Starbucks isn’t the only Western coffee chain struggling in China right now.
Tim Hortons’ same-store sales in the country fell 13.8% in the second quarter, parent company Tims China said on Thursday.
The company also said that it closed some underperforming stores in China in a bid to improve profitability. It worked, as store margins improved and the company reported positive EBITDA, or earnings before interest, taxes, depreciation and amortization, in its relatively short history.
The results demonstrate just how tough the China coffee market has been for Western brands this year.
A generation of Asian-based beverage companies, led by market leader Luckin Coffee, has been aggressively adding locations in China this year. They’ve also cut the prices of their drinks, all in a bid to gain market share. Even Yum China is getting into the game with its own brand, KCoffee, which is opening alongside KFC locations in the market.
(Check out our look at the China coffee market here.)
The environment has quickly put Starbucks on its heels. The company lost its status as China’s largest coffee chain to Luckin last year, even though the latter just opened its first unit in 2017 while Starbucks has operated there for decades. The newer competitors have also hurt Starbucks’ sales this year: Its same-store sales in China fell 14% last quarter on a combination of lower traffic and consumers ordering cheaper items.
Tims China is in the same boat. The company first started opening locations in China in 2019 and rapidly opened more than 900 locations. It then went public in the U.S. in 2022 as part of a reverse merger with Silver Crest, a special purpose acquisition company, or SPAC.
But it is already closing stores and dealing with falling sales. Revenues last quarter declined 11%.
The challenges led Tims China to sell its right to operate Popeyes in the country to Restaurant Brands International for $15 million. RBI and the private-equity firm Cartesian Capital also agreed to invest up to $50 million in the operator.
RBI also appointed Patrick Siewart, a 30-year veteran of the Asian market, as an advisor there.
Tims China last month received a delisting notice from the Nasdaq stock exchange because the price of its shares had been below $1 per share for too long.
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