Canadian Fast Food Giant Expands Southward

Who is Tim Horton and what does he want from America?The donut and sandwich chain, huge in Canada, but largely unknown here, has been expanding its U.S. footprint of late and appears to be using the market as a testing ground. So far, Tim Hortons spend has been modest. Its outlay on measured media last year was $12 million in the U.S., which is a good $100 million shy of what Dunkin’ Donuts spent. But the chain, named after a star hockey player, has been throwing body checks at its rival lately. This summer, for instance, Tim Hortons entered New York City by buying up old Dunkin’ locations. The move gives it a presence in highly visible locations like Times Square, Penn Station and Herald Square, and capturing the attention of bloggers and media, including several articles in The New York Times.Tim Hortons (the name lacks an apostrophe) opened its first U.S. location in Buffalo, N.Y., in 1984, but lately its U.S. expansion has been picking up. David Clanachan, Tim Hortons’ chief operations officer, U.S. and international, said he’s seeking out high-traffic areas in airports, hospitals, colleges and sports stadiums. (Two weeks ago, Tim Hortons opened a restaurant at Fort Knox, the first U.S. military location for a company that already has operations on seven Canadian bases and in Kandahar, Afghanistan.)As for brand positioning, Hortons will attempt to lure Dunkin’ customers with an emphasis on fresh products. In Canada, the ubiquitous brand—where a “double double” (coffee, two creams, two sugars) and cruller is a morning ritual—uses the tag “Always fresh. Always Tim Hortons.” In the U.S., it’s “Tim Hortons: Where quality meets value,” and advertising features product shots of the latest promotional items. (JWT, Toronto, handles both campaigns.) The brand also got a shout-out last week when it was integrated into an episode of CBS’ How I Met Your Mother, with its setting in Canada. The placement was initiated by a writer on the show who comes from Canada. Glen Hollis, vp-national advertising, said there’s more to the brand than freshness, in Canada, at least. “There’s more of an emotional attachment and sense of belonging in the way we connect with our customers,” said Hollis. “Tim Hortons is always a part of your life, which is a little different from just a focus on freshness.”In Canada, Tim Hortons has twice the number of outlets as McDonald’s and a market capitalization that makes it the fourth-largest player among quick service restaurant outlets in North America, trailing McDonald’s Yum! Brands and Starbucks. Nevertheless, its U.S. operations are barely profitable. Its brand profile is also low, despite the fact the company was once owned by Wendy’s. Since April 2008, the brand has attempted to change that. With Starbucks’ brand image taking a hit, Hortons sees an opportunity. “In the U.S., it’s Mom, apple pie and Chevrolet. In Canada, it’s hockey night, the Royal Canadian Mounted Police and Tim Hortons. We’ve become part of the cultural landscape,” said Clanachan. “Now we want to bring that to the U.S. marketplace. We’re an aspirational challenger brand.” Challenger, indeed. Dunkin’ Donuts, with more than $5 billion in sales in 2008, and Krispy Kreme, which despite its recent problems, is still almost twice as big as Hortons’ U.S. operations $345 million in revenues last year. Dunkin’ Donuts has a 72 percent share of the donut market compared to 8 percent for Krispy Kreme and 5 percent for Tim Hortons, according to food industry consultants Technomic, Chicago. “Tim Hortons faces a big challenge from the established players in a more competitive market, particularly from brands like Dunkin’ Donuts in the East,” said Technomic president Ron Paul. “Tim Hortons’ brand image is somewhat limited here and it’s not like everyone’s been to Canada and knows them as a well-established brand.”Given its huge presence in Canada, it’s understandable that the chain isn’t too worried. In fact, at the moment, Clanachan said that the chain is using the U.S. as an “R&D Petri dish” for its business expansion. “We’re smaller and more nimble here—less of an institution where consumers don’t have such an ingrained view of what the menu should look like, as they do in Canada,” he said. For instance, recent new menu additions like a breakfast sandwich and iced cappuccino were first developed in the States.But Hortons isn’t just toying with menu items. During the chain’s second-quarter earnings call in August, CEO Don Schroeder discussed the new changes in the company’s U.S. development strategy, citing the cost efficiencies of the reduced footage at new nontraditional sites as well as the resulting increase in brand visibility, which hinted at further expansion.“The New York City locations, which give us an immediate and notable footprint in downtown Manhattan in such high-traffic locations…help us build out our footprint and create brand awareness through nonstandard formats,” he said and underscored the halo effect among tourists. “I also believe this announcement created secondary benefits in giving us broad attention and great brand recognition across other parts of the U.S.”

Brand Marketing

Canadian Fast Food Giant Expands Southward

Noreen O'Leary

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Noreen O'Leary