually organic? Products that get “the seal” can market that fact. And if consumers care enough, they’ll pick products that are certified to be what they say they are. If I am buying high end paint, the water content matters to me for example.

The FDA should really focus entirely on consumer safety only. (It’s not a safety issue if your olive oil is Moroccan rather than Spanish or whatever.) And the FDA doesn’t have any mission to test if that 18/10 stainless steel sink is actually 18/10 stainless for example.

sounds really good but in the end, companies will do what's best for their bottom line... I think the Government should do it

Selling something that is not what you say it is is false advertising, and falls under the purview of the FTC. Unfortunately, the testing, enforcement, and penalties are all extremely weak.

Trust in the marketplace is a very valuable asset, one that cannot be bought. It has to be cultivated and maintained over many, many years, and having the government do that makes perfect sense as it is a societal benefit.

We need a UL/Consumer Reports for Internet-connected devices that documents and certifies their use of personal data and bandwidth. The regulators are not going to be able to keep up with the changes.

Computer component manufacturers have already caught on. New products are built to spec and then later on in that product's manufacturing life cycle, the parts it's built with are changed to reduce cost but the SKU is kept the same.

Are you suggesting other countries independently test each food product that is sold to consumers?

Local authorities in the UK have a legal duty to implement a food product inspection scheme. It's regulated by the Food Standards Agency. And yes, the labs used are independent.

In the UK the government tests each food product? I doubt it.

The website suggests random inspections. Just like the US does.

Do you think that the only way to improve on the US's current position is to test every single product?

No, but I failed to see how the current US approach is different than the UK's.

I think this is part of why they’re so expensive. If you can only go off reputation, you pay for it.

>How does one even know if the Vitamin C is Vitamin C?

Good question. For the last few years I've subscribed to Consumer Lab. They have a rigorous testing program for vitamins and supplements.

https://www.consumerlab.com/about/

Is there one similarly for sunscreen and lotions for toxicity?

Yes! https://www.ewg.org/sunscreen/

EWG doesn't test anything, they merely analyze the list of stated ingredients.

Look for USP certification.

My understanding is that it's voluntary, but the equivalent of the QC that prescription medications undergo.

The NSF Certified for Sport program is a good place to start.

https://www.nsfsport.com/

Stick to brands that have a reputation for quality worth defending.

It's no guarantee, but you want a brand that perhaps charges a bit more because of their long track record of quality. The longer and more solid their track record of quality, the more motivation they will have to make sure that reputation stays intact.

That's about the best you can do.

I stick to stores that I can trust. Costco very much can. Walmart maybe. Amazon nope who knows what your actually getting.

I would focus on finding brands to trust vs stores. Stores do absolutely zero diligence on ingredients of supplements.

https://www.foodsafetynews.com/2015/02/major-retailers-order...

> Three to four samples of each supplement purchased in different parts of the state were tested. Each sample was tested five times, for a total of 390 tests on 78 samples. Schneiderman said that only 4 percent of Walmart’s supplements (“Spring Valley” brand) actually contained the ingredients listed on the label, while 18 percent did at Walgreens (“Finest Nutrition” brand), 22 percent at GNC (“Herbal Plus” brand), and 41 percent at Target stores (“Up & Up” brand).

and brands are bought out by private equity and change for the worse all the time. look at the downfall of many historically great brands/names that are no longer what they once where: pyrex vs PYREX. Craftsmen. MEC. Birkenstock. And so many more.

Costco may one day fall too but their brand is what they sell in store and they do actually seem to do due diligence (also they have the Kirkland brand)

Thought the article points out Berkshire Hathaway owns 5.6% of Apple, Apple represents almost a 50% of Berkshire's holdings. If you ask me, quite a concentrated portfolio risk for a fund that is perceived to be stable.

But anyways - in regards to products & inflation...

"...our research shows that Apple have risen iPhone prices 26% higher than local inflation rates. "

https://www.self.inc/info/iphone-price-index/

This surprised me because I think I remember reading Buffett says re-insurance is the backstay of his profit, and investment.

