By, Lilian Jin
Canada’s iconic coffee and donut chain saw same-store sales drop by 1.4% last quarter. While sister companies Burger King and Popeyes surpassed sales expectations with the viral Impossible Whopper launch and Chicken Sandwich Wars, where did Tim Hortons go wrong?
Tim Hortons accounts for 61.0% of Restaurant Brands International’s revenue, followed by Burger King with 31.0% and Popeyes with 8.0%. Although net sales of the parent company increased 6.0%, shares fell by 2.6% last Monday following release of Q3 earnings. Restaurant Brands earned $1.46 billion in revenue, just missing analyst expectations of $1.47 billion.
RBI’s CEO Jose Cil attributes Tim’s lackluster quarterly performance to weakened cold beverage and lunch sales. Looking at the graph below, Tim’s same-store sales has consistently underperformed compared to Burger King and Popeyes.
Popeyes’s sales jumped 9.7% in Q3 due to the US launch of its new fried chicken sandwich in August, which sold out nationwide in just two weeks. The sandwich sparked an intense Twitter debate on whether Popeyes or Chick-fil-A had the best chicken sandwich and enticed celebrities like Cardi B to join the hype. The Chicken Sandwich Wars helped Popeyes earn its best quarter in two decades.
Burger King also launched its meatless Impossible Whopper in August, increasing Q3 sales by 4.8%, the chain’s strongest quarterly growth since 2015. As part of its promotional campaign, BK conducted the viral Impossible Taste Test on Whopper fans who couldn’t tell the plant-based burger apart from its beef burger. The Impossible Whopper boosted international sales growth by 15.0% and was popular amongst younger and older consumers.
Tim Hortons tried to replicate this success by testing Beyond Meat breakfast sandwiches in 4,000 Canadian locations in June. But after three months, Tims pulled the items out of all provinces except for B.C. and Ontario. While the plant-based burger grew incredibly popular at Burger King and A&W, it struggled to find a fit on Tims’ menu and was moved in too quickly and at too large of a scale.
It is difficult for the chain, whose branding is based on simplicity and non-fuss coffee and donuts, to adapt to a changing competitive food landscape while still appealing to its core consumer. Therefore implementations like all-day breakfast and plant-based meat, which have worked for other fast-food chains, are not working for Tims.
Tim Hortons has been a late-mover in food trends, struggling to find a balance between attracting new consumers and staying on brand. Prior to Beyond Meat, Tims tried to launch “perfectly uncomplicated” lattes in 2017, hoping to modernize while remaining unpretentious. Tims attempted to revamp its menu but introduced lengthy food-trend names like Beyond Sausage Farmer’s Wrap and Brown Butter and Sea Salt Dream Doughnut. More recently, Tims opened an innovation café in Toronto’s financial district, offering gourmet donuts at twice the price, Italian sandwiches and nitrogen-infused cold brew.
Robert Levy, president of consulting firm BrandSpark, says Tims has “become a choice of last resort” with its mediocre-tasting foods and has lost its title as Canada’s favourite coffee to McDonald’s. Rather than creating fancy menu expansions, Levy recommends Tim Hortons work on improving the quality of its core products, which can then appeal to a younger demographic while still maintaining its down-to-earth branding.
Nevertheless, Restaurant Brands’ CEO is confident in the company’s future as it has been significantly growing Tim Horton’s global presence. Now with more than 4,800 locations, Tims has expanded to Mexico, Philippines, UK, Spain and China. Most recently, Tim Hortons entered an exclusive franchise and development agreement with WeEat Company to develop the brand in Thailand.
Featured image by Conor Samuel.