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Canada's Tim Hortons to enter China as it battles slump at home

Reuters 

By and Nagarkatti

(Reuters) - Fast-company said on Wednesday it plans to open 1,500 outlets of its Canadian in over the next decade, capitalizing on a growing cafe culture in the world's second-largest economy.

The move, its biggest expansion outside of the core Canadian market, is part of new Alex Macedo's two-pronged strategy to battle intense competition in the fast-industry at home and to fix its bruised reputation.

"One is improving and increasing our leadership in Canada, and the second is taking a little bit of to the world," Macedo, told in an interview ahead of Wednesday's announcement at parent Restaurant Brands International's Oakville, Ontario, headquarters.

The move into China, in a joint venture with firm Cartesian Capital Group, adds to Tim Hortons' global footprint, after last year's entry into the Philippines, Britain, and will keep its offering the same in but will customize its menu for the local market, Macedo told on Wednesday.

has operated in the since 1984 and the since 2011. Tim Hortons has 4,256 locations across Canada, 725 in the and between five and 20 in the countries it entered last year, according to the company.

Macedo, who became of Tim Hortons in December, is seeking to stem profit declines and sweeten customer sentiment amid a bitter and public feud with a group of unhappy franchisees in and the that pushed public perception of the chain to 50th place in a January survey from fourth a year earlier.

China's coffee and tea consumption is expected to climb to 750,218 metric tons by 2020, from 693,748 in 2015, according to alone has an estimated 6,500 coffee houses, with small chains, independent stores and bakeries battling for a slice of a market that research firm says could grow to 79 billion yuan ($11.84 billion) by 2022 from 60 billion yuan this year.

is aiming to have 10,000 coffee shops in within a decade, more than the United States.

"I wouldn't say (Tim Hortons) has saturated the market in Canada, but they're mightily close," said Brian Madden, at in Madden is waiting for the franchisee issues to be resolved and for valuations to come down to buy the stock.

RBI shares were up 1.8 percent at C$82.57 in early trades, their highest level since November.

At home, Macedo admitted Tim Hortons could have operated differently to reduce negative publicity and said the company is taking a slew of measures, including upgrading outlets, a new kids menu and all-day breakfast. It also began testing deliveries this week and plans to introduce self-service kiosks, he said.

Many of these ideas came from franchisees, he said, acknowledging the company had not communicated well with them in the past and that he was trying to change that by meeting disgruntled franchisees all around

Great White North Franchisee Association, which was formed last year to fight the company's alleged mismanagement of franchise operations, did not immediately comment. It has previously said that RBI inflated prices on items franchisees buy from the corporate office, a claim the company and the official franchisee advisory board, which has largely distanced itself from the GWNFA, attribute to market moves and to lack of proper communication about the reasons.

"Public perception of this brand has really been tainted and tarnished over the last year to 18 months," Goodreid's Madden said. "It's going to require things that put money back into the pockets of franchisees to fix it."

($1 = 6.6715 Chinese yuan renminbi)

(Reporting by in and Nagarkatti in Bengaluru; additional reporting by Laharee Chatterjee and John Benny in Bengarluru; editing by Patrick Graham, and Jonathan Oatis)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, July 11 2018. 20:40 IST
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