BEIJING: Tim Hortons is the latest coffee-house chain to see China as a source of growth, joining Starbucks and a Beijing startup in announcing plans for expansion in what has traditionally been a tea-drinking country.
Tim Hortons’ announcement comes shortly after rival Starbucks – which has currently has more than 3,000 stories in China and plans to have 5,000 by 2021 – indicated that like-for-like sales in China were slowing.
That prompted outgoing chairman Howard Schultz to reassure investors thus: “I will say, unequivocally, that anyone who is betting against Starbucks in China is dead wrong.”
And this week he also hinted at a tie up with internet giant Alibaba, saying “there will be news coming that will relate to our plans for accelerating and integrating mobile commerce at a higher level into our core business”.
Mobile is the starting-point for Luckin Coffee, a start-up valued at $1bn which eschews cash altogether in the 525 outlets it has opened across 13 major cities in just nine months: customers have to order and pay via its app and almost half its current outlets are just kitchens delivering orders placed by consumers in homes and offices.
As it expands further, however, such delivery kitchens are expected to account for only around 15% of outlets, a company spokesperson told Quartz.
So Tim Hortons enters an increasingly competitive market, and has signed a joint venture that will see it open 1,500 outlets over the next decade.
“We have already seen Canada’s Chinese community embrace Tim Hortons and we now have the opportunity to bring the best of our Canadian brand to China,” said company president Alex Macedo.
“China’s population and vibrant economy represent an excellent growth opportunity for Tim Hortons in the coming years,” he added.
But if it is to achieve that, it will need to appreciate some underlying cultural and business drivers.
According to Tom Doctoroff, senior partner at Prophet, Starbucks has found success in China “by conforming to the public consumption imperative” and offering opportunities to show social status. (For more, read WARC’s report: Three golden rules to crack China’s consumer culture.)
Tim Hortons’ announcement comes shortly after rival Starbucks – which has currently has more than 3,000 stories in China and plans to have 5,000 by 2021 – indicated that like-for-like sales in China were slowing.
That prompted outgoing chairman Howard Schultz to reassure investors thus: “I will say, unequivocally, that anyone who is betting against Starbucks in China is dead wrong.”
And this week he also hinted at a tie up with internet giant Alibaba, saying “there will be news coming that will relate to our plans for accelerating and integrating mobile commerce at a higher level into our core business”.
Mobile is the starting-point for Luckin Coffee, a start-up valued at $1bn which eschews cash altogether in the 525 outlets it has opened across 13 major cities in just nine months: customers have to order and pay via its app and almost half its current outlets are just kitchens delivering orders placed by consumers in homes and offices.
As it expands further, however, such delivery kitchens are expected to account for only around 15% of outlets, a company spokesperson told Quartz.
So Tim Hortons enters an increasingly competitive market, and has signed a joint venture that will see it open 1,500 outlets over the next decade.
“We have already seen Canada’s Chinese community embrace Tim Hortons and we now have the opportunity to bring the best of our Canadian brand to China,” said company president Alex Macedo.
“China’s population and vibrant economy represent an excellent growth opportunity for Tim Hortons in the coming years,” he added.
But if it is to achieve that, it will need to appreciate some underlying cultural and business drivers.
According to Tom Doctoroff, senior partner at Prophet, Starbucks has found success in China “by conforming to the public consumption imperative” and offering opportunities to show social status. (For more, read WARC’s report: Three golden rules to crack China’s consumer culture.)
Sourced from Reuters, Quartz, Guardian; additional content by WARC staff
