Tim Hortons bets on Canadian branding in China despite current political tensions

Tim Hortons opened its first Chinese store on Tuesday, and the iconic Canadian coffee and doughnut chain is making no secret of its ancestry despite simmering political tensions between the two countries.

The store in Shanghai — the first of a planned 1,500 — has hockey sticks for door handles and abundant maple leaves, on cups and dusted on the tops of lattes.

“I’m not the political expert,” Tim Hortons President Alex Macedo said Tuesday. “We can’t judge when or how or where this is going to end…. If we can provide good service and a good restaurant environment, then that’s the best we can do.”

When Macedo talks about the China expansion, he’s fond of repeating some version of this phrase: “We try to focus on what we can control.”

Fast Food Franchises in China. Tim Hortons

And he cannot control what happens with Meng Wanzhou, the Huawei executive who was arrested in Vancouver late last year at the behest of U.S. authorities, an act that infuriated Beijing and set off a diplomatic spat between Canada and China.

What Macedo can control, though, is how much Tim Hortons reveals about its Canadian roots to Chinese consumers.

But he wasn’t willing to tamper with the brand’s two main pillars: Canada and hockey.

“Our brand has an essence and a spirit,” he said. “And that’s been around and survived 60 years.”

“When we tested the brand and our products, people were fine. I don’t know. We didn’t test anything political, I don’t think. We had, you know, two-hour wait lines today in the restaurant. People were wrapping around the block. So I think it was a good day.”

The China expansion is out of the Restaurant Brands International Inc. playbook.

RBI, which owns Tim Hortons, Burger King and Popeyes Louisiana Kitchen, expanded Burger King in China by signing a master franchise agreement with the private equity firm Cartesian Capital Group — essentially designating a single franchisee to build out the market.

Cartesian builds and runs the restaurants, with the option to sub-franchise them. By using the same strategy — and the same private equity firm — with Tim Hortons in China, Macedo was confident the company will surpass its goal of opening 1,500 locations in 10 years, political tensions or not.

We didn’t test anything political

But there is a legitimate risk to businesses connected to countries that have ran afoul of the Chinese government, said William Reinsch, a senior advisor at the Center for Strategic and International Studies in Washington, D.C. who served as under secretary of commerce for export administration under U.S. President Bill Clinton.

“The Chinese have gotten very good over the years at playing the nationalist card,” Reinsch said, referencing a boycott of South Korean brands and businesses in China starting in 2016 after the Chinese government voiced its displeasure with South Korea’s purchase of an American missile-defence system.

“If the Chinese government is annoyed and feels that it has unfairly dealt with, then it will respond by telling its people that the Chinese people have been hurt.”

It’s not yet clear whether the Huawei episode will reach that level, he said, though news of a spike in Chinese imports of Canadian soy beans in January could be interpreted as an encouraging sign for Canadian brands in China.

Despite the risks, Reinsch said he didn’t think the expansion was ill-advised.

“They’re not the only coffee-doughnut place in China,” he said. “One of the things you have to do is distinguish yourself from the rest of them. And one of the most obvious things that Tim Hortons can do is to basically say they’re not American.”

Published at Wed, 27 Feb 2019 02:17:58 +0000