Speaking at a press conference marking Tims China’s 1,000-store milestone, Yongchen said the Shanghai-based coffee chain will adjust its pricing where necessary, but will not resort to heavy discounting
Tims China CEO Yongchen Lu speaking at the Fourth ESG Global Leaders Summit in Shanghai | Photo credit: Tims China
Tims China is prepared to adjust its pricing strategy in China to remain competitive but will not be dragged into a price war, according to CEO Yongchen Lu.
At a press conference marking the brand’s 1,000-store milestone in China, Lu said the ‘rapid development’ of China’s branded coffee shop market has been a ‘double-edged sword’ that has seen coffee consumption soar, particularly among younger consumers, but has also led to “supply growing faster than demand, causing a price war”.
Chinese branded coffee shop market leaders have been locked in a tit-for-tat discounting over the last year with promotional beverage prices as a low as RMB 9.90 ($1.37) per cup.
Tims China will instead focus on ‘product differentiation’ and flexible pricing based on local coffee consumption and competition, Lu said.
Formed by Canadian restaurant group Restaurant Brands International (RBI) and New York-based private equity firm Cartesian Capital in 2018, Tims China opened its first Tim Hortons store in Shanghai in 2019.
The coffee chain reigned in outlet expansion in the first half of 2024, closing 49 ‘underperforming’ stores in the six months ended 30 June 2024 and opening 54 new sites to reach 907 outlets. In a bid to improve profitability, Tims China also commenced a cost-cutting drive, reducing spend on in food and packaging, rental expenses, labour and staffing.
However, having opened 93 net new stores over the last four months, Lu said Tims China is confident of a return to more robust outlet growth moving forward – but warned that the business would continue to close less profitable sites to strengthen its bottom-line.
“I remain optimistic about the coffee industry in the long term. The coffee industry has changed significantly in the past few years, as Chinese residents’ per capita coffee consumption has increased rapidly. We are increasing our store density in cities where we are already present and optimising our store network by closing those that are not performing well,” he said.
World Coffee Portal’s Project Café East Asia 2024 research found that the total Chinese branded coffee shop market achieved remarkable 58% outlet growth last year and is the largest branded coffee shop market in the world with over 50,000 outlets.
Tims China is the eighth branded coffee chain in the country to reach 1,000 sites – joining Luckin Coffee, Cotti Coffee, Starbucks, McCafé, Lucky Cup, Nowwa Coffee and Manner Coffee.
Shanghai-based Tims China will publish its third quarter results for the three months ended 30 September 2024 on 12 November 2024.