This is an English adaptation of a FoodBud historical article originally published on September 28, 2022.
Tim Hortons' China business, Tims China, officially listed on Nasdaq on September 29, 2022. The company completed its merger with SPAC Silver Crest Acquisition Corp. on September 28, U.S. Eastern Time, and began trading at 9:30 a.m. on September 29 under the ticker THCH.
The listing made Tims China the first China coffee-chain SPAC listing. The company said it would continue expanding its business and investing in China's domestic coffee market.
Tims China was established in 2018 as a joint venture between Tim Hortons' parent company Restaurant Brands International, or RBI, and Cartesian Capital Group. It opened its first coffee shop in China in February 2019.
The brand positioned itself in the RMB 15-30 per cup coffee segment.
According to the prospectus, Tims China's revenue was:
Revenue grew 271.9% in 2020 and 203.4% in 2021.
Store growth also accelerated. As of December 31, 2021, Tims China operated 390 stores across 21 cities in mainland China. Company-owned stores increased from 31 on December 31, 2019 to 373 on December 31, 2021, meaning the store base grew more than tenfold over three years.
Same-store sales growth for company-owned stores increased from 7.4% in 2020 to 15.7% in 2021.
The prospectus also showed improving operating costs at the company-owned store level:
At headquarters level:
The company attributed these improvements to scale effects and operating efficiency. Adjusted EBITDA for company-owned stores increased from RMB 13.519 million in 2020 to RMB 27.467 million in 2021, up 103.2% year on year.
Within three years of entering China, Tims China built its growth strategy around a combination of coffee, warm food, localization, and community-style operations.
Its Gold Maple and Red Maple stores are equipped with full back-of-house kitchen facilities, allowing stores to prepare warm food and baked products on site. This supports food quality and gives the company capacity to develop more food categories.
Beyond coffee-and-breakfast combinations, Tims China said it could launch additional warm-food categories to cover more dayparts. At the time, Tims had more than 40 food SKUs and planned to keep increasing the contribution of warm food while making fuller use of existing equipment and store space.
Outside its core freshly brewed coffee products, most Tims China products were developed locally. Examples included coconut cold brew, lemon cold brew, and lychee cold brew, all designed around Chinese consumer preferences.
The company had developed more than 30 new products per year in the past. It said more than 70 new products were expected to launch in 2022, with 8-10 test products behind each launched item.
To serve different consumer occasions, Tims China used three main store formats:
The company also opened Tims Go shop-in-shop locations with partners such as Metro and Tims Express small-format stores with Sinopec's Easy Joy convenience-store network, bringing the brand into supermarkets and gas stations.
Tims China had built and continued expanding a digital ecosystem in China. Its channels included vertical service platforms such as Ele.me, Tmall, and Meituan-Dianping, as well as social platforms including Weibo, Xiaohongshu, and Douyin.
According to the prospectus, digital orders, including delivery and pickup, accounted for about 73.0% of revenue from company-owned and operated stores in 2021, up 8.8 percentage points from about 64.2% in 2020.
The company highlighted the experience of its management team, led by CEO Lu Yongchen. The team had previously expanded Burger King in China from dozens of stores to more than 1,000 and turned the business profitable.
Foodservice operators may note that Western fast food is operationally more complex than coffee retail in many respects, and the team aimed to apply its Burger King China experience to Tims China's development.
After entering the capital markets, Tims China had access to additional capital support. Lu said the company would continue offering a combination of fresh, high-quality localized food and drinks at suitable price points, while using its core competitive advantages during a strong period for the industry.
FoodBud highlighted two points about Tims China.
First, among coffee chains in China, Starbucks was the strongest player in space-led store formats, but FoodBud argued there was still room for differentiated space-led coffee stores. Tims China's differentiation came from installing kitchens and using warm food as a point of distinction. This could extend the brand beyond breakfast into afternoon-tea and other dayparts. FoodBud noted that the breakfast market was highly competitive, but a strong position there could provide an important store-revenue foundation.
Second, FoodBud pointed to the strength of the capital structure behind the business. Tims China's rapid financing and store expansion resembled, to a degree, the earlier playbook used by Luckin Coffee, although at a slower pace.
FoodBud also noted that Tims China functioned as a large regional franchise operation in China. Its shareholder Cartesian Capital had also obtained China rights for Popeyes, another RBI brand. FoodBud had previously covered the relationship between Turkey's TFI and Cartesian Capital.
FoodBud's view was that coffee in China was a high-conviction category, but the key question was which players could scale quickly, improve operations, and survive over time. It also suggested that if Tims China later needed a broader capital-market story, Cartesian Capital could potentially combine the Popeyes business into the listed company, creating a multi-brand group structure somewhat similar to Yum China.
Note: IPO, SPAC, revenue, EBITDA, store-count, and forward-looking product-plan figures are historical and refer to the article's September 2022 context.