1. Introduction
Tim Hortons holds a dominating position in the Canadian coffee, pastry and fast food market. Starting its journey from a small coffee shop; today, it is considered the Canada’s national treasure.
This article presents the Tim Hortons strategy analysis by applying SWOT framework. SWOT is a popular framework that guides companies in their strategy formulation. SWOT analysis of Tim Hortons identifies various strengths, weaknesses, opportunities and threats that determine the company’s competitive positioning in the market.
2. Company overview
| Founding year | 1964 |
| President | Axel Schwan |
| Parent company | Restaurant brand international |
| Headquarters | Oakville, Canada |
| Industry | Restaurants |
| Number of countries | 15 |
| Number of restaurants | 5,352 |
| Number of employees | 20,158 |
| Tim Hortons Market capitalization (2022) | $9.81 billion (USD) |
| Tim Hortons Annual Revenue 2021 | $3.34 billion (USD) |
Tim Hortons Products: Hot/iced coffee| breakfast/lunch items |baked goods |sandwiches |doughnuts| fast food items
Tim Hortons competitors: Gloria Jeans| McCafé| Dunkin Donuts | Starbucks | McDonalds
Do you know?
A news broke that McDonald’s buys Tim Hortons coffee. Being a direct and fierce competitor, news captured the attention of coffee lovers, but later, McDonalds strongly denied, and called it a rumor.
3. Tim Hortons SWOT Analysis
3.1. Tim Hortons Strengths
Financial Post reported that Tim Hortons’s hot coffee market share increased from 70% (2019) to 72% in 2020, and its share in breakfast category raised from 57% (2019) to 59% (2021). In USA, Tim Hortons alone makes 4.7% of total coffee store industry revenue.
3.1.2. Revenue growth
Tim Hortons has quickly bounced back from the pandemic, as shown in following graph:
Source: Statista
3.1.3. Strong brand recognition
Tim Hortons is the largest restaurant chain of Canada serving more than 5 million coffee cups, and 80% of Canadians visiting Tim Hortons at least once a month.
3.1.4. Strong distribution in home market
Following table shows Tim Hortons holds strong distribution network in the home market compared to its competitors:
Source: Baskin Wealth
3.1.5. Best managed brand
Tim Hortons organizational structure is tall with narrow span of control. Company follows traditional, centralized, functional structure, which enhances its control over business operations, and that’s why it is considered among the Canada’s best managed brands.
An annual study on Canadian brands ranked Tim Hortons on 1st position based on leadership, governance, workplace, performance and innovation.
3.1.6. Most trusted brand
A recent 2022 survey on 4,768 Canadians revealed Tim Hortons is country’s most trusted brands, surpassing the trust level on Starbucks and McDonalds.
3.1.7. Brand influence
Tim Hortons ranks 10th as Canada’s most influential brands. Strong brand influence enables the company to bounce back from the issues it faces due to external environmental complexities.
3.1.8. Innovative experience
Tim Hortons frameworks for innovation and quality improvement are industry leading, which enable company to continually identify improvement seeking areas, and provide innovative experience to its customers.
3.1.9. Creative communication framework
Tim Hortons framework for creative communication now focuses on telling interesting stories. Company has invested $80 million on the new framework that focuses on telling ‘true’ brand related stories to the audience through digital communication.
3.1.10. Strong global growth
Tim Hortons is set to leverage the post-pandemic global growth opportunities. Following timeline shows the Tim Horton’s targeted global growth:
Source: World Coffee Portal
3.1.11. Low cost advantage
Tim Hortonscompetitive advantage lies in its ability to achieve economies of scale, and lower the prices than competitors.
3.2. Tim Hortons Weaknesses
3.2.1. Declining service quality
An Ipsos study revealed that around 35% customers’ opinions about Tim Horton fell during last five years, 25% considered Tim Horton customer service quality as worse, and 19% said the coffee taste has gone worse:
Source: Beloved Brands
Although, Tim Hortons spends heavily on the marketing and advertising, but it has comparatively weaker presence on online platforms than its competitors:
Source: Tweet-map
3.2.3. Closing operations in home market
Poor performance in home market is among the most serious Tim Hortons problems.Although, Tim Hortons is having strong global growth, it is closing stores in Canada. In 2022, Tim Hortons closed 41 stores in Canada due to declining sales, and customers’ decreasing trust on the service quality.
