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Customers queue up outside the new Tim Hortons cafe in Shanghai on Tuesday. Photo: Tim Hortons

Double double happiness? Canada’s Tim Hortons opens first China cafe, as diplomatic row brews between Ottawa and Beijing

  • There were queues outside the new Tim Hortons cafe in Shanghai
  • But the brand faces tough competition from other big coffee chains already established in China, like Starbucks and Costa

Tim Hortons has arrived in China, joining the high-stakes battle to sell coffee in a massive country that mostly drinks tea.

The Canadian coffee-and-doughnut chain, run by Burger King-owner Restaurant Brands International Inc, plans to focus on “everyday value” as it muscles up against the ambitious plans of local and foreign players such as Starbucks Corp.

In Canada, the brand is synonymous with down-home style, and the ubiquitous order of a “double double” – coffee with two serves of cream and sugar.

The first Chinese Tim Hortons opened on Tuesday in Shanghai. It is debuting at a tricky time as a diplomatic row brews between China and Canada, over the arrest in Vancouver of Huawei executive Sabrina Meng Wanzhou, and China’s detention of Canadians.

While more consumers may be giving java a shot, the coffee market remains relatively small. Only about a third of Chinese consumers bought hot coffee in 2017, according to a report from Kantar Worldpanel. Tim Hortons has its work cut out for it, said Jennifer Bartashus, an analyst at Bloomberg Intelligence.

“It’s a tough market,” Bartashus said. “Competitors have been there for a long time, and already established some sort of reputation with the consumer.”

The new Tim Hortons cafe in Shanghai. Restaurant Brands International Inc

Tim Hortons is targeting to open 10 to 20 locations in Shanghai this year, Alex Macedo, president of the chain, said in an interview. The brand is trying to stand out from rivals with a robust food menu that includes made-to-order shrimp sandwiches and salads, he said.

“Some of these other competitors, these coffee shops, they don’t have food at all,” Macedo said. “We’re going to migrate toward being more of a cafe destination for a place for you to sit and hang out for a while.”

Besides joining a crowded field that includes Dunkin’ Brands Group Inc., Coca-Cola’s newly acquired Costa Coffee and local startup Luckin Coffee, Tim Hortons faces a slowing Chinese economy and complicated geopolitical situation.

Its origins as a beloved Canadian brand may run into some nationalistic consumers, given the political tensions underway currently.

Huawei’s Meng has been held in Canada at US request since last December. The Canadian government said in January that 13 citizens have been detained in China since Meng’s arrest.

Many Chinese consumers, however, seem unfazed. Down jacket maker Canada Goose, which opened its flagship store in Beijing in December amid calls for boycott of Canadian goods, downplayed the backlash fears earlier this month, and shoppers lined up outside its store.

There were queues outside the new Shanghai Tim Hortons on Tuesday, too.

But Tim Hortons has struggled to build a following outside its home country. The chain, named for a Canadian hockey star, opened its first Chinese cafe on Tuesday in People’s Square, in Huangpu, and is banking on a growing middle class keen to try Western inventions like its honey cruller doughnuts.

“Tim Hortons will need to offer not just something unique that Chinese consumers can’t find at other chains, but also spend heavily on marketing to build awareness of the brand,” said Jason Yu, Shanghai-based general manager of Kantar Worldpanel in Greater China.

Though the coffee market in China may be in its infancy, Yu said there have already been some high-profile failures. British chain Pret A Manger pulled out of China last December after failing to gain a following.

Starbucks has operated in China for two decades, but is pushing harder to find growth amid concerns that it’s peaked in the US. The chain opens a store in China roughly every 15 hours and has said that country will likely be a bigger market one day than the US, where it has more than 14,000 cafes. Starbucks, however is seeing slower growth in China, with transactions down 2 per cent in its latest quarter.

Mandy Nian, a 26-year-old student in Shanghai, likes foreign coffee but hasn’t heard of Tim Hortons. She buys Costa when she’s going to the movies, taking advantage of a discount that comes with the purchase of a ticket. She’s willing to pay up because she views brands from outside China as “higher quality.”

“I can accept a little higher prices than the local brands,” she said.

Dunkin’, meanwhile, failed in two previous attempts to crack the market but is trying again with its namesake coffee brand – a favourite in Boston. The company has 39 locations in China, with plans to open 1,400 over the long term.

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