Tim Hortons turns 51: Canada’s coffee market brews up big changes since 1964

Near St. Lawrence Market in downtown Toronto there’s a Tim Hortons to the south, a Starbucks to the west and a Balzac’s sandwiched in between the two java juggernauts.

“There’s room for us all,” says Diana Olsen, the president and founder of Balzac’s Coffee Roasters at her Market St. location in an interview with Yahoo Canada News.

And so it seems there is. All three stores were bustling with a mix of tourists and locals on a recent spring weekday afternoon. Canadians are certainly hopped up on java, sipping 2.1 billion servings of coffee every year, according to a report by market research firm NPD Group.

The leader in the take-out coffee market -- Tim Hortons officially turns 51 on May 17. The coffee industry in Canada has changed significantly since hockey player Tim Horton opened his first store in Hamilton back in May 1964. For one there was no Starbucks Coffee Co. here – the first Canadian store didn’t open until 1987 in Vancouver. And it was decades later that Olsen gave up the corporate gig she hated and opened her first Balzac’s café in Stratford, Ont., in 1996.

Tim Hortons is the top coffee shop in Canada, with a whopping 3,773 stores across our home and native land, 892 in the United States and 59 in the Gulf Cooperation Council.

Foreign competition

It has remained the leader by successfully serving up a side of Canadiana with the iconic double-double and Timbits. While many Baby Boomers who grew up with Tim Hortons see it as part of the national fabric their kids and grandkids might not be as loyal, notes Alan Middleton, assistant professor of marketing at York University’s Schulich School of Business in Toronto.

Big change is percolating, and it’s not only the aging population that’s driving changes. In a whopper of a deal Tim Hortons merged with Burger King in late 2014, with headquarters remaining in Oakville, Ont. In recent years two other American fast-food chains have been gaining ground in Canada’s take-out coffee market – namely McDonald’s and Subway. Yes, Subway. The chain known for their cheap subway sandwiches has become a popular choice with young, cost-conscious coffee fiends, says Middleton.

Tim Hortons, now owned by Brazilian private-equity firm 3G Capital, is not likely to be knocked from its top spot. Other long-time Canadian coffee chains? Well, they’ve been burned by the new foreign competitors. Both Second Cup Ltd. and Timothy’s World Coffee started in 1975, but they have been unable to maintain the head start they had over other premium coffee brands, such as Starbucks and Balzac’s.

Starbucks vs. the indies

Starbucks started as a single store way back in 1971 in Seattle’s historic Pike Place Market. These days the chain has more than 21,000 stores in over 65 countries. There are about 1,500 stores with the iconic white-and-green logos across Canada.

While Olsen, an extremely calm, confident and jitter-free woman, has no ambitions for Balzac’s to become the next Starbucks she sees them as going after the same customer.

While she does not see Timmies as a direct competitor it seems Tim’s does see indie shops as a threat. Recently the big chain has been offering items usually seen at the small indies, including testing single-origin coffee in some stores.

That’s a smart move as Millennials and Gen Z have shown they deeply care more about the taste of their coffee and where it comes from. Tim’s is a national icon, but the execs are right not to rest on their laurels assuming the next generation will automatically keep up the Canadian tradition of going to Tim’s every day, says the marketing professor.

Unlike Tim Hortons’ stores, Balzac cafés are beautifully decorated, Parisian-inspired spaces where customers are encouraged to while away an afternoon. There are currently 10 Balzac’s in southern Ontario. Does Olsen plan on massive expansion à la Starbucks or Tim’s? No.

“I guess it’s lack of ambition,” explains Olsen, sitting in her bustling Market Street location.

Olsen, originally from the West Coast, has gotten “hundreds of requests to franchise” in Ontario and across Canada, but seems quite content with the level of success and control she currently has over her cafés.

Meanwhile out in Vancouver, Peter Kim also gave up a corporate gig to run his own shop. Kim and two close friends opened Timbertrain Coffee Roasters in the hip Gastown neighbourhood in Vancouver in 2014.  The shop has been an instant success in a city that has indie coffee shops and Starbucks on every corner. Kim isn’t fazed by all the competition. In fact, he welcomes Starbuck’s effort to educate customers about single-origin coffee.

“They’re actually educating people for us,” says Kim in a phone interview from Vancouver. “It’s great that they’re pushing that, they have such brand power.”

Rise of the pods

All take-out coffee shops have woken up to the massive popularity of coffee pods in recent years. All of the big guys offer pods, that can be made at home or the office for less. Most indie shops sell a variety of take-home beans to their loyal customers. The coffee pod machines, such as Tassimo and Keurig, have certainly jolted the coffee industry awake. NDP Group attributed a recent thee per cent drop in out-of-home coffee consumption to the burgeoning pod market.

From hot to cold

As spring turns to summer the coffee chains are dreaming up new ways to lure customers in to their stores and on to their patios. Waist-lines be damned, Tim’s recently released its latest summer treat -- the Creamy Chocolate Chill. And Starbucks just started offering health-conscious customers a slightly less guilty indulgence: a Mini Frappuccino.

You won’t find any drinkable desert concoctions at Balzac’s or Timbertrain.

“We’re rooted in classics,” says Olsen. “We’re not going to do those crazy Frappuccinos.”

There are plans to offer cold brew coffee, though. Timbertrain already offers the hip drink on tap. And Starbucks has also started offering their version at select stores in Canada and the U.S.

A part of our daily lives

While Tim Hortons and Starbucks have borrowed ideas from the indie café community most indies have no master plan to try to become the next Timmies. Both Kim and Olsen seem happy with what they’ve accomplished so far and simply want to continue to offer high-quality coffee in a cool environment to their loyal followers. Yes, both are open to expanding their small businesses down the road, but there are no plans for national or world domination.

That’s good news for Tim Hortons, says Middleton. Canada’s most popular coffee chain is already in the midst of dealing with significant cuts at every level and a corporate culture shift, notes the marketing expert.

For now, Canada’s thirst for coffee seems to be brewing up more than enough business for all the Timmies, Starbucks and Balzac’s that are such an important part of our daily routines.

Follow Melissa Dunne on Twitter: @Melissa_Dunne33