If Homer Simpson lived in Canada, he’d be a happy guy. With the variety of doughnuts here – from Krispy Kreme’s original glazed, to Tim Hortons’ dutchie and Country Style’s cinnamon twister – it’d be like heaven, once he got used to the brazen winters and outrageous taxes. And with several players digging deeper into their pockets for marketing dollars these days, the doughnut category is sizzling, just like one of those delicious Krispy Kremes right off the line.
For the Winston-Salem, N.C.-based company, the plan is to have 32 locations across Ontario, Quebec and the Maritimes in the next six years. However, they may not all be identical in design to the big box ‘doughnut theatre’ of Krispy Kreme’s Canadian debut store in Mississauga, Ont., which opened last December. According to Roly Morris, CEO and president of Krispy Kreme Doughnuts Eastern Canada, the U.S. operation is testing new format stores, including one that is only 900 square feet. If all goes well, they may be adaptable to urban areas, smaller markets and confined spaces like malls. ‘Once it’s been proven successful, we will look at it in Canada,’ he says. ‘[But] it’s designed to be added to the market once you already have a number of hot theatre stores and the brand is developed.’ Meanwhile, arrangements with wholesale partners mean the doughnuts may be sold in two- or four-packs in places like movie theatres, supermarkets, or sporting venues in the near future.
So far, Krispy Kreme has tasted the sweetness of success here. The Mississauga store set a new opening-week sales record for the company at $465,000. Despite minimal advertising, which included local transit and billboards depicting a box of doughnuts with rising steam (it was created by steam machines and resulted in some panicky calls to the Mississauga Fire Department), brand awareness surged in Ontario from 20% last July to 58% today.
Morris credits this to Krispy Kreme’s unique, melt-in-your-mouth product, as well as a ‘multisensory’ in-store environment, where customers can watch the goodies bake. ‘We wanted to make sure the experience was as positive as we could possibly make it. We took that to every detail.’
In early May, Krispy Kreme will kick off its charity-based marketing strategy, through FUNdraising, which enables not-for-profits to purchase doughnuts at wholesale and sell them to raise money. The retailer is also partnering with Kids.now, an organization that teaches tweens leadership in preparation for high school. ‘I think it’s important to be a relevant part of the community in which you are doing business,’ says Morris.
Richmond Hill, Ont.-based Country Style Donuts also aims to beef up its marketing tactics down the road, once it gets itself out of the hole. (It filed for protection under the Companies’ Creditor Arrangement Act last December.) ‘There’s no question that part of what got us into trouble is that we never clearly articulated our point of difference,’ admits president and CEO Patrick Gibbons, formerly chief marketing officer of Burger King Canada.
Alongside 170 conventional stores, which will be updated to be more ‘efficient and customer friendly,’ Gibbons, who has reduced Country Style’s price of coffee by 8% to be more competitive, points out that there is also opportunity in non-traditional locations, such as gas stations and bingo halls, as well as new markets. (So far Country Style has 200 ‘non-traditional’ locations.) ‘We’re focusing on Ontario right now, and then we’ll develop our rollout plan province by province,’ he says. ‘The big growth is in markets we haven’t been [in] before.’
Country Style has already introduced a new jingle and tagline, ‘Love at first sip, freshly ground every time,’ in its P-O-P and billboard ads, produced by Segal Communications and Kickstart Marketing & Design, both of Toronto, and its radio creative by TDG Marketing & Communications, and it will eventually establish a 12-month marketing program.
The company also unveiled a new promotion in mid-March, which ran head-to-head with Tim Hortons’ popular ‘Roll Up The Rim to Win.’ However, Gibbons claims the similar ‘Turn Up A Winner’ initiative had an edge, in that every single coffee cup gave away some kind of freebie, ranging from a doughnut to a Hyundai Santa Fe SUV. ‘We know the competitor does the cup promotion extremely well,’ he says. ‘There’s no way we could beat the other guy, because it’s stronger, but this is slightly more compelling. We did a very heavy radio buy for this in Ontario and billboards in 150 locations in the GTA.’
Country Style isn’t the only one attempting to take a bite out of ‘Roll Up the Rim.’ Toronto-based Coffee Time Donuts, which has 350 stores across the country, introduced its third annual ‘Peel One 2 Win’ in March. However, this time coffee drinkers received a medium- or large-size coffee for only a loonie, in addition to a crack at the contest, which was supported by a TV spot and radio. And recently, the retailer’s branded cups were also redesigned. ‘The color went from red to a dark brown,’ says director of marketing Helen Keletzis. ‘It was time for a change, and it’s more modern.’
Timothy’s Coffees of the World, Toronto, also hopes to take a piece of the pie in the doughnut-and-coffee category through its acquisition of Mmmuffins Canada this past January. While the Timothy’s banner is in the specialty-coffee market, where it duels the Starbucks of the world, ‘Mmmuffins will compete with Tim Hortons, where coffee is a value-add on to baked goods,’ says Becky McKinnon, president and CEO of Timothy’s, who admits her first priority is to improve the mall-based chain’s image. That includes modernizing the Mmmuffins logo, updating store design at its 90 units and eventually establishing a marketing agenda. ‘The message of Mmmuffins – that it offers scratch baking – hasn’t gotten out effectively in the last little while. We need to get the ‘fresh baked’ message out.’
