How This Little Known Toy Making Company Landed In Warren Buffett's Portfolio This Year

One of the world's most admired investor Warren Buffett has a playful side. He keeps buying companies whose products he personally enjoys like Dairy Queen and See¡¯s Candies.

Now it's time to count plush toy maker Squishmallows on the list.

Little Known Toy Company Lands In Warren Buffett's Portfolio

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After Lady Gaga, Kim Kardashian and others helped make the plush stuffed toys company a viral sensation on TikTok, Squishmallows debuted at Berkshire Hathaway annual meeting this year in Omaha, Nebraska, with shareholders snapping up 10,000 snuggly dolls in the span of hours, including ones modelled after the ¡°Oracle of Omaha¡± and his longtime business partner Charlie Munger.

Berkshire inherited Squishmallows parent Jazwares through its acquisition of insurance giant Alleghany in the fourth quarter of 2022, as per a CNBC report. That deal also ended Buffett's six-year drought for a big deal.

Jazwares founder and CEO Judd Zebersky and president Laura Zebersky now report to and are in regular communication with Greg Abel, Berkshire¡¯s vice chairman for non-insurance operations and Warren Buffett¡¯s successor. The South Florida-based couple, who are lawyers-turned-toy entrepreneurs, said they are excited to be under the Berkshire umbrella and enjoy having the autonomy to run their own business.

¡°It¡¯s an amazing structure. We¡¯re thrilled to be part of it,¡± Laura Zebersky said in an interview. ¡°It¡¯s better than we could have ever anticipated and being around the greatest leaders in the world is phenomenal, and being able to explore the synergies is also something we are interested in.¡±

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100 Million Toys Sold Last Year Alone

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A whopping 100 million Squishmallow units ¡ª with prices ranging from $5 to $30 ¡ª were sold last year alone. Laura Zebersky said the pandemic turbocharged Squishmallows¡¯ growth. Endorsements from celebrities from Kim Kardashian to Lady Gaga on TikTok also helped.

¡°The idea of having something that was nurturing, cozy, cuddly, it was affordable and accessible. Instant gratification,¡± Zebersky said. ¡°We really touch on all walks and areas. So it¡¯s been really interesting to see that it¡¯s not just kids, it¡¯s adults. Our demographic is very wide and broad and it¡¯s very unusual in our business to have that.¡±

In April 2020, Jazwares bought toymaker Kellytoy, which created the Squishmallow brand in 2017. While Warren Buffett only got into Jazwares indirectly through Alleghany, he has shown the willingness to invest in far smaller businesses that don¡¯t have the heft to move the needle in terms of Berkshire¡¯s massive earnings and revenue. Often Buffett admires the business¡¯ management and expects it to continue to grow and remain profitable.

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How The Toy Company Is Growing

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In order to sustain the success of Squishmallows, Jazwares is conscious about oversaturation and tends to be very selective about partnerships, Zebersky said. The plush toy brand has driven 40% of Jazwares¡¯ entire revenue for the past two years.

¡°We¡¯re on year six of the brand ... it¡¯s not a flash in the pan,¡± Zebersky said. ¡°It¡¯s growing smartly and sustainably. We make sure we limit the amount of production. We make sure that there¡¯s something different for each channel of retail, that there¡¯s collectability, that there¡¯s unique styles, unique sizes.¡±

Squishmallows recently announced a partnership with McDonald¡¯s Happy Meal, which will roll across 70 different countries throughout 2023, as per CNBC.

Last month, Jazwares participated in VidCon in California, an annual convention for content creators and online brands. The company featured a pit stuffed with a sea of Squishmallows for visitors to jump into.

¡°We don¡¯t do traditional marketing. We are where our fans are. And a great example of that is VidCon, the largest gathering of influencers,¡± Zebersky said. Also, Squishmallows is one of Jazwares¡¯ fully owned intellectual properties, but the company also sells products with licensed partnerships with Disney and Pokemon, etc.

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