Tim Hortons jumps into loyalty, single-serve retail

Tim Hortons finished off its 2013 with same-store sales growth of 1.6 percent in Canada and 3.1 percent in the U.S. Although the results were shy of expectations, CEO Marc Caira said during this morning's earnings call that the company's foundational elements are in place for impactful results within the next five years.

A top priority for Tim Hortons has been the simplification of its restaurants. For example, digital menu boards are being redesigned to provide easier navigation for operators and customers and to speed up service.

In the fourth quarter, the company delisted 24 menu items and began piloting a program that will speed lunch sandwich service.

Tim Hortons has also migrated much of its management reporting to an online tool that streamlines data for restaurant owners and has added an online app for the onboarding process for new hires.

The chain is also testing a redesigned soup and sandwich station.

"These types of incremental improvements can make a big impact. Any time you make it easier for your guests to order and reduce complexity for your teams, it makes a difference when you multiply that across millions of transactions every day," Caira said.

Cold Stone partnership ending


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One of the biggest changes the company is making as part of this simplification effort is in dropping its Cold Stone Creamery partnership in Canada.

"While Cold Stone is an excellent brand, we determined it was not an ideal fit for our price value and speed strategy. By debranding, these restaurants can now simplify and focus on their core business," Caira said.

Many of those units will add express beverage lines to fill any possible void. The U.S. cobranded units will not be affected by the decision, which was made in Q4.

"In the U.S., Cold Stone is more established and plays a bigger role as a destination," Caira said.

New loyalty program

Tim Hortons also announced today that is has created a new loyalty program based on a cobranded credit card with the CIBC. The CIBC Visa credit card will launch in May and will allow cardholders to accumulate 1 percent Tim Cash rewards for all purchases made on the card. That Tim Cash can then be redeemed instantly using the same card at participating Tim Hortons locations to purchase coffee, baked goods or any other offerings.

It will function both as a CIBC Visa credit card and a Tim Hortons loyalty card. Caira said this is the first loyalty card of its kind that he can think of.

"We think this will be popular, especially to the millions of Canadians who visit Tim Hortons multiple times a week. It is consistent with our stated objective that we're going to be a bit more aggressive with technology. Our plan is to embrace new technology in a way that will resonate with our guests," he said.

Tim Hortons and CIBC have worked together on past initiatives, including the first point-of-sale mobile credit card transaction using the CIBC Mobile Payment App at a Tim Hortons location in November 2012.

Retail

Tim Hortons executives also outlined their retail plan with the recent single-serve coffee entry into supermarkets. CFO Cynthia Devine said there is a revenue sharing program in place so restaurant owners can enjoy some of the benefits of being in the retail space.

"There is so much volume out there happening through grocery that we're not participating in today that we just need to be a part of," she said.

Caira said the move was necessary to remain a coffee leader.

"We believe we need to be positioned when and where customers purchase coffee. Grocery represents 40 percent of overall single-serve dollars and this is meeting unmet needs for loyal guests," he said. "As a coffee leader, we have the responsibility to ensure we're at the forefront of these trends. We need to be realistic — there are people who go to supermarkets to buy coffee. Why shouldn't they be buying Tim Hortons?"

Photo courtesy of Tim Hortons Facebook page.

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