How Tim Hortons and Other Fast Food Chains Are Entering the War for Value Meals

The owner of Canada’s best-known fast-food chain managed to increase profits in the latest quarter despite a slump in consumer spending that has long plagued retailers and is now spreading to the fast-food restaurant market.

The CEO of Restaurant Brands International Inc. (RBI) said his company’s brands — Tim Hortons, Burger King, Popeye’s Louisiana Kitchen and Firehouse Subs — are “navigating a softer consumer environment.”

“There is no denying that conditions have been difficult,” Joshua Kobza told analysts during an earnings presentation on Thursday.

That sentiment has been growing in the fast-food market in recent months, with major brands like McDonald’s admitting that high interest rates and mortgage rates would cause them to adopt a “street-fighting mentality to win,” the company’s chief financial officer, Ian Borden, said during an April 30 earnings presentation.

Last week, sales at McDonald’s stores open at least a year fell for the first time since 2020.

RBI’s brands — along with McDonald’s, Wendy’s and other fast-food chains — have focused on valuable messages and promotions to boost sales during a summer of intense media competition. dubbed “the value meal wars.”

Cheap burgers, $1 coffee

At Tim Hortons Canada, for example, the chain is advertising $3 breakfast sandwiches with the purchase of coffee — a deal Kobza took advantage of Thursday morning. Burger King has similarly turned the spotlight on its $5 “Your Way” meals.

“I think we’ve been very disciplined in our day-to-day pricing, and it’s paying off,” Kobza said.

Rivals, however, have employed similar tactics. In Canada, Wendy’s advertises two breakfast combos for $4, and Starbucks offers 25 percent off iced drinks on summer Fridays.

McDonald’s, meanwhile, lowered the starting price of a cup of coffee in Canada to $1 and is offering ice cream cones for the same price this summer.

When asked about pricing strategy and competition, Kobza said, “Tim’s is performing excellently and outperforming the market, even in a tough market.”

“That’s been the case for some time now,” he continued, noting that inflation has declined in Canada but unemployment remains higher than in the U.S.

Tim Hortons is particularly strong because it has long held a leading position in the Canadian brewed coffee and breakfast sandwich markets, executives said in the interview.

The brand has spent the past year trying to expand that reach even further. In recent months, it has launched flatbread pizzas nationwide and rolled out new wraps, bowls and sparkling fruit drinks in an effort to capture more afternoon and evening sales.

WATCH | Tim Hortons Tries Pizza:

Tim Hortons introduces pizza in hopes of attracting evening customers

Tim Hortons, in an attempt to capture a share of the fast food market, is introducing pizza to its menu. While some fans like the idea, others say Tim’s should focus solely on coffee.

Despite recent successes with expansion and navigating headwinds, RBI Chairman Patrick Doyle indicated the company is not resting on its laurels.

“We know [consumer] “Purchasing behavior is influenced by many macroeconomic factors and it is our job to adapt to that, but it is clear that we have opportunities to position ourselves to perform even better in all environments and capture market share, regardless of category conditions,” he said.

“We need to continue to improve our operations across the board. This is something we can never take for granted, even with a brand like Tim’s, which is already performing at an astonishing level.”

How RBI fared in the fast food wars

The company, which keeps its accounts in U.S. dollars, said on Thursday that net income in the second quarter totaled $399 million (Canadian dollars 547 million), or 88 cents per diluted share.

The result was higher than net income of $351 million ($481 million Canadian dollars), or 77 U.S. cents per diluted share, a year earlier.

Revenue for the quarter ended June 30 was $2.08 billion ($2.85 billion Canadian dollars), up from $1.78 billion ($2.44 billion Canadian dollars) in the same quarter last year.

Consolidated comparable sales increased 1.9 percent, mainly due to a strong performance from Tim Hortons.

“In the second quarter, we saw significantly lower than expected sales across all of our businesses and it is not yet clear when we will see category strengthening,” Doyle said on the same call as Kobza.

Doyle admitted that sales weren’t what they wanted, but he also noted, “Relatively speaking, we’ve done pretty well.”