From what I understand, insurance companies were/are his cash cows so to speak. The simplified business model of an insurance company is to take the money customers pay for the insurance and invest it safely enough that you can cover the sum of payouts required and make an extra profit. Now in theory this is profitable without high returns from that investment because the sum of payouts is less than the sum of money collected if your risk models are correct. But if you assume that you are above average in investing (which Buffet assumes) then it becomes even better to buy these companies because you are the one who gets to invest said money.

is there branding to this? Because if Vitamin C is 10 bucks in bulk and 100 bucks in drug stores I'm about to open a 50 bucks vitamin C store in the US. Competition generally eliminates these kinds of margins. Quick check here on the German Amazon you can get Vitamin C ranging from 13€/kilogram to 117€/kilogram, they show that ratio explicitly.

If people want to pay 10x for the fancy bottle and name they can but I don't think they lack the alternatives.

Competition generally eliminates these kinds of margins.

That's last-century thinking, from when manufacturing cost dominated. Today, it's all about building a monopoly and crushing any new entrants. Comcast. Apple. Google. Facebook. CVS. The US is down to four big banks.

That's not last century thinking. You can't create any monopoly for generic drugs, by definition. You're not even forced to buy an an expensive Apple or Google phone. You can buy a 200-300 dollar phone with more than decent specs. They reason why people are running around with 1k phones is because it's a status symbol.

It's exactly this century where you can buy anything at manufacturing cost from India or China if you want to, there's an entire political class upset about it.

I mean I'll give you Comcast, ISPs in the US in particular seem bad, but otherwise? Digital and electronic goods in particular have been driven down to the marginal cost of production, that's why 90% of the former are free.

The missing key concept here is "regulatory capture". In many industries, companies get enough money and power that they can afford to rewrite the laws to lock themselves in and put up a big barrier to entry to keep competition out.

There is no regulation in supplement selling, except for food safety. You can sell sugar branded as Vitamin C, and if your customers aren't going to sue you for false advertising or something, you won't have any problems.

The prelegeri really is retail capture.

> prelegeri

Sorry, I’m having trouble tracking down this term. Could you tell me what it means or what it means in this context?

Speculation: Google Translate says it's "lesson" in Romanian; tsimionescu's name might make that make sense.

Possibly connected to https://en.wiktionary.org/wiki/praelego#Latin and the form praelegere to 'read before' in Latin, either the same kind of lecture/lesson sense, or about the parent comment "reading 'regulatory capture' before should really be 'retail capture'"?

You're right about Romanian, and the best translation is "lecture", but it was just a bilingual predictive keyboard-assisted mistype - the best kind of mistype!

Oops, that's bilingual predictive auto-correct failing, and me not re-reading my comment...

I wanted to say "the problem is retail capture", but somehow it filled in a Romanian word instead... Phone keyboards...

Just for completeness, "prelegeri" would be best translated as "lectures" - it made no sense at all in context, it only happened to match a few letters of what I fat-fingered.

I didn't realize bilingual auto correct existed until now. How did you set that up?

It's a standard feature of many mobile keyboards. I personally use MS SwitfKey, but GBoard has it as well, and I'm sure others have it too. You get to select multiple languages for which they'll do auto-correct, predictive suggestions, and swipe-typing.

It works surprisingly well, but it does sometimes fail pretty spectacularly when you're sloppy and mis-type too many letters. It also can't help much when words are ambiguous (is that an English "in" or a mistyped Romanian "în"?). Still, it's generally a godsend for typing in mixed languages (say, like in Spanglish, where you'll write unas palabras en Ingles, y altras in Spanish). They even include things like names of local politicians or cities or brands.

Windows does seem to have this as well as an option ("Multilingual text suggestions"), but individual apps might not (e.g. I haven't seen it in Outlook).

That seems pretty cool. Maybe one day in the future, after trilingual, quadrilingual, etc., autocorrect, something like Esperanto will be reinvented from the ground up.

