No. of Recommendations: 14
The move was a real gift to Berkshire. Buffett’s response was pragmatic and respectful. Rather than fight her, Warren acquired her new store in 1992 for $5 million—a bargain compared to NFM’s $60 million price tag. This move not only neutralized the competition but also brought Mrs. B back into the fold. This being way cheaper than hiring a consulting firm. Mrs. B’s rival store served as a real-world stress test of NFM’s strategy, revealing inefficiencies and reinforcing the value of her low-cost, high-volume approach—all at a fraction of the cost of external consultants
Broaching NFM’s Moat
NFM’s competitive moat—built on massive inventory, low prices, and a single-location model generating over $100 million in annual sales by 1983—was formidable. Mrs. B’s new store challenged this by replicating her core strategy: sourcing products from alternative suppliers and undercutting prices. Her success showed that NFM’s moat, while strong, wasn’t impervious, especially when faced with her unparalleled reputation and operational efficiency. Customers flocked to her new store, some traveling from out of state, just as they had to NFM. This likely underscored for Buffett and Munger the importance of preserving Mrs. B’s founding principles, even as NFM modernized under Berkshire’s ownership
Mrs. B’s decision to start a competing store was a bold move driven by her frustration with NFM’s management and her unwavering belief in her business philosophy. Her success exposed gaps in NFM’s strategy while reinforcing her low-price model. Buffett’s $5 million acquisition of her store was a cost-effective way to learn from her “consulting” through competition, and it ensured her legacy endured within NFM. Charlie Munger likely saw this as a textbook example of competitive advantage in action, and both he and Buffett admired her for it. Mrs. B didn’t just challenge Berkshire—she showed them how to sharpen their edge.
