Tencent buys into Tim Hortons China play

DIGITAL EXPERTISE Chain hopes to open 1,500 stores in 10 years

TORONTO • Chinese tech behemoth Tencent Holdings Ltd. is now investing in the Tim Hortons expansion into China after agreeing to a deal with the private equity firm in charge of the coffee chain’s operations in the country.

The partnership with Tencent — which is behind the social media and mobile pay system We Chat that has become ubiquitous in China — will help boost the digital expertise at Tim Hortons for a market far more familiar with online ordering and delivery.

Since the start of its expansion into China in 2018, Tim Hortons has entrusted its on-the-ground operations in China to the global private equity firm Cartesian Capital Group LLC, which acts as the chain’s master franchisor in the region. Cartesian on Tuesday announced the investment deal with Tencent, although how much the company was investing or how any payback structure might work was not made public.

“We do not disclose our investment amount in Tim Hortons China,” Tencent said in an email to the Financial Post. “The proceeds will be used for Tim Hortons China’s acceleration of its digital upgrade and store expansion in China.”

Since the start of the China expansion in 2018, Tim Hortons and Cartesian have been clear about their plans to open 1,500 stores in the country within the next 10 years. Cartesian had previously led a similar Chinese expansion for Burger King, which is also owned by Tim Hortons parent company Restaurant Brands International Inc.

“Today, Cartesian announced that Tencent, one of the largest digital companies in the world, has invested alongside them,” Tim Hortons said in a statement, adding that the deal will “help ensure the Tim Hortons brand is established as a strong and iconic digital brand.”

The first Tim Hortons in China opened to long lineups in Shanghai in February, 2019, leaning heavily on Tim Hortons’ Canadian roots in the design — with hockey stick door handles and maple leaf lattes — despite heightened tensions between China and Canada following the arrest of Huawei executive Meng Wanzhou in Vancouver.

Tim Hortons now has about 50 locations in China, mostly around Shanghai.

The partnership announcement with Tencent comes as Tim Hortons market position in the China starts to look more promising, according to Hai Lu, a professor at the University of Toronto’s Rotman School of Management who specializes in the Chinese market. Chinese coffee chain Luckin is embroiled in a financial scandal, firing its chief executive on Tuesday amid an internal investigation.

“Tim Hortons should have potential to gain huge market share in China, particularly when Luckin is in trouble,” Lu said.

CHINA OUTSTR / AFP / GETTY IMAGES A man walks past a Tim Hortons store in Shanghail last February. The chain has significant expansion plans for China.