Canadian coffee chain is latest international firm to eye growth potential in the Chinese market, but ambitious expansion plans face a slowing economy and competition from scaled rivals
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Tim Hortons will need to open a store in China every 2.4 days to reach its goal of 1,500 in 10 years
Tim Hortons has made its first foray into the highly competitive Chinese market. Located in the city’s historic People’s Square, the debut store is the Canadian coffee chain’s first under a master franchise agreement with private equity firm, Cartesian Capital Group.
Announced in July 2018, the ambitious partnership aims to establish 1,500 Tim Hortons sites over ten years. Cartesian Capital Group currently holds the master franchise for Burger King in China and has expanded the fast-food chain’s portfolio from 56 to more than 800 restaurants across the country since 2012.
In a press statement, Tim Hortons president, Alex Macedo, said the chain was targeting to open 10-20 stores in Shanghai this year. "China is an attractive growth market and we can't wait for guests to try our classic favourites and some new offerings crafted specifically to the Chinese market,” he said.
Tim Hortons will need to expand at a rate of approximately one store every 2.4 days if it hopes to reach its 10-year goal of 1,500 Chinese sites. Even at that pace, the chain will be some way behind Starbucks, which has opened a store in the East Asian nation roughly every 15 hours since 1999 and is on track to achieve its goal of 6,000 stores in 230 cities across China by the end of 2022 – an annual rate of around 600 stores.
Domestic coffee chain,
Luckin’ Coffee, has an even more impressive expansion record, opening around 700 stores across 21 Chinese cities during 2018. The UK’s largest coffee chain, Costa Coffee, which was bought by Coca-Cola for £3.9bn in 2018, operates over 450 stores in China and is planning to open 1,200 by 2022.
China’s burgeoning middle class is a key demographic for international café and fast-food brands seeking growth. Consumer culture in the country is heavily driven by e-commerce, delivery and app-based ordering, with Starbucks and Luckin’ Coffee investing in so-called ‘new retail’ offerings. In July 2018,
Starbucks announced a strategic delivery partnership with e-commerce giant, Alibaba, while Luckin’s business model revolves around value-focused app-based delivery.
Chinese consumers are rapidly embracing coffee-focused concepts, but a slowing economy presents a new challenge for coffee chains attempting to gain a foothold in the country of 1.4 billion people. In December 2018, UK food-to-go and coffee chain, Pret A Manger, which was acquired by Luxembourg-based conglomerate JAB Holdings in June 2018, wrapped up its two-store operation in mainland China, which had run since 2014. In 2015, US coffee giant, Dunkin’, announced plans to open 1,400 stores in China over two-decades after unsuccessful launches in 1994 and 1998 and today operates just 39 locations.
Tim Hortons currently operates around 4,800 stores in Canada and around the globe including the US Mexico, Europe, the Philippines and the Middle East.