Tim Hortons’ Turnaround Strategy, Why it’s Working
It wasn’t too long ago when many felt like Tim Hortons had lost its way. The coffee wasn’t very good, service was poor and it began selling trendy menu items like Beyond Meat burgers that customers weren’t interested in. At the same time competition from the likes of McDonald’s and Starbucks were luring customers away from the iconic Canadian brand. This was reflected in Tim Hortons’ same store sales growth which was slowing, dropping from 2.5% in 2016 to -1.5% in 2019.
One of the hardest things for a company to do is turnaround its business. Customers that were loyal to you don’t always return even when you are trying hard to get them back. Or in the process of trying to turn the ship around many companies make a number of missteps as they desperately try to improve operations. But Tim Hortons, which started working on a turnaround plan in 2020, has been successful in improving its business. In 2022 Tim Hortons had same store sales growth of 11% in its fourth quarter and its revenues in 2022 were $7.2 billion which exceeded its pre-pandemic 2019 revenues of $6.7 billion. If you are curious about what Tim Hortons has done to improve its performance then consider these five elements of its strategy.
1. Celebrity partnerships. McDonald’s was on to something when it launched its “Famous Orders” promotion in 2020. The campaign involved promoting McDonald’s combos that celebrities like Travis Scott and BTS enjoy eating. The promotion was so successful it helped boost McDonald’s sales not only in 2020 but also in 2021.
The success of that campaign was not lost on other fast food chains and in 2021 Tim Hortons launched a marketing campaign with Canadian pop superstar Justin Bieber. For this promotion Tim Hortons launched limited edition Timbiebs which featured three new flavours of Timbits (donut holes). The new flavours, personally selected by Bieber, were white fudge, sour cream chocolate chip and birthday cake waffle. "Doing a Tim Hortons collab has always been a dream of mine," said Bieber. "I grew up on Tim Hortons and it's always been something close to my heart."
Tim Hortons also launched limited edition merch as part of the campaign which quickly sold out. The promotion was a huge success, boosting awareness of the Tim Hortons brand and increasing sales. Joseph Cil the former CEO of Restaurant Brands International (which owns Tim Hortons) said the promotion was: “one of the more successful traffic-driving initiatives in recent memory and outperformed our internal expectations.” There was also an “unprecedented” boost in social engagement and visits from younger customers.
One of the reasons the promotion was so successful is that Justin Bieber is a long time fan of the brand and had posted about Tim Hortons on his social media channels many times over the years. Then when the partnership launched it made a lot of sense to his fans who then went out to see what a Bieber and Tim Hortons collab would taste like. Celebrity collaborations don’t always work but when they do its likely because they are authentic and don’t stray far from the brand identity of the celebrity or the company they are collaborating with. “Justin is so fervent in how much he loves Tims,” said Hope Bagozzi, chief marketing officer at Tim Hortons. “That is the perfect recipe for a collaboration. It’s not forced.”
Tim Hortons has been in business for nearly 60 years. As a brand ages its customers tend to age along with it making it difficult to acquire younger customers that have a higher lifetime value. Partnering with Bieber allowed Tim Hortons to effectively tap into a younger customer base without alienating its older customers. "We won't ever take our eye off staying relevant to our loyal guests, but at the same time, you do have to be mindful of your guests of tomorrow. We're committed to having a good balance of not changing so much that the loyal guest stops recognizing who we are," said Bagozzi.
The promotion was also outside of Tim Hortons’ marketing bread and butter which is partnerships with professional hockey players demonstrating it’s important not to get stuck doing the same thing over and over. “It opens us up to a different audience and a different conversation beyond just hockey,” said Bagozzi. “Justin has wide appeal, but definitely does appeal to younger guests.”
2. Digital engagement. The COVID-19 pandemic forced many retailers to wake up their sleepy digital presence and Tim Hortons was no exception. If you are Canadian you likely have heard of Tim Hortons’ Roll Up the Rim to Win competition. If you aren’t familiar with it then here’s how the contest used to work. If you made a purchase of a beverage at Tim Hortons all you had to do was “roll up the rim” on the cup to see if you had won a prize. When the pandemic hit out of an abundance of caution Tim Hortons didn’t want its employees handing millions of cup rims so it quickly decided to pivot and make the promotion digital.
Speaking about the move to a digital game Matt Moore, chief operating officer at Tim Hortons said: “guests loved the digital game and told us they found it fun and easy to play. It also helped propel our digital sales and digitally engaged guests.” “Over 30% of all sales in Q1 2021 came through our digital channels including our app, nearly doubling the levels of Q1 2020 and up from 1% of all sales in Q1 2019.”
