Tim Hortons' rollout of flatbread pizza, its latest effort to improve its relatively weak presence in Canada’s quickly growing later-day fast-food market, is not without risk.
The chain launched pizza across the country on Wednesday after a two-year pilot project in selected cities. The personal-sized pizzas come in four varieties, are made fresh and are priced under $8. The rollout, with a national media campaign after a few weeks of soft launch, is Tims’ “big bet” this year, says Hope Bagozzi, the company’s chief marketing officer.
Experts say Tim Hortons’ desire to grow in what the industry calls the “P.M. daypart” isn’t a surprise. “We've seen quick-service restaurants do this sort of thing before,” Mike von Massow, a food economist at the University of Guelph, told Yahoo Finance Canada. “We saw McDonald's going to breakfast and we've seen companies go the other way.”
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But von Massow and others say the chain’s path to success may not be an easy one. A number of hurdles stand in the way, from implementation in stores to the burden of a very well-known brand historically tied to coffee and donuts. And then there’s the fact that McDonald’s tried pizza … and failed.
McDonald’s flirtation with pizza in the 1990s was motivated by similar ambitions to take more of the dinnertime market, and informed by the chain’s successful breakfast market move with the Egg McMuffin in the 1970s. The rollout in Canada wasn’t universal, and though it was well promoted — one ad campaign starred Howie Mandel — the chain phased out pizza by the end of the decade.
“McDonald's had a hard time because it took them 11 minutes to cook a pizza and customers at McDonald's weren't used to waiting that long for food,” Bruce Winder, a retail analyst, said in an interview with Yahoo Finance Canada. “And the other thing is it sounds like their taste at the time wasn't up to par with other chains.”
Bagozzi says Tim Hortons didn’t study the McDonald’s example at great length, largely because the technology has changed so much. The high-speed convection ovens in their restaurants can bake flatbreads in under 90 seconds. “So we're not impacting speed of service, and it's delivered in a comparable amount of time” to existing lunch offerings, she said. “I think that's the big change from back in the 90s.”
Strayers gotta stray
It’s not the first time Tim Hortons has made a big leap into the dinner category. The afternoon-and-beyond segment is the fastest-growing one in the fast food industry in Canada, according to Tim Hortons, representing an $8.5 billion market that is growing at an annual rate of five per cent. In 2022, the coffee chain’s market share in the P.M. daypart was just four per cent.
In 2019, the brand jumped on the plant-based meat alternative bandwagon, adding two Beyond Meat burgers to its menu. Within a few months, the burgers were pulled from Tim Hortons menus across the country. Jose Cil, Restaurant Brands International’s CEO at the time, acknowledged shortly after that some of the company’s new product launches “strayed too far from our core categories that we’ve always been famous for.”
The effort to expand into lunch and dinner comes after the company launched a back-to-basics strategy in 2020 in response to falling sales. The initial plan was focused on improving the brand’s core offerings, including coffee, baked goods and breakfast items. Once it had made progress in those areas, Bagozzi says Tims turned its attention to “places where we haven't been strong historically, but where guests’ tastes are changing, where we need to be strong.”
Risks and rewards
Experts have identified a few essential points that need to be addressed when adding something new to a menu, which they say Tim Hortons would certainly have considered in depth. The high-speed convection ovens eliminate concerns about wait times, and changes to the physical layout of a restaurant are negligible. Prices are highly competitive, and the two-year pilot project means Tims is confident that customers will like the four options.
The unknowns are whether Tims’ flatbread pizzas are good enough to make a difference, and whether Tim Hortons can succeed in persuading customers that it is a place to go for pizza.
“The pizza market is huge, but it's very competitive,” said Winder, the retail analyst. “So, your taste has to be really good, because the bar is set high. People are used to some really good-quality pizza from a number of big chains as well as small entrepreneurs.”
Tims’ own iconic brand may also prove to be a hindrance. “The stronger the brand, the more people specifically identify it with certain products,” Winder said. “In Tims’ case, it's coffee and donuts, maybe you can add sandwiches or something now, but it's coffee and donuts. So pizza is a fairly big stretch away from that.”
Von Massow agrees. “If you're going to McDonald's, you're gonna go get a burger,” he said. "If you want pizza, there's a pizza place probably within a block of the McDonald's. So it's not hard to get something that makes sense in your mind. And I think that's the same challenge that Tim Hortons will have.”
On the other hand, the brand’s strength means even if it gets it wrong on a new menu item, the consequences won’t be crushing. If the pizza play succeeds, Tims gets a bigger afternoon market share. If not, they try something else. “I think if people don't like their pizza, they just won't buy pizza,” said von Massow. “It's unlikely to have a significant impact on the coffee-donut-cookie brand.”
Tim Hortons’ Bagozzi says the strategy is to emphasize flatbread over pizza in order to capitalize on existing brand associations, rather than trying to go up directly against pizza chains. "Research indicated that because we're so known for our bakery credentials, we could do more with that in the afternoon,” she said.
“Strategically, having it be flatbread and having that come out of an oven and having people understand the savoury evolution of our menu in the afternoon … I think that's what people will get their arms around.”
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.
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Tim Hortons isn't the first Canadian fast food giant to try pizza. Here are the stakes - Yahoo Canada Finance
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