Tim Hortons has an identity crisis
Tim Hortons is finishing what is likely one of the strangest years in its history. Most of the iconic chain’s decisions have left Canadians scratching their heads. Many of its choices in recent months have been simply inexplicable.
Take the Beyond Meat burger as an example. Tim Hortons took this well promoted plantbased item off its menu in September 2019, only two months after introducing it at most of its 4,800 locations across the country. The burger is now only sold at Tim’s in Ontario and B.C. Proteins are not even Tim Hortons’ strategic focus, but they still ended up confusing customers as to why Beyond Meat had been such a focal point over the summer. Tim Hortons is about coffee, donuts, muffins, bagels and the odd soup or sandwich. Unlike Popeyes or Burger King, other chains owned by Tim’s parent company Restaurant Brands International (RBI), Tim Hortons is not about proteins. Given Burger King’s partnership with Impossible Foods, one of Beyond Meat’s chief rivals, RBI clearly had its portfolio of chains in mind, and not the welfare of the Tim’s brand equity. Big mistake.
Secondly, RBI initially announced in December that Alex Macedo, Tim Hortons’ CEO, was leaving. For a CEO with a reported net worth estimated at $26 million, and an annual salary of $14 million, his departure was strangely discreet. The announcement was made during the holiday season, when most of the continent was at a standstill. Macedo, 41, was North America’s head of Burger King for several years before becoming CEO of Tim Hortons three years ago. So, he’s been part of the RBI family for quite some time now.
As a Brazilian, he has tried to disconnect himself from 3G Capital’s reputation of being cost-obsessed, but to no avail. 3G Capital is one of RBI’s main shareholders. But it was awkward that the announcement mentioned that Macedo would remain available for the transition. Charged with corporate arrogance, Macedo has had a rocky tenure as CEO, and leaves a chain reeling financially, trying to figure out how to grow organically and maintain its market dominance in Canada.
And then came Timbits cereal. Announced just a few days ago, Tim Hortons launched a breakfast cereal in partnership with Post, well-known for its past successes in the category. Synergies between food service and retail sectors are becoming more apparent. Increasingly, food service brands like Swiss Chalet, St-Hubert and others are attempting to increase their exposure in retailing. It was not surprising to see Tim Hortons trying to do the same thing beyond its coffee. But the call to introduce a sugar-filled cereal with an array of artificial flavors made little sense in an era when more consumers are increasingly conscious of their health. The “Dream Donuts” line, coming out of Tim Hortons boutique Innovation Café in Toronto, also extended the chain’s line of unhealthy products, although reviews overall have been positive.
And let’s be honest, extending its donut menu made much more sense than the Beyond Meat move in July 2019.
Finally, Tim Hortons’ attempt to capitalize on “Megxit” backfired spectacularly. Hearing that Prince Harry and Meghan could be moving to Canada, Tim Hortons opted to offer both the Duke and Duchess of Sussex free coffee for life, should they move to our country. The offer was made through social media. Within minutes, seconds really, the chain was accused of undermining its low-paid employees and people who suffer from food insecurity. Offering free coffee to two individuals who could arguably buy several Tim Hortons stores was not a stroke of marketing genius. And of course, who can forget the new lids, which apparently took two years to develop.
Over the last few years, many of their decisions made little strategic sense and have confused the brand identity, at least in Canada. Innovation through trial-and-error is encouraged as it speeds up change. But successive failures will create doubters. Overseas though, Tim Hortons is getting more traction than before. After opening its first store in China in February 2019, it now has over 20 stores in the country, and plans to open 1,500 stores there within 10 years. At the same time as Tim Hortons is growing its global footprint, mishaps have undermined the brand.
Tim Hortons is clearly experiencing an identity crisis, which is likely why some changes at the top were warranted. Their marketing and product development groups are simply out of touch with what is happening out in the field and in stores. RBI is still trying to figure how Tim Hortons can fit with its other mammoth chains like Burger King and Popeyes and how it can generate managerial synergies among all of these. Perhaps, at some point, RBI may conclude that Tim Hortons as a brand is uniquely different, and the store experience is critical to their success. While total and same-store sales are up for both Burger King and Popeyes, they have been sluggish at Tim’s for the last 12 months.
The launch of their loyalty program was likely the chain’s best move this past year, even if it was long overdue.
Despite its blunders made at the expense of franchisees and customers, Tim Hortons enjoys one of Canada’s most influential private monopolies. The chain serves eight of every 10 cups of coffee consumed outside the home in Canada. In food service, this figure is simply unprecedented.
The pressure to maintain such market dominance is extraordinary and may be underestimated by many Canadians.