You can't create any monopoly for generic drugs, by definition.

Sure you can. If you're the dominant player, you can pay or buy out new entrants. Happens all the time in generic drugs.[1]

[1] https://www.nytimes.com/2015/09/21/business/a-huge-overnight...

There has to be more to it. If not, a simple refusal to sell would allow you to move the market. If the sellout bundle is profitable enough, why doesn’t everyone start a generic drug company to be sold and retire rich?

Then the competition moves money from profit markets to undercut you... making it impossible to compete... your competition subsedize the costs and effectively sell for 20% below cost until you agree to sell or close shop

How can they sell vitamin c at 10x the bulk price and at the same time undercut you?

small businesses generally can't launch everywhere. a big drug manufacturer can switch to selling at cost in a region for a few months to kill the profit opportunity of a young competitor. also, once they've done that a few times, it prevents others from trying

It happens with a lot of stuff. Chocolate candy bars in gas station kiosks are always the same 5 brands. Anybody _could_ make chocolate bars, but the big players make deals to control retail, so you don't get a choice of other candy bars, in the situation you'd typically buy one. If I control the conditions under which you buy something, I can control what you are going to buy.

Because small chocolate manufacturers don’t have the scale to supply massive distribution companies. An little retail gas stations don’t have any incentive to go make deals with boutique manufacturers. That would be madness for a gas station owner to go to individual manufacturers for specific items. And the manufacturers would hate it. Dealing with hundreds of thousands of small orders would be a logistical pain. That’s the reason their is a distributor layer for those sorts of products. If customers at gas stations started demanding Valrhona chocolate, they’d ask their distributors to start getting it. I’d buy it, but most people at gas stations aren’t going to care about a $10 chocolate bar.

The monopoly is in the illusion of access to choice on shelves. The pharmacy markets is dominated in the US by 2 players - Walgreens and CVS. Heck they even have their own generic meds competing at the same prices

Sounds like the perfect start-up plan: just open a 50 bucks vitamin C store, and the dominant player will buy you out for $$$. Rinse and repeat for infinite money.

There's usually a x-year non-compete agreement when this happens... I know a guy that does exactly what you describe, starting a new garbage pickup service every 3 years, when the agreement elapses. He then works for ~3-4 years to build it back up. Sold twice already, and on his third.

Laundromat -> liquor store -> hotel -> retire rich is a common path here. Rinse and repeat a couple times at each point, and because you sell each time to the guy trying to do the same thing behind you instead of to a big competitor, there's never non-compete agreements. Bonus in that the first two are recession proof and cash heavy businesses (if you wish to avail yourself of the possibilities that suggests).

Anecdotally, work from home put a crimp in many laundromat businesses. And liquor stores only work in states that do not let the big stores sell liquor. These days, any half decent hotel brand will require a couple million cash (for the down payment), and more for a new build. At least in the western US.

What if there were no agreement? seems like he is the driving successful factor in these businesses, but I'm guessing he'd rather sell his company than get hired by them.

there are example employees I've seen that have this kind of leverage too

For that to work you first have to scale up production and distribution significantly enough to be on their radar. That requires some investment and then the question is whether is an investment, with higher probability of returns.

You missed out the difficult part of distribution. This isn't exactly easy or cheap. Ask Walmart or any other retailer. Even the direct-to-consumer ones have to spend a lot on distribution.

By “all the time” you mean “so rarely it makes the NYTimes”?

I work in the industry. It doesn’t happen all the time.

Do you have any idea on how I can avoid the excessive interest rate the bank charges on my mortgage? :) Yes I checked, other banks loans are just as expensive. So it seems I'm not able to buy loans at "manufacturing cost" and neither am I able to buy gas or electricity for minimal cost.

Never walk into a BANK and apply for a loan. Use one, or better, a number of mortgage brokers. Make a spreadsheet. Add in all garbage fees. Estimate the life of the loan. Now calculate real APR. Points and garbage fees dominate if you’re going to sell or refinance in a few years.

