Sylvain Charlebois is a professor in food distribution and policy, and scientific director of the Agrifood Analytics Lab at Dalhousie University.
RBI has blamed currency, franchising turnover issues and extra supply-chain recalibration costs for the less-than-convincing results this past quarter.Deborah Baic/The Globe and Mail
Restaurant Brands International Inc. (RBI) has posted less-than-convincing results this past quarter. Markets were surprised to see results coming in below expectations. Sales were slightly up, but what really caught many by surprise was the drop in same-store sales, of about 0.6 per cent. For stores outside of Canada, same-store sales dropped a whopping 2.6 per cent, compared with 0.4 per cent for Canadian stores. These numbers should not only be of great concern for RBI, but also suggest RBI’s turnaround is not working, at least not yet.
The company blames currency, franchising turnover issues and extra supply-chain recalibration costs for their missed mark. The weather and frigid winter conditions across the country may also have been a factor, according to RBI. But problems are much more deep-rooted than that. RBI owns two other chains, Burger King and Popeyes. While Burger King’s comparable sales increased 2.2 per cent, Popeyes’s comparable sales increased 0.6 per cent, a significant contrast with Tim’s situation. And while Tim Hortons appears to be dealing with some unforgiving headwinds, McDonald’s and Starbucks are still doing quite well, despite the weather, currency or any other “uncontrollable factors” that RBI can throw at us.
The uptake on the Roll Up the Rim to Win campaign was much lower than anticipated by the fast-food giant. Even though Tim Hortons went out of its way to give more prize incentives, the campaign did poorly. As more observers criticized the chain for its fascination with unrecyclable cups, it may have received the wake-up call it needed to reboot the program. Now, Tim Hortons will aim for a more seamless digital integration for its campaign next year.
Such a change is probably five years too late, if not more. The damage to the promotional brand may now be tainted by RBI’s stubbornness in continuing without making any changes. Environmental stewardship has more market currency than ever, especially when packaging and promotions are involved. The Roll Up the Rim campaign checks both boxes in a negative way. Changing the nature of a campaign such as Roll Up the Rim is not easy, but doing nothing is much more costly, as RBI is figuring out. Undermining the will of consumers to make a difference for the environment is a commercial non-starter, more than ever.
Grocers are moving in that same direction, as well. Metro was first when it announced a few weeks ago that it was allowing its customers to come in with their own plastic containers. Food-safety risks are real, but Metro felt reducing the number of plastic containers is more critical to its business than food safety. Other grocers will follow suit, mind you with a different approach, but change is coming, nonetheless.
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For years, though, the Roll Up the Rim approach was just looking for trouble. Every spring, as snow vanishes across the country, countless roll-up cups can be found everywhere. The company makes almost 300 million of these cups to support the campaign every year. Some are bound to end up in parks, on fences, in rivers and on roadsides. The campaign takes place in the middle of winter, when littering is likely more widespread. Wind, snow and, of course, human thoughtlessness often win over a short walk to the nearest garbage can. Not all of us lead perfect, responsible lives, all the time.
So, a reboot of the campaign is much-needed and frankly long overdue. Tim Hortons’s plan to engage customers was to launch a loyalty program, years after Starbucks and other chains had already done so. It is hard to imagine why Tim Hortons took so long to launch a loyalty program in an era in which such programs can make or break a company at retail. Tim Hortons has been beating that drum for a few months now. Employees are clearly well trained and franchise owners appear to be on board with the loyalty program. Only time will tell, but it is unclear how this new program will offset the effects of a struggling flagship promotional program, that is Roll Up the Rim.
As RBI is trying to put in the past its battle with a group of dissident franchisees who vocally criticized management and RBI’s strategic approach, the company intends to refresh Tim Hortons, and even go international. But with sluggish same-store sales across the board, RBI apparently has more work to do.