Hortons hopes to spread the cult of Timmy in U.S.

By Published on .

Wendy's Canadian doughnut and coffee chain Tim Hortons has hooked Canucks. Now it's out to do the same in the U.S.

With its "Always Fresh" motto, Timmy's-as locals lovingly call it-is bigger than any other fast-feeder in the country, including McDonald's. In the land with more doughnut shops per capita than any other, the brand named for its hockey-legend founder is as synonymous with Canada as the maple leaf.

Hortons has a cult-like following. Over 10% of its customers visit an astounding 10 times a week or more and the numbers of those visiting three to five times a week has solidified. And while its "double double" coffee (double sugar, double cream) and Timbits (mini doughnuts) are foreign to most Americans, that soon may change. The $1 billion brand bought by Wendy's International in 1995 now has 251 U.S. units with plans to double that by the end of 2007.

North of the border, its 2,439 units practically laughed Krispy Kreme out of the market and Starbucks is just getting started. Hortons controls 27% of the fast-food market in Canada and is 11 points ahead of McDonald's, according to Wendy's management. It differentiates itself on freshness and price value, said Bill Moir, exec VP-marketing.

Another reason for its success is menu diversity. From its start with coffee and doughnuts only, the "fast-casual chain with a drive-thru" has managed to successfully expand into other baked goods along with soups and sandwiches, giving it a relevant offering for its 24/7 operation. But don't overlook the coffee. In Canada, it has a 62% share of coffee sales while the next closest competitor, Second Cup, has 7%. At least half of the chain's sales come from coffee.

STREET TAKES NOTICE

Hortons has gotten the attention of Wall Street, too, accounting for nearly half of Wendy's profits and about 25% of its revenue. After posting same-store sales in the upper single- to low-double digits for more than a year, in March Hortons posted its weakest same-store sales figures on tough comparisons, with 3.3% for Canadian and 5.5% in the U.S. year-over-year. However, analysts are still impressed with the brand.

Despite its fledgling penetration in the U.S., Hortons has "really strong ratings," said Bob Sandelman, president of Sandelman & Associates. "They're going to have competition here from Starbucks, Dunkin' Donuts, Panera Bread and other ... chains, but on the other hand it will make the segment even more competitive."

Hortons' management isn't fazed. Mr. Moir cited a Toronto store where Starbucks and Hortons share a common wall. "We're doing exceedingly well," he said. "We coexist very well with them."

Nor does it worry about Dunkin' Donuts or chains like Panera or Einstein Bros. or convenience stores. "In Detroit, [consumers] would compare us in the morning and saw it as place to get everything in one place," said Cathy Whelan Molloy, VP-brand marketing and merchandising.

Hortons, which spends about $55 million on advertising in Canada and $6 million in the U.S., has worked with Enterprise Advertising, Toronto, a unit of WPP Group's JWT, since 1990. WPP's MindShare, New York, and Detroit, handles media buying.

The chain has a reputation for conservative, if not corny, advertising that works. In February, the chain broke a "guylogical" effort more akin to beer advertising asking men to share the pain of dealing with women. It raised men's awareness for lunch and the ire of some women who called it sexist.

Brand In Demand

The Tim Hortons chain, named for its hockey-legend founder, is as synonymous with Canada as the maple leaf

In this article:
Most Popular