3.2.4. Lack of variety
As per Bloomberg, Tim Horton’s menu does not have much for the general populace, and cannot create hype around different items. While, its competitors’ Starbucks and Dunkin perform well in attracting millennials through their attractive menu options.
3.2.5. Poor in-store environment
Tim Horton’s in-store environment is not cool enough where people may hangout, and relax in, while its competitor- Starbucks has gained mastery in it- as reported by Forbes.
3.2.6. Ineffective promotion of new items
Tim Horton’s does not effectively promote its new items. For instance, despite having potential, Tim Hortons did not effectively promote its vegan home-style biscuits, due to which many customers did not even know about it.
3.2.7. Customer service loosing relevance
When Tim Hortons was launched, it was known for simple and down-to-earth customer service. The company still sticks to it, but the fast casual dining style has in fact lost dominance, and customers now seek boutique styled dining experience.
3.2.8. Failed attempt to launch plant-based meat
Tim Hortons’ plant based meat venture met failure due to poor brand association. Customers associate Tim Hortons with Coffee and doughnuts, and do not seek Tim Horton for eating vegan burgers.
3.2.9. Poor packaging
Tim Horton’s new packaging lid in 2019 was not welcomed positively by its customers. Even Justin Bieber commented on it by saying lid is too uncomfortable in mouth, and very little liquid comes out. Its old lid also got negative customer feedback. The outrage is once again compelling Tim Hortons to change its cup lids.
3.3. Tim Hortons Opportunities
3.3.1. Growing Canadian fast food market
The Canadian fast food market is likely to growth with 7% CAGR from 2021 to 2027, which suggests Tim Hortons to penetrate further into fast food segment:
Source: Research and Markets
3.3.2. Emerging markets
China is among the fastest growing emerging markets that present attractive growth opportunities to international players. Despite the Canada-China tensions, Tim Hortons is pursuing aggressive growth strategy in China, as depicted in following graph:
Source: Bloomberg
Tim Hortons currently has a limited variety. It can add more products targeting health conscious customers. Expanding the menu will diversify the customer base, and will present more revenue generation opportunities to Tim Hortons.
3.3.4. Invest on emerging technologies
In post pandemic world, consumers’ preferences for online ordering have not faded. Tim Hortons may invest more on consumer facing technologies, and start its own delivery service. Tim Hortons should also increase investing on drive-thru technologies for order taking and home delivery.
3.3.5. Partnerships
Tim Hortons benefited a lot from its partnership with Burger King, and recently partnered with Justin Bieber to promote the brand. Tim Hortons should further pursue such partnerships and collaborations to drive the market share, and handle the competition.
3.3.6. Digitalization
Tim Hortons should accelerate the digitalization process by strengthening the online presence on different digital platforms. It can optimize the coffee sales, and present an opportunity to creatively interact with the customers.
3.4. Tim Hortons Threats
3.4.1. Independent specialty coffee shops
The rising number of small, independent specialty coffee shops have emerged as a serious threat to large coffee chains like Tim Hortons.
3.4.2. Declining demand due to worsening economic outlook
According to World Bank, coffee industry is facing headwinds as demand is softening and global economic outlook is worsening. The 2022-2023 forecast suggests demand for hot beverages may shrink by 1%.
3.4.3. Rising competition from existing players
Other than small new entrants, Tim Hortons is facing tough competition from well-renowned brands like Starbucks and McDonalds, particularly in its home country. For long, Tim Hortons was Canada’s most loved coffee brand, but 2017 survey showed Canadian customers placed Tim on fourth position:
Source: Baskin-Wealth
3.4.4. Growing health consciousness
Consumers’ growing health consciousness has become a serious threat for coffee brands. Institute for Scientific Information reported that there is 650% surge in health related searches by coffee consumers who are increasingly getting conscious and concerned about health impacts of coffee.
3.4.5. Rising cost of production and downward price pressure
Global brands like Tim Hortons are facing double pressure. Consumers are becoming more price sensitive, while rising inflation is increasing the cost of production. It is directly affecting the industry’s profitability.