Creating a digital game also helped to increase app downloads. There were “two million downloads of our app in March 2021, twice the downloads that we saw last year during the contest, and significantly higher than a typical month,” said Moore. “Modernizing the iconic Roll Up The Rim game enticed even more Canadians to go digital with us — both during the new Roll Up To Win promotion and after the game ended.”
Every retailer wants more people to download their app but just having merchandise on your site may not be enough. Tim Hortons has proven a fun game can also be a powerful way to get customers to engage with your brand digitally.
3. International expansion. While Tim Hortons got its start in Canada it’s bullish on international expansion. By the end of 2022 Tim Hortons had 600 restaurants in China with plans to increase that number to 1,000 by the end of 2023. “It sounds like an ambitious goal, but it’s really quite manageable,” said Peter Yu, chairman of Tim Hortons China. “The Chinese market is absolutely a compelling market. In the area of coffee, it’s also the fastest growing market in the world, and so we see plenty of room to reach that stated target.” Fun fact. Timbits did not take off in China as they have in Canada so instead customers in China can buy mochi holes.
Tim Hortons also opened its first location in New Delhi India in 2022 with a goal of opening 300 restaurants in India over the next decade. Overall Tim Hortons has more than 5,000 restaurants in more than 10 countries including Canada, the United States, Mexico, Spain, China, the United Kingdom, China, Thailand and the Philippines.
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4. Quality improvements. For many years as the competition from Starbucks and McDonald’s heated up in Canada Tim Hortons couldn’t keep up. In a 2018 Angus Reid survey, 14% of those surveyed said the quality of Tim Hortons’ coffee improved while 19% said that it had worsened. When asked about the quality of Starbucks coffee 13% said that it had improved while only 7% said that it had worsened. In the same survey, when it comes to service 8% of consumers said the quality of service at Tim Hortons improved while 25% said it worsened. Compared to Starbucks, 13% believed that the quality of service improved while only 8% believed it worsened. During that time Sylvain Charlebois, a professor in food distribution and policy at Dalhousie University said: “if you were to use [Tim Hortons] coffee as that anchor product, it’s still not great. They have to really dig in and see how exactly they can perfect that, because everyone else has picked up their game.”
The gains by the competition as well as Tim Hortons’ lagging financial results did not go unnoticed by management. To get back to its roots Tim Hortons invested in technology to improve its coffee and started using fresh cracked eggs in its breakfast sandwiches. Tim Hortons has also removed artificial ingredients from its core menu. "I'm hearing from people as they feel a difference when they come to Tims, whether it's the level of service, taste and quality of the products, or that the advertising feels fresh and more contemporary,” said Bagozzi. “I think all of the things that we've been doing are the right things to do for the brand and it's starting to connect on the business level too."
5. A move towards simplicity. Every company faces the growth dilemma. Do I keep doing what I am doing that’s working well? Or do I venture into new waters? A few years ago Tim Hortons decided to venture into new waters. 60 new items were added to Tim Hortons’ menu in 2019, two – three times the normal amount. Not only did these menu additions confuse customers they were difficult to execute, straining employees who tried to keep up with the changes. One of these new menu additions was a plant based Beyond Meat burger. That’s a fairly large departure for a restaurant known for its coffee and donuts. Customers were not impressed and two months after the Beyond Meat burger was launched in 2019 Tim Hortons quickly removed it from its menu.
Speaking about that time period Duncan Fulton, Restaurant Brand International’s chief corporate officer said: “some new products over the last two years strayed too far from our core categories that we’ve always been famous for. Going forward, new launches will be more targeted and will build on our core categories.”
After same store sales fell by 1.5% in 2019 Tim Hortons unveiled a strategy to get “back to basics” in three areas: food and beverage menu items, digital engagement and the in-restaurant experience. "What they've done is they've focused on retrenching their menu and making it less complicated than it was before,” said David Soberman, a marketing professor at the University of Toronto's Rotman School of Management. “Overall, as far as companies in their sector, they've actually been doing much better this year [2021] than they did in the previous year."
Tim Hortons is also focusing on breakfast since that category attracts the highest amount of sales amongst fast food chains. “It’s bigger than lunch. It’s bigger than supper. And while it shrunk … it never lost its number-one spot,” said Vince Sgabellone, NPD’s foodservice industry analyst. “A lot of those visits are coffee-driven. Canadians love their coffee.”
But if you are wondering about recently added menu items like “loaded bowls”, Tim Hortons says these items are prefermoning well. Items like that helped to increase Tim Hortons’ lunchtime sales 15% above pre-pandemic levels.