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Tim Hortons jumps into single-serve coffee market

WiFi access, digital menu boards, double drive-thrus all part of current strategy.

August 10, 2012 by Alicia Kelso — Editor, QSRWeb.com

Tim Hortons turned in a positive second quarter this week with revenues up nearly 12 percent and profits up 13 percent.

Canada's same-store sales increased 1.8 percent during the quarter, while the U.S. system jumped 4.9 percent on top of a 6.6 percent increase during the same period last year.

"We are pleased that our menu initiatives continue to grow the business and are encouraged by the U.S., where our team has done a great job building brand awareness and loyalty. Despite challenging economic conditions in both markets, we're confident in our ability to grow the business," said Paul House, executive chairman, president and CEO.

Several initiatives underway

During the second quarter, Tim Hortons continued to develop several initiatives. Free wireless Internet is now available in 1,100 Canadian units and about 500 U.S. restaurants. By the end of the year, 2,000 Canadian restaurants will have WiFi accessibility, making the brand that country's largest free wireless network.

Digital menu boards have been rolled out in about 60 percent of the Tim Hortons system.

"These offer a compelling visual to showcase our products and we expect the rollout to be completed sometime during the fourth quarter," House said, adding that drive-thru menu boards will also be enhanced into 2013.

Tim Hortons continues to ramp up its double drive-thru units throughout Canada to help with traffic and speed of service.

Second quarter sales were also lifted with product launches, including the Panini, which should continue to help the company grow its lunch daypart. House said this time of day is a significant opportunity for the brand.

Also, Tim Hortons' expansion of cold beverages, including the frozen original and raspberry lemonades in Canada, and peach mango fruit smoothie, helped drive sales growth during the quarter, particularly because of unseasonably warm spring weather.

"A couple of years ago, a summer like this would have been disastrous because we didn't have any cold drinks. We love the balance of our menu today and we'll balance it even further going forward," House said.

Single service coffee market

As the single-serve coffee segment accelerates from Dunkin' Donuts and Starbucks' K-Cup presence, Tim Hortons is set to compete for its share of the market. The company has reached a North American-wide agreement with Kraft Foods to enter the single-serve, on-demand coffee market, leveraging Tim Hortons' coffee and Kraft's Tassimo system.

As part of the agreement, Tim Hortons's coffee, decaf coffee and lattes will be sold in a single-serve format in Tim Hortons restaurants throughout Canada and the U.S., as well as online, using the Tassimo T Disc on-demand beverage platform.

The single-serve coffee market is currently experiencing triple-digit growth in North America.

The Tim Hortons/Tassimo single-serve line is expected to be launched in time for the 2012 holiday season.

Organizational and management changes

Tim Hortons also announced a new organizational structure to position the company for future growth as part of strategic planning work initiated in the fourth quarter of 2011.

Since the Initial Public Offering in 2006, the company has added more than 1,000 restaurants and grown annualized total revenues by approximately $900 million, while entering new markets. New executive appointments and accountabilities include:

• A Business Unit organizational structure has been established with accountability for all operating businesses;
• A Corporate Center has also been established to provide centers of excellence, central accountability and governance over key enterprise and control activities;
• David Clanachan has been appointed chief operating officer of Tim Hortons Inc., with executive accountability for all operating businesses, including Canada, the U.S. and International;
• Roland Walton has been appointed president, Tim Hortons Canada, with accountability for the Canadian business;
• Mike Meilleur has been appointed executive vice president, Tim Hortons U.S., with accountability for the U.S. business. He has also been appointed as an executive officer of the company;
• Stephen Johnston, senior vice president, Development, will report to Clanachan in the new structure;
• Cynthia Devine, in addition to her role as chief financial officer and head of Manufacturing, has been appointed with executive accountability for the Supply Chain strategy and operations;
• John Hemeon, executive vice president, Supply Chain, will report directly to Devine;
• Bill Moir has entered into a two-year employment agreement in which he will remain chief brand and marketing officer, until a new successor has been identified over time and accountabilities transitioned; and
• Brigid Pelino, executive vice president, Human Resources, and Jill Aebker, executive vice president, General Counsel and corporate secretary, will continue to lead their respective functions as part of the executive group.

"We have experienced tremendous growth as an organization and I have great confidence in our future. Our new organizational structure is designed to help us keep pace with the growth we have experienced while I believe also positioning us for future success," House said.

The board is continuing with an external search for the position of president and CEO to lead the entire team under the new organizational structure.

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