Tim Hortons aims to win upmarket crowd
OTTAWA — A coffee war is brewing in Canada as Tim Hortons prepares to launch its own line of espressobased drinks to compete with Starbucks and Mcdonald’s.
Starting next week, the national chain will begin offering customers espresso, lattes and brewed-on-the-spot cappuccinos.
Tim Hortons has served cappuccino for years, but the flavoured coffee has been made from a powdered base. The new machines feature espressobased coffee and real steamed or frothed milk.
The move is aimed at winning back some of the more casual coffee crowd that has defected to upmarket competitors such as Starbucks and to the chain’s main competitor, Mcdonald’s Canada, say analysts. Mcdonald’s has seen major success with the introduction of its Mccafe specialty coffees.
“Consumers in Canada are not at all tired of specialty coffee. It is one of the fastest growing categories in food service, growing faster than regular coffee,” said Svetlana Uduslivaia, senior analyst in Canada for market researcher Euromonitor International.
Coffee is a lucrative business — worth $650 million in Canada each year, according to Acnielsen — and competition is tight.
Mcdonald’s has its offerings, and Burger King and Subway Restaurants have teamed up with Seattle’s Best Coffee, owned by Starbucks, to better compete for consumer dollars, but Tim Hortons accounts for 80 per cent of all restaurant coffee sales in Canada, says Brian Yarbrough, a retail analyst with Edward Jones.
“With Mcdonald’s remodelling and putting all this money into their stores in Canada, they aren’t going to just sit idle,” he said.
The huge profit margins associated with specialty drinks, which can be sold at premium prices but cost only slightly more to make than regular coffee, are also a strong motivator.
“It’s definitely a profitable business,” said Yarbrough.