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Tim Hortons Secures Tencent Funding for China Expansion

By Rich Duprey – May 12, 2020 at 2:03PM

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The coffee shop looks to join the growing market in China.

Looking to expand in China to confront Starbucks' (SBUX -1.31%) growth directly, Restaurant Brands International's (QSR -0.29%) coffeehouse Tim Hortons said it has secured financing for the strategy from Chinese conglomerate Tencent (TCEHY -2.33%).

According to TechCrunch, the doughnut and coffee chain announced the funding on its Weibo social media account. Details on the amount were not available.

Coffee pouring into a Tim Hortons cup

Image source: Tim Hortons.

A crowded, but growing, market

Expanding another coffee chain in a country known for its love of tea may seem counterintuitive, but Starbucks has proved particularly adept at the exercise. Moreover, before its accounting scandal was uncovered, China's Luckin Coffee seemed to be on a growth spurt as well.

While Starbucks has a considerable lead, it's not expecting a return to growth until late this year, despite 98% of its 4,100 restaurants in China having reopened.

Having entered the country a little over a year ago, Tim Hortons trails far behind with about 50 restaurants, though it anticipates one day having as many as 1,500 locations. It plans to use the financing to upgrade its digital infrastructure and open more stores.

Partnerships seem to be a driving force in the space as Starbucks has teamed up with Alibaba for a broad retail development program covering stores, delivery, and distribution within Alibaba's supermarket division.

Tim Hortons' first-quarter systemwide sales dropped 10% on a decline in comparable store sales of a similar percentage due to the COVID-19 pandemic. 

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Luckin Coffee Inc., Starbucks, and Tencent Holdings. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Restaurant Brands International Inc. Stock Quote
Restaurant Brands International Inc.
QSR
$54.81 (-0.29%) $0.16
Starbucks Corporation Stock Quote
Starbucks Corporation
SBUX
$83.69 (-1.31%) $-1.11
Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
TCEHY
$35.16 (-2.33%) $0.84
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
BABA
$77.57 (-1.70%) $-1.34
Luckin Coffee Inc. Stock Quote
Luckin Coffee Inc.
LKNC.Y
$16.52 (3.15%) $0.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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