Why Tim Hortons can’t rrroll into the United States

America doesn’t want our donuts.

(Photo: Natalie Castellino)

(Photo: Natalie Castellino)

This is a big week for Tim Hortons. We’ve entered “RRRoll Up the Rim to Win” season and the company will unveil its 2012 year-end results on Feb. 21. And while the company’s success continues to rrroll ahead—revenue increased 10.3% in its last quarter alone—it is also on the rim of some serious trouble.

As Jeff Beer recently wrote, analysts are worried Tim Hortons has reached its saturation point in its domestic market. There were 3,365 Hortons in Canada as of Sept. 30, 2012; the company has consistently said there’s room for about 4,000 in total. With 44 new ones opening in the last quarter alone, they may soon need to open donut shops inside of donut shops to keep growing.

Which is why international expansion is so important for Canada’s premier donut depot. The company has been without a permanent CEO since May 2011, when Don Schroeder unexpectedly left the company. Most assume it’s searching for a replacement with American experience to help it navigate a U.S. expansion. Finding the right person has proven difficult; acting chief Paul House indicated in an interview last year that he might still be around at the end of 2013.

The company clearly needs help developing a strategy in the U.S. market. Missteps in the New England region forced it to close 36 stores in 2010. American growth continues to lag, with just 22 new restaurants opening last quarter, half as many as on the other side of the border.

Regardless of who next leads Tim Hortons, betting on an American expansion to maintain growth seems unwise. It took 27 years for Tim Hortons to open its first 500 outlets. Over that time, the brand built an emotional connection with Canadians, supporting charities, backing amateur hockey teams and serving as the default community centre for many small towns. Perhaps most importantly, the brand was unabashedly patriotic, from its hockey rink-laden advertising to its support of Canadian troops in Afghanistan. Underneath the folksy, homespun image is a finely calibrated brand identity, one that’s earned notice from both Ad Age magazine and the Reputation Institute. By the time the company began expanding aggressively in the mid-nineties, even if you didn’t love Tim Hortons, you likely had a hockey buddy, coworker or far-flung relative willing to drive miles for a double-double.

But here’s the fundamental problem for Tim Hortons. Its current brand identity—particularly the Canuck iconography—doesn’t help it in the United States. Without the brand identity, Tim Hortons is just another donut shop. America’s got plenty of those already.

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5 comments on “Why Tim Hortons can’t rrroll into the United States

  1. James you might want to do a little more research. You state that “Tim Hortons is just another donut shop. America’s got plenty of those already”.

    If America already has “plenty” of donut shops, then why does Dunkin Donuts think it can put another 9,000 locations in the U.S over the next few decades? The U.S has “plenty” of donut shops in the northeast – where Dunkin Donuts was founded – but very few in other parts of the country. The U.S is a big place and you can’t judge an entire country by the places Canadians frequent (i.e Buffalo, New York, Boston)

    • Agree with you, you can’t reach at the conclusion by picking the limited sample. I have seen there is lot of space of growth in other parts of US. I’m amused by Tim Hortons strategy of picking the fight with 800 pound gorilla – Dunkin Donuts, as a new entrant.

      Another aspect is it is quite strange how they are focusing in limited geography, why not they bypass the community based growth model and open their outlets at Airports and at the places where people are more open of trying new. I have seen many no-name brands are getting successful by operating at Airports and Tim Horton as well oiled machine can easily successful.

      However I agree with James that Tim Horton’s success in Canada is based upon its effort to connect to Canadians and it took years. Same strategy may not possible in USA but other outlets like Starbucks becomes successful without labeling as default community center.

      Tim Horton needs right strategy and I’m hopeful it will be force to be reckon with in the future.

      Sarab Mann

  2. http://sarabmann.blogspot.ca/
    I initially blogged about the strategy of Tim Hortons
    Their penetration strategy to focus on key 9 states might have strategic logic but I see their strategy rigid and obsolete. Why they could not simply follow the Canadians .The CND dollar is roaring and I don’t think there will be end to the rally.
    You see huge line-up at border , many are going there for shopping and some simply dash to fill the gas tanks .The businesses at the south side are flourishing, coffee stands, grocery shops and malls are seeing unprecedented growth in revenue .
    Why Tim Horton is not following simple strategy of following the Canadians and bring them their favourite coffee and donuts ? ….This can be the example of strategic stubbornness, however there might have been other valid reason behind the imperative

    Sarab Mann

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