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Tim Hortons’ Zone Defense Fights Starbucks & McDonald’s for Canadian Customers

North American Expansion of U.S. Retail Chains Across Mexico & Canada Borders

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Tim Hortons’ Zone Defense Fights Starbucks & McDonald’s for Canadian Customers
Barbara Farfan for About.com
Updated March 07, 2013
<< Continued from Page One <<

The largest North American retail chains might not be happy about U.S. retailers sharing the love across their borders, but it's really only Canadian and Mexican consumers that can successfully fight the invasion and send American retailers back home. That might happen, but for now, U.S. retailers are packing a big bag in anticipation of a long visit.

The Canadian retail chain that seems to be best girded for battle with the U.S. retail invasion in 2013 is the iconic Canadian fast food brand, Tim Hortons. Reportedly Tim Hortons is still capturing about 80% of the $3 billion that is spent by Canadians on coffee away from home each year. Agriculture Canada says that 64% of Canadians drink coffee every day, and these coffee-lovin' Canuck stats are sure to catch the attention of any American fast food chain with coffee brewing equipment. Tim Hortons seems ready prepared for the competition with a strong retail zone defense.

I have seen Canadians practically dig a tunnel in a snowstorm in order to get their daily Timmy's caffeine fix. There are even urban legends which say that Tim Hortons puts nicotine into the fiber of its coffee cups and that's why Canadian coffee drinkers are so addicted to their Timmy's. Nonetheless, Tim Hortons has not been resting on its market share or legacy brand laurels.

When McDonald's started investing $1 billion to build and renovate McCafes in Canada a couple of years ago, it also started getting aggressive with its coffee program, offering free coffee promotions to Canadian coffee drinkers for a week at a time. (No doubt there has been some American study which determined that one week is the amount of time it takes daily coffee drinkers to get addicted to a new taste.)

And if that wasn't enough of a battle, Starbucks is launching a new attack on Tim Hortons with in-store locations inside all of those new Canadian Target stores. Headlining on the Target-Starbucks menu is the already successful Starbucks Blonde roast, which was actually launched a year ago and is reportedly being consumed twice as often by Canadian coffee drinkers as it is by Americans. The Canadian market is the largest of Starbucks' international operations, with more than 1,200 locations already operating and presumably profitable.

The Tim Hortons counter attack includes expanded breakfast and lunch sandwich menu items, and free Wi-fi to match McDonald's and (sometimes) Starbucks' standard offerings. Restaurant renovation and parking lot expansion are next in the Timmy's anything-Americans-can-do-Canadians-can-do-better tactics, along with a new buzz-worthy move to install battery charging stations for electric cars at strategic Tim Hortons locations.

Timmy's has also turned up the volume on its wildly popular annual RRRoll Up the Rim to Win contest promotion and this year is awarding 40 new 2013 Toyota RAV4 vehicles, 100 MasterCard $5,000 prepaid cards, and other prizes to literally millions of Tim Hortons coffee drinkers. This annual giveaway bonanza has the ability to give happy customer vibes a boost. But the long-term, long-lasting customer loyalty advantage that Tim Hortons has that no American competitor has (yet) is a true and genuine connection to hockey, which is the biggest religious sect in all of Canada.

Tim Hortons was founded by legendary Canadian hockey star Tim Horton, and this month marked the 39th anniversary of his untimely death. If all other marketing strategies fail for Tim Hortons, they can always play the Hockey-Timmys-Country loyalty card, which you can wager is already being passed around the marketing boardroom in anticipation of the upcoming 40th anniversary. They'll be tippin' a cup to Timmy next year for sure, dontcha know.

Not that it's any comfort to Canadian retailers, but the American invasion is not exclusive to its northern border. Mexico is also a big target in the sights of the largest U.S. retail chains. According to Mexico's National Statistics Institute, the Mexican economy grew by 3.9% in 2012, which was pretty darn good percentage-wise compared to the rest of the world during that same year.

It's not just the 112 million consumers in the growing Mexican economy that is attractive to American retailers, it's also the 74% of Mexican households that Credit Suisse now estimates has an upper-middle class income. According to the 2012 Global Retail Development Index, Mexico is one of the 30 most desirable countries for retail expansion, based on population, GDP per capita, and political environment.

Even as the largest Mexican retail chains are working hard to get retailing off the street markets and into the malls, U.S. retail chains are wanting to capitalize on that shift and grab their share of growing mall traffic.

Of course we all know about the huge presence and alleged corrupt dealings of Walmart in Mexico. But Costco, Victoria's Secret, Starbucks, and just about every American based fast food chain have been successfully retailing their wares to Mexican consumers on Mexican soil as well.

The newest American retail entry into the Mexican retail scene is American Eagle Outfitters, which is planning to open six stores in Mexico City in 2013, and 50 or so outlets in Mexico in the near future. Reportedly American Eagle merchandise sold by local independent street vendors is already popular, so a brick-and-mortar presence for the chain only makes sense.

Rival Aeropostale is poised for some retail skirmishes with American Eagle after having struck a deal with Mexico's fifth largest retail chain, El Puerto de Liverpool, to open Aeropostale branded departments inside Liverpool stores, and build standalone Aeropostale stores which will be operated by Liverpool. The Gap is already a well-established retailer in Mexico that has also announced its intention to expand in Mexico. All of these retailers are hoping to capture a sizable portion of the money spent on shoes and clothing in Mexico, which increased 11.7% in 2012, according to the Antad Mexican Retail Association.

While Mexican and Canadian retailers undoubtedly see the aggressive moves by the U.S. retail industry as an invasion, to American retailers it's just an easy and natural North American expansion of its wonderfulness to poor deprived consuming neighbors who don't know what they've been missing. Americans might not know how to create, build, or produce much of anything any more, but we do know how to retail.

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