Timmy's legacy
If you didn’t know, coffee is a big deal. Coffee is in fact the second largest traded commodity in the world.
The first one, oil, is something Canada produces in abundance. But even though Canada doesn’t produce coffee beans, it seems addicted to it. Canada now ranks third amongst the world’s largest coffee drinkers in the world, after the Netherlands and Finland. The average Canadian drinks a whopping 152 liters of coffee annually.
That’s almost the size of a barrel of oil. As Canadians savour their coffee more than ever, however, people are wondering if this trend is actually desirable.
Many years ago, Canadians travelling to Europe quickly noticed two shockingly lifestyle differences: more smoking and aromatic coffee. The smoking differential remains while coffee, on the other hand, has lessened in recent years. Europeans drink mainly smaller, stronger coffee portions, yet North American coffees have changed dramatically.
The charge for stronger coffee, led by Starbucks more than two decades ago, enticed other retailers to adjust as the North American consumer’s palate for coffee changed. This same phenomenon has occurred in Canada. Most with significant market shares in coffee have “Europeanized” their coffees, including Tim Horton’s. What was coupled with this phenomenon is McDonalds’ Canada has also made in-roads in the coffee game in recent years. With one restaurant per 25,000 Canadians, McDonalds’ success in the coffee space has been noticeable.
When looking at Canada’s love affair for coffee, Tim Horton’s legacy can hardly be overlooked. Canadians may possibly drink more coffee due to our colder climate, as Scandinavian countries do, but the story is much more complex than that. Canada has one Tim Horton’s for every 9,000 consumers, which is a high ratio.
It has built its empire by connecting with many communities in many ways, both urban and rural. For decades, their corporate and social engagement was textbook, as Tim Horton’s sponsors sport teams and holds summer camp drives.
By giving back, Tim Horton’s has sold more coffee. It is not a fluke that Canadians are the largest consumers of coffee outside the household, according to Eurometer. That trend, is known in the sector as the “Timmy’s effect” and has been on-going for more than a decade. Coffee drinking in Canada has changed immensely over the last five years.
Yet in recent years the demand for coffee outside the home has contracted in Canada by almost 3% yearly. The rising popularity of the single-serve market and coffee machines has positioned itself as a strong rival to the traditional drip brewers, prompting more to drink at home. Deemed more convenient and less wasteful, the single-serve coffee pods have put Canada almost at the top of coffee drinkers in the world.
That is why many coffee retailers are selling us pods at a cost to the environment. With some leadership from companies like Loblaw, Canada has seen its first compostable coffee pod. More manufacturers will follow suit, to the delight of Millennials looking for sustainable solutions. Speaking of which, Millennials have also something to do with this as their consumption is increasing annually in the order of 5% to 6%.
To help coffee’s cause, the commodity is getting some good press of late. Many studies suggest that drinking up to 4 cups of coffee per day may actually be healthy.
The International Agency for Research on Cancer (IARC) has recently downgraded coffee from a cancerous food product to one that is part of a healthy diet. In fact, it has stated that coffee can lower the risk for liver and uterine cancer, but the IARC does warn against drinking very hot beverages (anything over 150 degrees Fahrenheit) since they are considered to be possible carcinogens.
Over the last 50 years, Tim Horton’s leadership has given us a very different coffee drinker in Canada, but things may change. In a mega deal in 2014, our beloved Tim Horton’s was sold to 3G Capital and Warren Buffett’s Berkshire Hathaway, owner of Burger King. In a tax inversion scheme, Tim Horton’s remained Canadian-based but is now American-controlled.
With a new owner, Tim Horton’s is arguably a very different company now, with many layoffs and new hires in recent months. It is even turning its attention to the U.K. where it is trying to make a case with British consumers.
Beyond Canada, and perhaps the Middle East, Tim Horton’s really hasn’t had much success. It will be interesting to see if Restaurant Brands International, Tim Horton’s new owner, can figure out how to lure the British away from their tea and adopt a double-double. Meanwhile, Tim Horton’s should never forget how it has transformed the coffee market in Canada to its benefit. Because if it does, other retailers are more than ready to pick-up the baton.
