Tim Hortons to battle Starbucks; price rises likely

Thu Aug 14, 2014 7:28pm EDT
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By Solarina Ho

TORONTO (Reuters) - Canadian coffee and donut chain Tim Hortons, which has offered only one coffee blend in its 50-year history, hopes to lure new coffee drinkers and fend off rivals such as Starbucks Corp (SBUX.O: Quote) and McDonald's Corp (MCD.N: Quote) with the launch throughout North America of its new dark roast blend.

Tim Hortons, which announced the move on Thursday, may also increase prices to tackle rising costs and competition from U.S. rivals expanding in Canada.

"Looking at the coffee market, I would suggest that, given the degree of cost increases, that we are looking at prices going up sometime in 2015," Tim Hortons Inc THI.TO chief executive Marc Caira said on Thursday.

Tim Hortons, which says it serves nearly 8 out of every 10 cups of coffee sold in Canada, outlined a plan in February to kick-start growth and improve returns by fine-tuning its menu to encourage more spending, improving service and opening new restaurant formats.

Last week, the chain reported market-beating quarterly growth that showed its strategy, which includes higher priced and new menu items, is paying off. Still, traffic declined for the ninth consecutive quarter in Canada and is flat in the United States.

Caira expects the new dark brew, which will also be available for home brewing in formats such as Keurig Mountain Inc's single serve pod, to contribute to results, but he declined to give details.

The alternative brew was first sold late last fall in Columbus, Ohio and London, Ontario, and then in the province of Quebec in June. It will be offered at all 4,496 restaurants across Canada and the United States starting Friday.

"There's about 38 to 40 percent of coffee drinkers that are looking for a darker roast," said Caira. "Those are very intriguing numbers for us ... If we weren't pleased with the (initial) numbers, we wouldn't be launching it."   Continued...

Tim Hortons employees prepare coffee before the company's annual general meeting in Toronto, in this file photo taken May 8, 2014. REUTERS/Peter Jones/Files