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A more modern Timmies

News broke last week that Tim Hortons is preparing to open an “innovation cafe” this month.

The coffee chain hopes the new restaurant will serve as a “modern interpretation of the Tim Hortons brand and [as] a unique space to test new menu items and technology initiatives,” when it opens at the base of Toronto’s Exchange Tower on July 25.

The decor and design of the new shop have been inspired by its founder, Tim Horton, and are expected to reflect its hockey roots. Tim Hortons is using it to test food and beverages, such as seven different coffee-serving methods, new donuts (including Maple Bacon and Crème Brûlée), as well as new premium sandwiches and soups.

“Our goal is to create a space where we can celebrate and showcase what Tim Hortons has been passionate about for many decades,” Axel Schwan (right), Tim Hortons’ CMO, tells strategy, adding that donuts, coffee and hockey have always been its core focus. “It’s really about celebrating the essence of our brand, the core of our brand in an environment that offers an alternative for our guests.”

“The moment the store is open we will get feedback immediately from our guests,” he says. “Our marketing approach is all about study, plan, execute. When we think about marketing, we are thinking [more in terms of] evolution, less revolution.”

Strategy asked industry experts to weigh-in on the more up-scale Tim’s location; how they see it fit into the company’s strategy; and whether it can help deliver much-needed growth for the brand.

What the experts think about the new store concept

• Susan Weaver, managing director of Pearl Strategy & Innovation Design: “It makes a lot of sense as it addresses Tim Hortons’ underdevelopment among the millennial and Gen Z cohorts, as well as in urban markets. In the low growth foodservice market, bold moves are necessary to breakthrough to gain share.”

• Ken Wong, professor of marketing at Queen’s University’s Smith School of Business: “Consumers who see themselves as coffee lovers want upscale beans and local or international roasters. They want coffee theatre. Those who can afford Starbucks or local roasters but still frequent Tim’s feel they don’t want to pay for hype and that is what upscale Tim’s is.”

A year in review

The grand opening of the new store will cap a year of increased investment and innovation from the brand, which has pumped greater dollars into its marketing, launched a loyalty program, added menu options, among several other efforts over the last 12 months.

Parent company Restaurant Brand International’s latest financial filing suggests those efforts have yet to pay off though: same-store sales fell 0.6% during Q1 of this year – double the 0.3% decline recorded last year – while system-wide sales growth slowed to 0.5% for the quarter, down from 2.1% the year before. Tim Hortons was unable to discuss financial results, saying it’s currently in a “quiet period” ahead of its Q2 earnings next month.

Here, we look at the QSR’s investments over the last year, and asked our experts to give their verdict on the developments so far.

April 2018: Same-store sales dip 0.3% during Q1. “We’re not happy with sales growth and overall results at Tim Hortons,” says RBI chief executive Daniel Schwartz on a conference call, attributing the slump to increased competition and negative media coverage. The news follows a difficult year for the brand, which has dropped in a number of brand reputation surveys. In Canada, it has faced frequent clashes with franchisees over things like the mismanagement of marketing dollars and minimum wage issues. Schwartz’s comments follow the launch of “The Musical,” the first spot in a new coffee-centric marketing approach under new CMO Axel Schwan.

July 2018: Former president of FGL Sports Duncan Fulton (right) is hired as RBI chief corporate officer. He’s tasked with strengthening the RBI brand (as well as the brands of its three restaurant chains), working on a corporate road map with the executive and marketing teams, and developing a stakeholder strategy that involves customers, franchisees, government, investors and vendors. His appointment comes as the chain announces plans to open 1,500 locations in China over the next 10 years, part of an international expansion that has seen it enter the U.K., the Philippines, Mexico and Spain over the last two years. Earlier in March, the brand announced $700 million in store renos here in Canada.

October 2018: Ahead of the hockey season, Tim’s works with agency Zulu Alpha Kilo on a social campaign showing support for Kenya’s sole ice hockey team. Zulu strategist Tim Hopkins tells strategy the goal is to project the company’s brand purpose (and hockey roots) to markets around the world.

November 2018: Unveils the first spot of six in a relaunch of its “True Stories” platform, returning to a former strategy aimed at positioning the brand as an indelible part of the Canadian identity. The effort represents the company’s largest investment in marketing since its 2014 acquisition by RBI. For the first time, creative is led by global agency Gut. Meanwhile, Zulu continues to lead creative specific to the Canadian market. The new agency relationship follows the hiring of Coca-Cola veteran Paloma Azulay into the newly created role of global creative head for the brand.

Also this month, Tim’s launches Timmies Minis, a new kid-friendly menu including cheese sandwiches, wraps and chicken strips intended for children. It picks Horizon Media Canada as its new media AOR, starting next year.

January 2019: Moves into new headquarters in downtown Toronto. The branded work environment includes Tim’s and hockey-inspired wall decor and 21 coffee stations resembling the chain’s coffee shops. Tim Hortons president Alex Macedo tells strategy the move is designed to attract (and retain) top talent to the organization.

February 2019: Generally more tactical in its approach to Roll Up the Rim, Tim’s invests more heavily in the annual promotion with help from Zulu. The contest receives an additional bump from a TV commercial by Gut that falls within the revamped “True Stories” platform. Also this month, the chain expands its retail product lineup, adding a “Double Double Coffee Bar” and a selection of instant coffees, iced coffees and Iced Capp beverages.

March 2019: Delivers on a promise first made in 2014 to launch a loyalty program. The program rewards customers with a free coffee, tea or baked good after every seventh visit. The company says it plans to add new features over time.

May 2019: Becomes the latest QSR to add Beyond Meat to its menu. The coffee chain begins testing plant-based breakfast sandwiches and wraps at 60 restaurants in the GTA, with plans to potentially roll them out nationwide by the end of the summer.

June 2019: In a departure from its usual focus on hockey, Tim’s puts Toronto Raptors superfan Nav Bhatia in a mini-doc exploring inclusivity and the Canadian spirit, reminding people that it’s been sponsoring the team for more than 20 years (albeit more quietly than the Leafs). The spot follows other playoffs-inspired creative, including an ad paying homage to the team’s Jurassic Park roots and work supporting the Leafs’ own playoff start. Also this month, the brand invests more heavily in its annual campaign to help raise more money for Camp Day.

What the experts think of the brand investments over the last year

• Weaver: “It’s important to examine Tim Hortons’ same store sales results in perspective. If we split same store sales performance between Canada (down 0.4%) and the rest of the world (down 2.4%), we see the bigger issue in its international markets. Tim’s same store sales in Canada had posted growth of 0.9% and 0.2% in 2018 and 2017, respectively. With a steady pipeline of product innovation and advertising, in addition to its new loyalty program and repaired relationships with its franchisee network, it should be able to post more consistent year-over-year results.”

• Graham Robertson, brand advisor and author of Beloved Brands: “I think some of the simple innovation has been the best investment I’ve seen Tim’s make. The new menu items feel like hometown comfort food. That’s likely why same stores are flat and not down 10%. Zulu has given the brand a nice jolt of life, that reminds us back to Tim’s of yesteryear. Love it. I’d mandate one ad per year that makes me tear up or get goosebumps, with three other ads that make us smile… [But] the loyalty card feels more volume discount than it does loyalty. Add some magic to the idea. Random draws each week for a Canadian experience, such as Raptors tickets or trip to the Yukon or a train ride through the Rockies. When we want out of the box ideas, we run brainstorms asking ‘what would a brand like Tesla or Apple do with this brand?’ Tim’s should have brainstorm sessions that ask, ‘what would the 1997 version of Timmies do?’