Soaring coffee prices could mean a more expensive cup at Tim Hortons

Coffee drinkers at Tim Hortons may soon have to swallow a more expensive cup of joe as the restaurant chain responds to the soaring price of beans.

TORONTO — Coffee drinkers at Tim Hortons may soon have to swallow a more expensive cup of joe as the restaurant chain responds to the soaring price of beans.

Price for Arabica coffee have nearly doubled this year and chief financial officer Cynthia Devine said it’s a factor being taken into consideration as the company prepares for 2015.

“It’s something that we will, and are, working on closely with our restaurant owners to understand what actions may be necessary,” she said Wednesday during a conference call with analysts to discuss the company’s financial results.

“Coffee costs, as everyone knows, are much higher than they have been historically and it’s been a fairly continued kind of rise in those prices.”

Tim Hortons Inc. (TSX:THI) locks itself into long-term contracts with coffee suppliers, which gives it flexibility and protection from market fluctuations.

Most of the company’s key coffee deals were negotiated more than a year ago, which has allowed executives to navigate through one of the most volatile periods for coffee prices in recent memory.

But the value of coffee beans has nearly doubled this year, partly on concerns that lack of rain in Brazil could affect the world’s top exporter.

In October, the price of Arabica beans jumped to a two-and-a-half year high, as weather forecasts for the region suggested that next year’s crop could be dramatically impacted.

Already, some of Tim Horton’s competitors have jacked up how much they charge for a cup, in anticipation of future supply levels. Coffee chain Starbucks increased prices during the summer and other suppliers have followed suit, like Keurig K-Cup maker Green Mountain Coffee Roasters and J.M. Smucker, which makes the Folgers brand.

During the third quarter, Tim Hortons delivered results that exceeded analyst expectations, helped by more customers buying its higher-priced menu items like the crispy chicken sandwich and steak and egg breakfast sandwich.

Adjusted earnings per share totalled 95 cents, seven cents higher than analyst expected, according to a survey by Thomson Reuters.

However, overall profits were dragged lower by costs associated with Burger King’s agreement to buy the company, which pulled net income down to $98.1 million from $113.9 million a year earlier.

Burger King agreed in August to buy Tim Hortons in a friendly deal worth more than US$11 billion in stock and cash. The deal still requires shareholder and regulator approvals.

Excluding $27.3 million in costs related to the deal with Burger King Worldwide Inc. and 3G Capital as well as $1 million in corporate reorganization costs, Tim Hortons said it earned an adjusted operating profit of $196.1 million for the quarter, up from $169.8 million a year ago.

Total revenue rose to $909.2 million from $825.4 million.

Tim Hortons reported same-store sales were up 3.5 per cent in Canada as customers spent more, offsetting a slight decline in the number of same-store transactions, while in the U.S. same-store sales increased 6.8 per cent.

Chief executive Marc Caira said more attention will be paid to rolling out lunchtime side dishes, which complete a combo and help boost the average dollar amount spent by each customer per visit.

“That’s work in progress and you should expect to see a lot of exciting things in that area in the months ahead,” he told analysts.

Tim Hortons is already testing a few side dish ideas, like both a “classic” and “Asian” coleslaw that are already available at select locations in the Barrie and Kitchener, Ont., areas.

Tim Hortons shares were ahead 73 cents at $92.57 Wednesday afternoon at the Toronto Stock Exchange.

Just Posted

Red Deer city council aims to force larger non-profits to become more accountable

New bylaw defines which not-for-profits must pay for a business licence

Red Deer city council will seek public input on portable signage March 4

Council gave initial approval to retaining 100-metre separation distance

Smaller, more affordable, lots wanted in Red Deer’s Evergreen neighbourhood

Council approves first reading of requested lot-size changes

RDC’s new name to be unveiled in February

The next big milestone for Red Deer College is a new name,… Continue reading

Lacombe considering licensing cats

Council is expected to take a look at cat potential licensing regulations next month

2-for-1: Total lunar eclipse comes with supermoon bonus

On Sunday night, the moon, Earth and sun lined up to create the eclipse, which was visible throughout North and South America

Opinion: Faith in immigration must be preserved

Canada has a deserved reputation for extending its arms to newcomers, but… Continue reading

Olympian Adam van Koeverden wins federal Liberal nomination in Ontario riding

MILTON, Ont. — Former Olympic flag-bearer Adam van Koeverden will be carrying… Continue reading

World champion Osmond says it’s “really nice” not to know what future holds

SAINT JOHN, N.B. — Kaetlyn Osmond has a world title, Olympic medals… Continue reading

World economy forecast to slow in 2019 amid trade tensions

For Canada, the IMF’s estimate for growth in 2019 was 1.9 per cent, down from expected global growth of 3.5 per cent

Timberlake pops in on patients at Texas children’s hospital

DALLAS — Justin Timberlake has pulled some sunshine from his pocket for… Continue reading

UK police speak to Prince Philip about not wearing seatbelt

LONDON — British police have spoken with Prince Philip after the husband… Continue reading

‘Gotti’ leads Razzie nominations, Trump up for worst actor

The nominations were announced on Monday, Jan. 21 with some movies earning up to six nominations

Curtain rising Sunday night on total lunar eclipse

CAPE CANAVERAL, Fla. — The celestial curtain will be rising soon on… Continue reading

Most Read