Tim Hortons planning 20 stores in Beijing

Canadian coffee chain Tim Hortons' China unit plans to open 20 new stores in Beijing by the end of this year as part of its efforts to have 1,500 stores over the next nine years in China, further escalating the competition in on-premise coffee consumption.

Its first store in Beijing opened on Friday at The Place shopping mall in the city offering the company's signature coffee, sandwiches and desserts, and featuring design elements that integrate Canada's maple leaf symbol with Chinese cultural elements.

Yongchen Lu, CEO of Tim Hortons China, said the move is in line with the company's goal of having 1,500 stores in nine years, with a priority on markets in the northern and eastern parts of the country. Next year, the company will expand its footprint to South China.

"We plan to start from first-tier cities and increase the density of our stores in cities where we have had a presence with multiple store formats. We are also heading toward the second-and third-tier cities."

In May 2018, Tim Hortons China was formed as a joint venture between Tim Hortons' parent company, RBI, and Cartesian Capital Group. Currently, the firm has more than 50 stores in China, mostly in Shanghai. There are around 5,000 Tim Hortons stores around the globe.

"The coffee market in China still has massive potential with the market far from being settled in its competitive structure," said Jason Yu, general manager of Kantar Worldpanel China.

According to the On-Premise Coffee Consumption report released by research firm Mintel Group Ltd in December 2019, the on-premise coffee market value had reached 42.6 billion yuan ($6.07 billion) in 2019 and will have an annual growth rate of 15.6 percent from 2020 to 2024.

The number of coffee chain stores in China was around 126,000 in 2019. In the next five years, the volume will grow at 11.9 percent every year, according to Mintel.

More players have entered the market and taken different positions, such as good value for money or specialty, said the report. Starbucks is estimated to be planning a steady outlet expansion and eyeing a dominant role in terms of value share, enhanced further by its easier online ordering and offline pickups, according to Mintel.

Costa, acquired by Coca-Cola, has also seen a steady store expansion and is gaining more strength by introducing innovations in food and beverages. Luckin Coffee, the homegrown rival to Starbucks, has 4,000 stores, but is facing an uncertain future after an accounting scandal in April.

Buoyed by the market potential, Chinese internet giant Tencent decided to invest in Tim Hortons China this May. The collaboration with Tencent will further meet Chinese consumers' constantly changing demand for better coffee, spurring the industry development, said Lu from Tim Hortons.

"We have been actively pushing up our digital innovation and enhancing online-to-offline integration, including digitalizing the selection of store locations," Lu said.