Once that happens, Timothy’s will examine Mmmuffins’ potential for expansion, says McKinnon. ‘The response to the changes will enable us to chart a direction for future growth, which may mean different types of locations.’
Despite all the action, it’s unlikely that any of these retailers will ever catch Tim Hortons, which now has 2,000-plus stores in North America, most of which are in Canada.
Patti Jameson, VP corporate communications, believes Tim Hortons, owned by Dublin, Ohio-based Wendy’s International, has benefited from consistent advertising, produced by its long-term AOR Enterprise Creative Selling of Toronto, as well as the chain’s grassroots marketing strategy. For example, The Tim Horton Children’s Foundation, which operates four summer camps for needy kids, is well recognized. Hortons is also known for its sponsorship of minor sports, and 33,000 four- to six-year-olds are involved in Timbit hockey leagues every year. ‘Charity is very important because it’s one of the things that keeps consumers loyal to a company,’ concedes Jameson.
With its expansion into lunch fare – now its bread and butter – over the last several years, the chain has moved into the fast food category to take on McDonald’s. And last month, Tim Hortons announced it would serve up grub at 300 Esso gas stations across Canada, enabling travelers to get soup and sandwiches instead of the traditional junk food associated with such pit stops. ‘From Tim’s standpoint, one of the things we determined in the last several years, is that our customer wants convenience and accessibility,’ explains Jameson. ‘These were important factors in our decision to get involved with the Esso ‘On The Run’ concepts.’
So how come Tim Hortons is as huge as Homer’s waistline? And where does that leave everyone else? Strategy asked four observers to share their thoughts on the various marketing strategies.
Wendy Robertson, strategic consultant
Toronto, Ont.
[Robertson formerly worked at Enterprise, where she was a strategic planner on the Tim Hortons account.]
‘Tim Hortons has a way of fostering corporate and brand alignment so each store can deliver the same level of customer service, promotional support and the same foundation of a community-based business. The Tim Hortons businessman is very typically a high profile community businessman. At the core of their success is the fact they’re well grounded in the markets they serve. They also have a good grasp of the brand in the various markets they compete in. In the East, Central Canada and the West, there are subtle but important differences in how audiences are expected to interact with the brand.
‘Coffee Time and Country Style haven’t developed core competencies. The fact they can do the same thing as Tim Hortons, but not as well, or as consistently, makes it difficult to compete. There’s bottom-feeder value in chasing Tim Hortons’ ‘Roll Up the Rim’ with the same promotion. During ‘Roll Up the Rim’ time, Tim Hortons’ volume swells and it must come from people who are price shopping. I’m assuming copying them is effective to some point. [But] it does nothing for the brands.
‘Krispy Kreme’s strategy should be severely different, because they don’t have penetration in the market. Their reputation precedes them but only among people who pursue ‘bought nostalgia’ for a product that’s actually never been a part of our history. They should be looking at destination shopping areas.’
Richard Talbot, retail analyst
Talbot Consultants, Unionville, Ont.
‘Nobody in Canada will beat Tim Hortons. Part of the problem with many of the others, is that the focus is more on selling franchises. It’s a bit like publicly traded retailers, where there’s tremendous hype about how well they’re doing, and then it’s, ‘oops sorry, we’re selling shares.’
‘I think what the Country Styles and Coffee Times need is a makeover. It’s the same with any restaurant. They constantly have to upgrade décor, image and menus to keep people. They need different concepts that fit into different neighbourhoods. A Coffee Time’s a Coffee Time. And it’s boring. They’re stuck in a time warp and they have a distinct truck stop feel, which isn’t going to grow your market. They need to move up a notch and be more interesting and fun. [Once they do that] they need to advertise more.’
John Lee, president
Holmes & Lee, Toronto
‘With Tim Hortons, the client and agency have agreed to do something that gets the point across and is workmanlike. They get the job done and everybody seems to be happy with that. Their spend is so high and presence is so great with what they do on a per exposure basis, that to make their creative work harder isn’t really necessary. They just hammer away, and have set their horizons to go after McDonald’s because they don’t have any competition.
‘Krispy Kreme is a nice novelty in this country…but not enough to take a serious hit away from Tim Hortons. [With more units] Krispy Kreme can [beat out the smaller players], because they offer something different. All Country Style and Coffee Time do is knock off Hortons. There’s got to be more to it. You can’t survive by being reactive.’
Tony Miller, creative director
Sharpe Blackmore, Toronto
‘The ‘Roll Up The Rim’ contest has been massively successful for Tim Hortons. It’s become a springtime tradition. The company has been consistent in the name and messaging of the promotion, and they refresh the creative every year, which, whether or not you think it’s hokey, works. Enterprise has had the business for a number of years, so that relationship is a strong one.
‘The others copy ‘Roll Up the Rim’ probably as a joint customer retention and acquisition strategy. Maybe if they don’t copy, they’ll lose customers to Tim Hortons. That’s probably a very real fear…[because] my guess is the Tim’s customer is more loyal than that of Country Style or Coffee Time.
‘Tim’s has the best creative – it’s the most developed and thoughtful. I have a pretty good sense of who their customer is. With Coffee Time and Country Style advertising, it’s unclear who their market is, although I can guess. They are not communicating a big enough point of difference. Why should I go to them? They haven’t given me a reason. Also, their color schemes are practically the same. It’s baffling that they haven’t delineated themselves more clearly and with more attractive packaging and coloring.’
