Price sensitivity a sticking point in Tims China’s third quarter

Tims China closed 10 company-owned sites during the third quarter | Photo credit: Tims China

Tims China has reported a second consecutive quarter of adjusted corporate EBITDA profitability despite a fall in sales, order frequency and average ticket price in the third quarter. 
 

The coffee chain posted a 17% year-on-year decline in revenues for the three months ended 30 September 2024 to RMB 359.6m ($51.3m) – a 2% fall on the previous quarter. 

Revenues from Tims China company-owned stores fell 23% year-on-year to RMB 299.5m ($42.7m) following the ongoing closure of underperforming outlets and a 21% decline in third quarter like-for-like sales growth.  
 

Tims China opened 39 net new stores during the quarter to reach 946 sites, driven by the addition of 49 new franchised stores, but permanently closed 10 company-owned outlets. 

Shanghai-based Tims China also reported a 12% decline in the number of orders, from 15.4 million in the third quarter of 2023 to 13.5 million, alongside a 12% year-on-year fall in average ticket. 

However, Tims China achieved a second consecutive positive adjusted corporate EBITDA of RMB 2m ($300,000), compared to a loss of RMB 63m ($8.7m) in the same quarter of 2023. 
 

“In the third quarter of 2024, we maintained adjusted corporate EBITDA profitability, despite the ongoing fierce price competition in the Chinese coffee market, after achieving first-ever adjusted corporate EBITDA profitability in the second quarter of 2024,” said Yongchen Lu, CEO, Tims China. 
 

In October 2024, Yongchen said he was prepared to adjust Tims China’s pricing strategy in China to remain competitive but would not be dragged into a price war with market leaders Luckin Coffee and Cotti Coffee, which regularly discount beverages to as low as RMB 9.90 ($1.37). 

Speaking to investors following Tims China’s third quarter earnings release, Yongchen said the coffee chain would ‘avoid direct participation’ in the price war and instead focus on ‘distinguishing itself by delivering great value’ and ‘differentiating’ its product ranges. 

Tims China introduced 10 new beverages, including Melon and Coconut Cold Brew, in the third quarter alongside nine new food items.  

While the coffee chain’s coffee beverages typically start from RMB 16 ($2.20), Tims China has introduced several promotional deals to provide greater value to customers, including a RMB 14.90 ($2.06) coffee and croissant breakfast deal and a RMB 21.90 ($3.02) coffee and bagel lunch offer. 

In a bid to elevate the customer experience, Tims China is also rolling out work stations in its stores where guests can see food being freshly prepared on site. The business launched nine new food items during the quarter with a focus on low-sugar, high-fibre and plant-based options.