Tims China, the operator of Canadian coffee chain Tim Hortons in China, says consumers are becoming increasingly receptive to convenience, with delivery, ready-to-drink retail partnerships and smaller format stores enabling the coffee chain to grow its reach. World Coffee Portal speaks to Yongchen Lu, CEO of Tims China, about the dynamic Chinese market, expansion during the pandemic and the importance of having diverse sales channels
Yongchen Lu, CEO of Tims China | Photo credit: Tims China
Since opening its first store in Shanghai in 2019, Tims China has grown to more than 500 stores, employing nearly 5,000 staff across the country.
The company, which completed its merger with special purpose acquisition company Silver Crest and began trading on New York’s Nasdaq stock exchange in September 2022, has recently commenced retail partnerships with Chinese multimedia conglomerate Tencent and supermarket chain EasyJoy to grow its reach across China.
With a strong pipeline of store openings also slated over the next few months, CEO Yongchen Lu explains why Tims China is primed for growth.
What have been some of the key milestones for Tim Hortons since its market entry in China?
In February 2019, we opened our first store in Shanghai and have used our local knowledge to expand quickly – we have more than 500 stores today with many more openings planned for the next 12 months.
We have also built consumer awareness and guest influence through a strong presence on digital platforms. We have nearly nine million loyalty club members to date.
We listed on the Nasdaq on 29 September 2022 under the ticker THCH.
How will Tims China’s retail partnerships enable the brand to compete more effectively?
Part of our philosophy for Tims is to build genuine community. One important way we do this is through multiple partnerships in food and beverages, entertainment and e-sports, health initiatives and cosmetics.
In November 2021, we announced our strategic partnership with leading retailer METRO China to be the exclusive coffee shop located in METRO stores in China. Through this agreement, we hope to reach millions of new customers to share our welcoming guest experience and high-quality product offerings.
In July 2022, we announced a collaboration with Easy Joy, China's largest convenience store chain with 190 million loyalty club members. As part of this collaboration, we are creating a unique, co-branded ready-to-drink coffee product to be sold in Easy Joy's network of more than 27,800 stores.
Easy Joy's expansive store network will broaden our reach to meet new customers and enter new regions in China. We have already opened Tims Express coffee shops in three Easy Joy convenience stores in Beijing.
In August 2022, we announced a new E-sports shop in Shanghai in collaboration with our shareholder and partner Tencent, the leading global technology, internet and video game company. This offers an immersive and innovative space for customers to interact with the gaming community.
We have more than 500 stores today with many more openings planned by the end of the year | Photo credit: Tims China
Are smaller format and convenience-focused stores the future of Tim Hortons in China?
From inception, Tims China has contemplated a variety of formats to offer a welcoming atmosphere in spaces large and small. Although we sometimes use a compact format shop, the goal is always to offer our guests absolute convenience.
The future of Tims China is about connections. So, we create physical spaces where our guests can relax with their families and friends, and digital spaces where they can connect to other members of the Tims community.
We are only three years old, but we can see that our loyal guests use each of these formats depending on their location and needs.
“Most of our stores were built during the pandemic, and so we’ve been able to adapt well, leveraging our three vectors of customer service (dine in, take away, delivery) depending on the operating environment”
Firstly, our store network. We want to have the right store in the right place to meet our customers where they are. To do this, we leverage store density, data analysis, and format to optimise site selection. Locations vary from larger stores with seating areas, to kiosk-type locations that are as small as 215 square feet.
Our store formats comprise flagship, classic and Tims Go. Flagships are key to brand building and buzz-creation. Our classics provide the full brand experience. And Tims Go provides convenience in a smaller space, mainly for takeaway and delivery.
In collaboration with Easy Joy, we have created the new ‘Tims Express’ design, which is a compact and efficient format that can integrate easily into Easy Joy stores. We look forward to future growth within Easy Joy’s vast network.
Together, this range of formats and intelligent site selection drives traffic and creates network effects.
Secondly, mobile ordering. If customers don’t have time to relax in our warm and comfortable café, they can order on their mobile phone in advance, skip the line, and be on their way in seconds.
Thirdly, delivery. In the first half of this year, more than 40% of our business is home or office delivery with our partners, including Meituan and Ele.me. This is the ultimate convenience, and we package our products well, so customers receive them piping hot or ice cold, however they like.
How has Tims China adapted to Covid-19 trading restrictions in China?
Most of our stores were built during the pandemic, and so we’ve been able to adapt well, leveraging our three vectors of customer service (dine in, take away, delivery) depending on the operating environment.
We are pleased to say that trading has rebounded to pre-lockdown levels, and sales are growing.
“China is the most compelling consumer market in the world, not just because of its size, but because it’s the most demanding, the most dynamic and the most digital”
Is reaching 1,500 stores in the country by 2028 still your target?
Our vision at Tims is as simple as it is ambitious: to build the premier coffee and bakeshop in all of China, establishing a profitable network of more than 2,750 outlets by 2026.
This goal is eminently achievable. Firstly, because China is the fastest-growing major coffee market in the world. Secondly, because of our demonstrated track record of growing Burger King China nearly 20 times. And thirdly, and most of all, because of our great, motivated, and dedicated team.
Will China become a nation of coffee drinkers in the long-term, and, if so, how long will this take in your view?
China is the fastest growing coffee market globally, according to Global Market Trajectory & Analytics, Research and Markets (2020). Coffee consumption per capita in China is currently a small fraction of Western countries but is expected to grow from RMB 28.4bn ($4bn) in 2017 to RMB 157.9bn ($22.6bn) in 2023, according to the International Coffee Organization.
China is the most compelling consumer market in the world, not just because of its size, but because it’s the most demanding, the most dynamic and the most digital. All of these features make it exceptionally fast-moving, so we expect the Chinese consumer’s embrace of coffee to be rapid in comparison with the adoption we’ve observed in other markets.