TORONTO — When Tim Hortons rang in the new year, it marked the occasion with a nod to its humble roots, bringing back a quartet of doughnuts, including some from its earliest days.
The short-lived reappearance of the Dutchie and blueberry fritter was meant to prime the country for the company's 60th anniversary, which arrived Friday, but its return was also a reminder of how much the chain has changed since its hockey star namesake opened the first location in Hamilton, Ont., in 1964.
Tims now counts thousands of locations — some as far as China and India — and has a menu in Canada that stretches far beyond coffee and doughnuts to include rice-based bowls, sparkling fruit drinks and most recently, flatbread pizzas.
Such expansion has made Tim Hortons so ubiquitous that many consider it part of the fabric of Canada, which leaves the chain facing a big question as it marks 60 years: where can it still find growth?
Ask the president of Tim Hortons' Canadian and U.S. operations, and he mentions his mission to get more people to visit the chain beyond breakfast, where it's cornered half the market.
"To get to similar market share numbers that we have in the morning will take some time, but that's totally OK," said Axel Schwan in an interview.
The later-day customers he covets can be lucrative because they tend to spend more. However, they don't typically dine at the same place day after day like morning customers do.
"Outside of that morning brewed coffee routine, it can be fairly easy to lose customers," said Sara Senatore, a senior research analyst covering restaurants at Bank of America.
Some slip away because Canada's fast-food market is brimming with options. It only stands to get more crowded as U.S. burger joint Shake Shack and sandwich chain Jimmy John's join the rivalry this year.
"To some extent, everybody competes with everybody for share of stomach," said Senatore.
Tims has usually managed to gobble up a sizable slice of the competition by leaning on the affordability of its dishes, but rivals have been increasingly mimicking that strategy, said Senatore.
“In a slowing consumer environment, (Tims) might be feeling some pressures, but I think those who mention that are probably failing to see the forest for the trees,” said Danilo Gargiulo, a senior research analyst at Bernstein.
“The reality is the company is as strong as it has ever been."
He feels the company “has the potential to become the McDonald's of Canada," but that title hinges on it maintaining the right balance between coffers and coffee.
"You cannot swap out quality for profitability," Gargiulo said.
Schwan, who joined Tims' parent company Restaurant Brands International under its Burger King banner in 2011 and took the helm of Tims' North American business in 2019, knows this well.
In recent years, the company pursued a "back to basics" strategy that boosted the quality of the coffee Schwan glugs up to three times a day and added more Venetian cream to his favourite Boston cream doughnuts. Fresh eggs were launched and apple fritters were stuffed with more fruit.
The changes have resonated well, but "you can always improve your quality," said David Pullara, a York University marketing instructor who has worked for Starbucks and Pizza Hut.
Customers routinely complain about doughnut frosting sticking to the top of the paper sleeves they’re served in and lacklustre spreads of cream cheese on bagels abound on social media.
A Conservative MP even went viral last week with a rant about the plastic-free, fibre lids Tims has been trialling that she claimed “dissolve in your mouth.”
Asked about these instances, Schwan said, "Everybody — rightly so — has his or her opinion and if people take the time to share that with us, then we are thankful for that and try to do better next time."
Tims customersspan 19 countries and 5,800 stores, selling everything from pancakes to paneer wraps, but no market is like home, where it has 4,000 restaurants.
"It has done remarkably well in Canada," said Senatore, "but it has done less well when it tried to expand to other markets."
She chalks some of that struggle up to the amount of brand awareness any chain has to build when it enters a new market, and the wealth of competitors, including homegrown restaurants that have been there far longer or that are competing on price.
In China alone, Gargiulo said the coffee market “has become much more competitive this year than last year, even more than two years ago and so forth.” Boutique café Manner Coffee is expanding quickly and Luckin Coffee is selling drinks for as little as RMB9.9 ($1.87 CAD)
Gargiulo doesn’t expect Tims to be deterred. RBI has long found success with its other brands — Burger King, Popeyes Louisiana Kitchen and Firehouse Subs — abroad, and with Tims blanketing much of Canada already, other regions are logical places to grow.
Though he doesn't oversee the foreign portions of Tims, Schwan said, "We believe that we have tremendous growth opportunity with teams internationally and in the U.S."
However, if the company is looking for growth at home, it should tinker with technology and cold beverages, experts say.
Tims has experimented with digital screens that advertise menu items to customers based on the time of day or weather and tested automated drive-thru windows, but Gargiulo said it could mirror a McDonald's pilot that lets artificial intelligence take orders.
It could also go further in growing the cold beverage category, where Pullara sees Tims having "a lot of licence to play."
"They can expand and go into breakfast smoothies," he said. "And why not do a protein shake?"
Gargiulo, meanwhile, suggests courting younger customers and those looking for a treat.
“Not all the way to Starbucks customization because that's going to be a disaster,” he said, referencing the rival chain with 170,000 drink combinations. “But (Tims) could make some more indulgence plays.”
Building on Tims' fruit-flavoured quenchers and recent Oreo and Caramilk iced capps are "a big part of our multi-year growth road map," Schwan said.
He hinted more could be coming on the cold beverage front soon but said the guiding force behind any menu addition is the customers.
"It's always about listening to Canadians," he said. "What would they love to see from us?"
This report by The Canadian Press was first published May 17, 2024.
Companies in this story: (TSX:QSR)
Tara Deschamps, The Canadian Press
