ONE DOLLAR COFFEE PERKS UP MCDONALD’S CANADA.

results in Canada. The period included a rough patch in January when the brand came under fire after some Ontario franchisees cut back employee benefits in response to a minimum wage hike in the province. The franchisees countered that head office had not allowed them to increase prices to customers, as chains such as McDonald’s had done.

“Brewed coffee continues to be a battleground for them,” said Robert Carter, executive director of food service at market research firm NPD.

“McDonald’s business seems to be on a bit of an upswing. Their coffee platform is very strong, breakfast sales continue to be strong, they are focusing on menu innovation and they are also attracting millennial customers. At Tim Hortons, traffic seems to be soft. It is not growing at the same rate as McDonald’s.”

Traffic at McDonald’s in Canada rose one per cent in the first quarter, according to NPD; at Tim Hortons, traffic was flat.

McDonald’s was once the largest quick-service restaurant chain in Canada, but in 2003, Tim Hortons surpassed it after a successful years-long expansion of its lunch menu. In 2006, Tim’s introduced an egg-based breakfast sandwich to compete with its rival’s Egg McMuffin.

Under threat, McDonald’s made a bold play and scrapped its original coffee in favour of a higher-quality brew in 2009. Two years later, it began expanding its McCafé concept in its Canadian restaurants, offering a broader selection of coffee, espresso drinks, baked goods and smoothies.

“I definitely think that McDonald’s really went after Tim Hortons’ market — their whole coffee launch was about going after a segment that Tim Hortons had cornered,” said David Hopkins, president of Toronto-based restaurant consulting firm The Fifteen Group.

“It’s much like Tim Hortons capturing the coffee and doughnut space originally and then realizing they could move into other meal items.”

McDonald’s share of brewed coffee at restaurants in Canada is now above 12 per cent, according to NPD, more than double its six per cent share in 2009, the year it reformulated its coffee. Tim Hortons is still the industry leader, with a share in the mid-1970s.