Timbits cereal a novelty, but may dilute Tim Hortons brand, experts say

Hey there, time traveller!
This article was published 12/01/2020 (2443 days ago), so information in it may no longer be current.

Once best known for coffee and baked goods, the offerings at Tim Hortons offerings today boast ground coffee, made-to-order sandwiches and gourmet doughnut flavours. In the latest foray beyond the brand’s roots, the humble Timbit wants a home in Canadians’ breakfast bowls.

The expansion into the cereal aisle seeks to introduce sugar-loving tots to the Tim Hortons brand with Timbits cereal, but experts say this continued diversification may leave consumer confused about what the coffee chain’s brand represents. Cereal-maker Post Foods Canada Inc. may fall on the winning side of the partnership, they suggest.

Building loyalty with the next generation of consumers is important for a brand with as many “fanatics” as Tim Hortons, said David Soberman, a professor at the University of Toronto’s Rotman School of Management. The company needs to corner young Canadians now to maintain its position in the market for years to come.

The new product — a partnership with Post, purveyor of cereals such as Oreo O’s and Honey Maid S’mores — is geared toward a younger audience, he said. Kids love Timbits, and children begging for the new cereal now will theoretically evolve into loyal Tim Hortons customers as they get older.

That’s likely the intended outcome, Soberman said, but the launch could also dilute the brand’s image as a go-to for the best coffee and doughnuts in the country.

“There’s a confusion as to what the brand is,” he said. “This is even a further example of that.”

In recent years the company has battled a spate of negative news as it faced off with a dissident group of franchisees that accused the chain’s parent company, Restaurant Brands International, of mismanagement. Tim Hortons watched its reputation slip in the court of public opinion and its earnings stall.

RBI CEO Jose Cil recently said earnings were “not where we want them to be” at the chain. For its most recent quarter, RBI reported comparable sales, a key retail metric, at Tim Hortons fell 1.2 per cent in Canada and system-wide sales in the country dropped by 0.1 per cent, according to financial documents.

A bevy of pilot programs and product launches arrived in an effort to boost sales.

Whether that quest for sales led the company to extend its reach too far is a topic of frequent discussion among the faculty of Centennial College’s food media program, said the program’s culinary ambassador Rodney Bowers.

Tim Hortons targeted young, urban professionals with its Innovation Cafe in downtown Toronto, pouring nitro coffee and serving premium doughnuts and sandwiches.

It launched several of its soups and chili in supermarkets. It trialled Beyond Meat burgers and breakfast sandwiches, eventually dropping the burger and keeping the plant-based protein breakfast option in select locations.

All that happened in 2019.

“Can you be all the things to all the people and still be a strong brand?” asked Bowers.

The latest Timbit cereal innovation is “completely polar opposite to the last big splash they made” putting plant-based proteins on the menu. One promotes a seemingly healthier plant-based meal, while the other offers a sugary breakfast option.

Tim Hortons deferred inquiries about the cereal to Post Foods, and did not respond to emailed questions about why it decided to collaborate with the cereal maker or the nature of the partnership.

“The grocery and retail business is a small and exciting part of our overall business and although you will see us launch new products from time to time, our focus remains on growth through our famous, core categories,” spokeswoman Sarah McConnell said in an emailed statement.

Post Foods was unable to make anyone available for an interview or answer questions via email by deadline.

A Post Foods Canada statement announcing the product indicates that the company has licensed the Timbits registered trademark from Tim Hortons. Financial terms were not disclosed.

The winner in this arrangement appears to be Post Foods, said Bowers, in acquiring the right to use such a well-known symbol — the Timbit — in its cereal.

Every category within a grocery store depends on innovation to grow sales and protect shelf space, said Braden Douglas, a founding partner of Surrey-based Crew Marketing Partners.

Grocery stores allot a certain amount of shelf space to each company, but new entrants sometimes crowd out existing products. Companies innovate, in part, to avoid the label of poor performer and having their shelf space reduced.

Consumers will jump at the chance to try the doughnut-hole breakfast, he predicted, but it’s unlikely many will add it to their regular breakfast repertoire.

Consumer trends toward healthier eating work against the novelty product. One cup of the birthday cake flavour packs 130 calories and 13 grams of sugar, while the same portion of the chocolate glazed variety runs 140 calories and 17 grams of sugar, according to Post’s website.

As well, the way people eat breakfast has changed, Douglas said, with “so many alternatives” available, such as cereal bars, handy grab-and-go options and more convenient places for people to pick up their first meal of the day.

Douglas believes the product will be “an in-and-out innovation” — around for a few years and then fade out.

“In a year or two, I don’t think you’re going to see it on shelves anywhere … because it’s not in line with health trends and what’s going on with consumers anyways.”

This report by The Canadian Press was first published Jan. 12, 2020.

Companies in this story: (TSX:QSR)