Tencent Invests in Canadian Cafe Tim Hortons, Eyes 1500 Stores in China

China’s coffee market has attracted a number of domestic and international players.

Author: Belinda Zhou   

Canadian coffee chain Tim Hortons Inc. announced on Tuesday that it will digitize its business in China and add 1,500 stores in the country with the investment of Tencent Holdings Ltd. (HKEX: 0700).

Toronto-based Tim Hortons announced the Tencent investment on the microblogging site Weibo on Tuesday but didn't disclose the amount of the proceeds in the statement.

The coffee chain said that it will accelerate its digital innovation with Tencent's mini-program, lightweight apps that run inside the messaging app WeChat. 

"Tencent has established a unique platform that opens up consumers' online and offline lives. We will accelerate digital innovation, including the use of WeChat mini program, to bring customers a better consumer experience," Yongchen Lu, the chief executive officer of Tim Hortons China, said in the statement.

Lu previously served as the chief financial officer at Burger King and later introduced Canadian coffee brand Tim Hortons to China through the establishment of a joint venture.

Tim Hortons entered the Chinese market in February last year and based its first store in Shanghai's People Square. The company said in the statement that it plans to add over 1,500 outlets across the country together with its current 50 locations in China.

The fast-growing company opened its stores at breakneck speed; Tim Hortons opened its second store 20 days after landing the first store, and after 50 days, a third store was opened.

"When I joined Burger King in 2012, Burger King only had more than 50 stores, and now there are more than 1,000. So, why is it impossible to open 1,500 Tims in 10 years?" Lu said in an interview with Chinese business media in April 2019.

Tim Hortons and American fast food restaurant chain Burger King announced a $12.5 billion merger in 2014 to form Restaurant Brands International (NYSE: QSR), which was expanded in a 2017 purchase of American fast-food chain Popeyes Louisiana Kitchen.

The restaurant giant ranked as the fifth-largest fast-food restaurant entity after Subway, McDonald's, Starbucks, and Yum!Brands.

The price of freshly ground coffee of Tim Hortons is sold at 17 yuan ($2.4), similar to Starbucks' pricing, while a cup of flavored coffee ranges from 20 to 30 yuan ($2.9 to $4.3).

Cashing in on Chinese Coffee Drinkers 

China's coffee market has attracted a number of domestic and international players. 

Luckin Coffee (Nasdaq: LK) fired its CEO and COO on Wednesday after an uncovered fraud. Since April 7, LK shares have been halted at $4.39 from its recent high of $27 in late March. As of January 2020, it managed 4,507  stores, exceeded the number of Starbuck locations in China.

A number of foreign brands have entered into the booming Chinese coffee market in recent years. California-based Peet's Coffee entered the Chinese market in 2017,  while Japan-based Doutor Coffee opened its first store in Shanghai in 2018. British coffeehouse Costa Coffee owns 460 outlets in China. Still, Seattle-based Starbucks is by far the biggest foreign player, with 3,600 stores in China and a digital cooperation agreement with Alibaba with

Shares in Restaurant Brands International were trading at $49.37 per share, down 5% Wednesday morning.