Despite numerous mistakes, Tim Hortons can recover

Sylvain Charlebois,
Professor in Food Distribution and Policy,
Dalhousie University,
Courtesy of Troy Media

Tim Hortons has had what is likely one of the strangest years in its history. Most of the iconic chain’s decisions in recent months have been inexplicable. Canadians have been left scratching their heads.

Take the Beyond Meat burger as an example. Tim Hortons took this well-promoted plant-based 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, so customers had to be confused as to why Beyond Meat was such a focal point over the summer.

Tim Hortons is about coffee, doughnuts, muffins, bagels and the odd soup or sandwich. Unlike Popeyes Louisiana Kitchen 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. It was a big mistake.

Then RBI announced in December that Alex Macedo, Tim Hortons CEO, was leaving. For a CEO with a reported net worth of about $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 American 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 some time. 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, said Macedo, would remain available for the transition. 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. Tim Hortons launched the breakfast cereal a few days ago, in partnership with cereal giant Post.

Synergies between the food service and retail sectors are becoming more apparent. Increasingly, food service brands like Swiss Chalet, St. Hubert and others attempt to increase their exposure in retailing. So it wasn’t surprising to see Tim Hortons trying to do the same thing, moving beyond coffee.

But introducing a sugar-filled cereal with an array of artificial flavours makes little sense when consumers are increasingly conscious of their health. The Dream Donuts line, 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 doughnut menu made much more sense than the Beyond Meat move last July.

Finally, Tim Hortons’ attempt to capitalize on “Megxit” backfired spectacularly. Hearing that Prince Harry and Meghan Markle could be moving to Canada, Tim Hortons opted to offer the Duke and Duchess of Sussex free coffee for life through social media.

Within minutes, the chain was accused of undermining its low-paid employees and people who suffer from food insecurity. Offering free coffee to two people who could buy several Tim Hortons stores was not a stroke of marketing genius.

And, of course, who can forget the much-despised new coffee cup lids, which apparently took two years to develop.

Over the last few years, it seems Tim Hortons has deliberately tried to make itself the easiest of targets for criticism. Many company decisions made little strategic sense and have confused the brand identity, at least in Canada.

Innovation through trial and error speeds up change. But successive failures will create doubters.

Overseas, however, Tim Hortons is getting more traction than ever. 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.

But as Tim Hortons grows 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 reality.

RBI is apparently 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 them all. 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.

Perhaps RBI will conclude that Tim Hortons is a unique brand and the store experience is critical to its success.

The launch of the Tim’s 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 is simply unprecedented.

The pressure to maintain such market dominance is extraordinary and may be underestimated by many Canadians.

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