3.4.6. Customer privacy law suits
Consumers’ growing privacy concerns raise the risk of reputation damaging lawsuits. Tim Hortons already faced the lawsuit in 2022, as restaurants’ mobile app was accused of violating the customer privacy. If unaddressed, these concerns can discourage the use of Tim Horton’s app, affect brand image, and reduce revenue earning opportunities for company.
4. Tim Hortons SWOT Summary
SWOT framework Tim Hortons
| Strengths • Growing market share and consistent growth at global stage • Strong brand recognition and influence • Strong distribution • Low cost advantage • Best managed and most trusted brand • Innovative experience and creative communication | Weaknesses • Declining service quality • Weak online presence • Closing operations in home country • Lack of variety and poor packaging • Poor in-store environment • Ineffective promotion • Customer service style loosing relevance • Failed attempt to launch plant based meat |
| Opportunities • Growing Canadian fast food market • Emerging markets • Diversify menu • Invest on emerging technologies, accelerate digitalization • Pursue business partnerships | Threats • Growing specialty coffee shops • Worsening economic outlook • Intensifying competition • Growing health consciousness • Rising production cost • Customer privacy lawsuits |
5. Recommendations
• Address service quality issues by making customer service more responsive
• Strengthen presence on social networking platforms
• Increase variety by launching more products
• Invest more on promotion of new products (both- instore and online)
• Improve product packaging
• Adapt customer service style according to customers’ changing expectations
• Penetrate deeper into Canadian fast food market
• Expand further into emerging markets like India and China
• Include healthy items in its menu to target health conscious customers
6. Conclusion
Above Tim Hortons case studysuggests that the company’s strategic positioning is being challenged by quickly changing business environment. However,Tim Hortons is capable of mitigating external threats by leveraging its internal strengths.
7. References
Edmiston, J. (2022, May 3). “We also must win in espresso”: Tim Hortons charts new phase in multi-year turnaround. Financialpost.
IBISWorld – Industry Market Research, Reports, and Statistics. (n.d.-b).
Tim Hortons’ revenue by segment 2021 | Statista. (2022, July 27). Statista.
Tim Hortons. (n.d.).
Wong, E. (2020, February 18). How Not to Run a Fast Food Chain: Restaurant Brands and the mismanagement of Tim Hortons – Baskin Wealth Management. Baskin Wealth Management.
Canada’s Best Loved Brand: How Tim Hortons Won Canadian Hearts & Minds. (2016, June 27). Linkdex.
Yahoo is part of the Yahoo family of brands. (n.d.-b).
Tim Hortons develops a new framework to tell its stories. (2021, June 18). Strategy.
Tim Hortons gains ground globally but closes stores in Canada. (2022, November 21). World Coffee Portal.
Robertson, G. (2023, February 26). Tim Horton’s case study: Ignoring everything that needs fixing. Beloved Brands.
S., S., & S. (2021a, February 17). Do Canadians love Tim Hortons or Starbucks? | Tweepsmap Blog. Tweepsmap Blog.
Tim Hortons gains ground globally but closes stores in Canada. (2022b, November 21). World Coffee Portal.
“Choice of last resort”: Why Tim Hortons’ sales are lagging and what it can do to change that – BNN Bloomberg. (2019, November 1). BNN.
Hennessey, R. (2012, August 6). 3 Reasons Why Starbucks Still Shines, Despite Market Shortcomings. Forbes.
Ltd, R. a. M. (n.d.). Canada Fast Food Market, Share, Insight, Forecast 2022-2027, Industry Trends, Growth, Size, Impact of COVID-19, Company Analysis. Research and Markets Ltd 2023.
Hong, J. (2021, October 26). Tim Hortons China Hits 300 Stores Undeterred by Listing Delay. Bloomberg.com.
Baffes, J., & Temaj, K. (2023, March 5). Beverage prices ease as supplies increase and demand softens. World Bank Blogs.
Wong, E. (2020b, February 18). How Not to Run a Fast Food Chain: Restaurant Brands and the mismanagement of Tim Hortons – Baskin Wealth Management. Baskin Wealth Management.
People ‘waking up’ to coffee as part of a healthy lifestyle with interest increasing 650% over the last year. (n.d.).