You could get a loan at prime rate if you were a bank. You likely aren’t a bank, so a retail loan is what you get. Prime rate is the interest to the bank. Retail rates are higher because there are costs associated with your loan. Those costs also include the degree of risk to the bank.

>You can buy a 200-300 dollar phone with more than decent specs

Two weeks ago I got a "9.5" (looks brand new, battery too) used Pixel 3a for 100$ on eBay. It's a perfectly fine phone with picture/video quality undersold by it's camera pixel count.

...that's out of android updates as of this month.

The specs are fine, the security isn't, and that's the problem.

Very fair.

Four big banks, but I don't see much competitive advantage to having such large banks. In fact, many people choose one of the thousands of smaller, regional banks because customer service or services in general are better.

US has more banks than any other country by a factor of 10. Now, they may not all be retail banks, but still, there’s more choice in the US than elsewhere. Then there’s credit unions too.

https://www.helgilibrary.com/charts/what-country-has-the-mos....

Yeah I just mentioned Comcast and a hospital, along with Wells Fargo.

https://news.ycombinator.com/item?id=31384732

"Don't say the money is like magnetically charged. It's not the money is attracted to the north. It's the people, an asshole whose idea of invention is coming up with excuses, couldn't come up with shit if he cleaned up after his dog for once. Wants what is rightfully for innovators (creation of wealth that can scale, through thought that can be imprinted many times) and tries to corner a market. It always has a name, it's not an organic thing, there is always a guilty party. Not ISP's, Comcast. Not local banking, Wells Fargo. Not healthcare, Christus. Say it, corner the market. They're trying to corner the market. The markets have been cornered."

7-11 came out with their own brand chips, donuts, etc a few years ago. It's every hit as expensive as the brand name stuff was.

Costs of goods sold always dominates.

Comcast, Apple, Google, and Facebook are all who they are because they manufacture the thing they're selling for cheaper than anyone else can.

Whether that "thing" is last mile connectivity, iPhones, or segmented advertising eyeballs.

Where will you sell this? Will the people normally buying supplements buy from you?

The branded products (EmergenC and such) come with more of a markup

But Vitamin C in general is an extremely cheap compound. The costs are going to be in things like packaging, shipping, warehousing, shelf space, accounting for lost shipments and returns, and similar overhead. For simple products that overhead can be orders of magnitude more than the core product.

Do you have any evidence that the profit margins of Vitamin C are increasing? At least on Amazon, it looks like the price has been fairly consistent for the past 8 years. I wouldn't be surprised if the largest cost of Vitamin C is the opportunity cost of shelf space. It can't imagine it being a common purchase.

https://camelcamelcamel.com/product/B0000DJAVX

https://camelcamelcamel.com/product/B0019GE9HE

This is the predictable result of increasing drug store consolidation.

That's a very weird example - the majority of people buying Vitamin C at a US drugstore could just as well light their money on fire to no discernible difference in their health.

Maybe they're buying it to adjust the acid balance in their homemade wines (like me)?

Then I'm sure you can get a kilo of the stuff from a supplier at a price much closer to bulk. That is not what they are selling in a US drugstore, however.

They sell NOW supplements in half pound bottles for $6-8. Works for me and lasts a very long time. Much cheaper than the acid blends at brew shops too. I'd have no use for a kilo.

hmm you can differentiate your product via brand and placement to gain revenue OR participate in a commodity market, based on price and volume. There is no "law" to make products one way or the other. Price increases for commodity are a serious concern, but price increases for brand and placement, why not? really..

Public perception of scarcity is a cause for panic, and that is a real concern, regardless of origin.

Controlled scarcity increases profits, as companies are now discovering. If there's some place in the distribution channel where the incumbent can block new entrants, prices can be increased enormously without facing market forces.

So basically they changed it to a premium product?

It's always been a premium product. Buffet increased the prices to the cost the market would bear for said product. You could argue they were giving it away too cheaply before that.

My favorite is Whey powder which often sells for 10x the price of powdered milk.

milk powder is only 7% whey.

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