The headlines from Restaurant Brands International Inc.’s (RBI) fourth-quarter earnings – at least in Canada – were striking: A 4.3-per-cent dip in same-store sales for Tim Hortons in stark contrast to impressive numbers from its fast-food cousins, Burger King and Popeyes Louisiana Kitchen.
RBI chief executive officer Jose Cil did not hide from the challenges the Tim’s brand faces. “It is clear that we have a large opportunity to refocus on our founding values and what has made us famous with our guests over the years,” he said in a release on Monday.
But where did the iconic Canadian brand go astray?
Alan Middleton, professor of marketing at the Schulich School of Business, says Tim Hortons management has made more than its share of missteps since RBI took control in 2014.
“They’re losing brand share,” Middleton told BNN Bloomberg in a phone interview on Monday. “They’re doing some things that aren’t connecting with consumers the way they did (in the past).”
Middleton used to give speeches to Tim Hortons franchisees prior to the RBI takeover, including one titled “Brands don’t die, they’re murdered: How do you avoid murdering your brand?” He was never formally employed by Tim Hortons.
Here’s a look at what Middleton sees as the key causes of Tims’ downturn.
1.THE FRANCHISEES
“You’ve made some enemies in your franchisees by being over-oppressive and over dictatorial … You’ve cut money to your franchisees on very important things for Tim Hortons, like local sponsorships and promotions,” said Middleton.
Amanda Lang: Can Tim Hortons win back consumers?
BNN Bloomberg Amanda Lang discusses Tim Hortons’ vow to refocus amid low sales in the fourth quarter.
While Middleton said that the franchisees have solidified their foothold by buddying up in the Great White North Franchisee Association, he said both management and the franchisees benefit from a good relationship.
“Tims’ proposition, which is so powerful, is the relationship between the customer and the staff: When they walk into the franchise and there’s a nice environment, and it’s a comfortable surrounding … and the people there know you. So when you walk in it’s, ‘Alan! How are you? Double-double?’”
“You get that kind of relationship. That comes from the franchisees, which comes from Tims’ management dealing with the franchisees, so they can pay regular staff to be there. They’re not constantly turning over their people and they have an orientation towards the customer, rather than just towards delivery.”
2.ADVERTISING
“They engaged in a series of advertisements, which began to look like a standard price and item from any fast-food outlet,” Middleton said.
The strength of the brand’s resonance with customers, Middleton said, is a blend of familiarity and deep-seeded Canadiana. He added that, even until recently, the company has not been able to stick to one track with its ads. For example, contrasting a recent campaign featuring Wayne Gretzky, with a new one focusing on a company coffee-taster.
What’s weighing on Tim Hortons’ sales
Same-store sales at Tim Hortons fell again in the fourth quarter, and parent company Restaurant Brands International has vowed to refocus the brand. BNN Bloomberg’s Paige Ellis has more from the conference call about what the company is attributing the sagging sales to.
“They started getting back some of that Canadian-ness with Canadian hockey stars and relaxed environment, but now they’ve gone and blown it again,” he said, in reference to the coffee-taster campaign.
“I know what they’re trying to do: They’re trying to be simple and say ‘We’re just about the coffee.’ All of which is right. But it’s the manufacturer that’s talking to the consumer, and Tim’s strength was in their old communications. It was the consumer in their ads, getting across the proposition. I think that’s a major error.”
3.DEMOGRAPHICS
Tim Hortons doesn’t have the loyalty of the under-40 set, Middleton says, which could lead to a tightrope act for the company.
“They’ve got challenges with millennials and with the next generation down, Gen Z, who has not grown up with Tim’s in the same way that the boomers did,” Middleton said.
“So, that strength of automatic loyalty is not there, so they’ve got to re-earn it with the group, without ditching who they were … There’s a lot more competition now.”
4.THE LOYALTY PROGRAM
“They put in a loyalty program that basically gave everything away in an attempt to get the interactions, but cost them money in terms of subsidizing coffee,” Middleton said.
Middleton believes that what attracts the majority of Canadians to the Tim Hortons brand is not necessarily their orders, or how much they cost, but how they get treated at their local branch.
“They’ve changed their loyalty program to go broader, and it’s right to do one,” Middleton said. “But I’ve got a concern that the signal that’s being sent out that they think loyalty is something they build from the products and the money incentive. Not from the treatment of the customer when they walk into a Tim’s.”
At the end, it comes down to the idea of community, Middleton said.
“What people forget, is Tim’s wasn’t built top-down. Tim’s was built bottom-up,” he said.
“So, it’s promotion and activity in the local community with the local kids, and pee-wee hockey, and things like that that built the power of Tim’s.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
