Tim Hortons, the Canadian coffee and doughnut giant, has raised a new funding round for its Chinese venture. Sequoia China leads the investment with participation from Tencent, its digital partner in China, and Eastern Bell Capital. The round comes two years after Tim Hortons made its foray into China’s booming coffee industry.
Tim Hortons didn’t disclose the amount of its latest fundraise but noted in a social media post that the proceeds will be used for opening more stores, building its digital infrastructure, brand presence, and more.
Tencent, the Chinese social media and entertainment behemoth, first backed the 57-year-old Canadian coffee chain last May. At the time, the tie-up was seen as Tencent’s move to counter archrival Alibaba’s alliance with Starbucks to deliver coffee and help the American coffee titan go digital in China.
Tim Hortons’ collaboration with the WeChat parent is in a similar vein. It has accumulated three million members through its WeChat mini-program, a type of lightweight app that runs within the instant messenger. To appeal to young Chinese consumers, Tim Hortons opened an esports-themed café with Tencent, China’s biggest gaming company.
Two years into operating in China, Tim Hortons says it has reached storefront-level profitability with a footprint of 150 locations across 10 major cities. It plans to add more than 200 locations in 2021 and reach 1,500 stores nationwide in the next few years.
The dramatic rise and fall of coffee delivery startup Luckin brought China’s coffee market prospects to the forefront. Despite the investment frenzy around Luckin and other coffee businesses, coffee drinking still has a relatively low penetration in China compared to countries like the United States and Germany. On the other hand, coffee consumption is growing at a much faster rate of 15% in China, well above the global average of 2%. It is projected to reach 1 trillion yuan ($150 million) in 2025, a 2020 report by Dongxing Securities.