What company can turn news of consumer price increases into constant nationwide news-mercials that leave anchors and viewers yearning for a donut and a double double?
Hint: Its business name is missing an apostrophe (and some would argue a dollar sign too).
Yes. Tim Hortons. Or perhaps, more grammatically - and realistically - appropriate: Tim Horton’$.
For the past couple weeks Canada’s coffee shop has warned (or brilliantly advertised) of its four per cent price increase effective April 11, 2011.
It cites increased operational costs, including the price of food and coffee, along with increases in minimum wage, for the extra pennies on the dollar.
And when you have yearly revenue of $2.54 billion, those pennies are like gold.
Look, any company that can commission a study that finds idling in a drive-thru to be good for the environment, can turn lemons into lemonade, or perhaps pennies into financial aid.
Now, rather than point out Tim’s first quarter profit announcement of $78.9 million, which is up 18.7 per cent from last year, it seems more fitting to point out a minimum wage income in Toronto (the eighth most expensive city in the world, as of 2009).
Timmy's - at the intersection of Wealth & Poverty.
After all, the donut empire qualifies the ever-soaring minimum wage as an impetus for the new prices. And Ontario has the highest minimum “wage” in the country. At $10.25 an hour, working full time, this will earn a (very) gross income of $19,409 a year.
According to Statistics Canada, the low income cut-off (poverty line), for a single person in a city of 500,000 or more was $20,778 – in 2005 – pre-recession, pre-massive inflation.
Interestingly, Tim Hortons markets itself as a socially responsible company. Well, it also markets itself as “Always Fresh,” when in fact, it is almost always frozen.
Yes, Timmy’s fried dough balls start off as frozen dough balls – something co-founder Ron Joyce doesn’t even like. Granted, its coffee is always fresh, but not exactly fair as the company intimates with its “approach to fair trade coffee.” More on that later.
But, if Tim’s were so socially responsible, would it use below-poverty wages as an excuse to justify a cost increase? Heck, would it even pay these Timbit wages? And wouldn’t it stand to reason that if inflation affects the business’ finances, it would affect its employees’ finances too?
'Always Frozen' may be a fresher approach.
Its price increases are not so much about making up money, they’re about making more money. And in our capitalist-consumerist society there is nothing wrong with a business wanting to grow its bottom line.
Nonetheless, a huge part of its business is its employees.
Isn’t that why CEOs and board members are paid?
In 2009, the CEO of Tim Hortons, Don Schroeder, earned a total compensation of $2,788,628. Though it is not clear where Stats Canada ranks that on the low income cut-off chart, it is clearly a reflection of the company’s desire to compensate its employees, right?
In a message from Mr. Schroeder to these employees he noted:
We deal honestly with our co-workers, store owners, customers and suppliers. We treat them with the utmost respect, fairness, compassion and loyalty.
Our reputation as a fair and ethical Company, just like our reputation for high-quality food and service, is a valuable asset, and we are all responsible for protecting and strengthening it.
Well, if the utmost respect, fairness, and compassion equate to slave wages, then who wants to be treated fairly?
CEO Don Schroeder showing one of his faces.
Still, it is valid to say that Canada’s largest restaurant chain has a reputation as a fair and ethical company that is akin to its reputation for high quality food and service.
For if high quality food is defined as over-processed, super-refined, nutritionally sparse, made-from-frozen food (despite a tag line of “Always Fresh”), and if high quality service constitutes mediocrity, then sure, Tim Hortons’ reputation of fairness and ethics mirrors its reputation for food and service.
The aforementioned letter goes on to explain: Knowing and Doing What’s Right and Fair.
Among the suggestions in making such interpretations, Mr. Schroeder recommends questions that may help discover the difference between right and wrong. Such as:
“Am I being fair and honest?”
“Will I feel good about myself afterwards?”
If you cannot answer yes to these questions, Mr. Schroeder says you need to re-evaluate what you are doing.
So, Mr. CEO of Tim Hortons, are you being fair and honest in raising your prices, while complaining that minimum wage is just so expensive?
And how do you feel about yourself when you cash your cheque at the expense of your below poverty-line employees, who work grueling night shifts and clean feces?
Sure, costs for food have gone up, even while one owner claims donut portions have gone down 14.3 per cent.
Of course, prices for gas and coffee are greater than before, though we still don’t know where Tim’s gets its coffee -- coffee that is not purchased through its approach to fair trade program.
Yes. Timmy’s definition of fair is just as loose as its definition of fresh.
As much as it talks about helping coffee farmers in marginalized communities in the developing world, it will not disclose specifics of funding or allocations. Further, it does not participate in any certified fair trade operations; rather, Tim Hortons claims it’s created a better option and has been embraced by the farmers.
(Well, when you’re used to eating moldy bread, stale bread starts to look pretty good, doesn’t it.)
photo: Fraser Nelson
What’s more, the coffee that is farmed in these poor communities - rescued by the heroic jam buster - is not the coffee we buy at Tim Horton’s in North America. The company won’t say where the farmers’ coffee goes and where they find ours. Another non-disclosure.
But at least, as a publicly traded company, Canada’s caffeine crutch must reveal how it’s holding up through all the hardship of escalating costs.
Tim’s brags how shares have more than doubled from 2009 to 2010 and that from 2005 to 2010 revenues have consistently grown. Also key, last year, capital expenditures were much less than anticipated.
And, in 2010, the average same store sales growth in Canada was three to five per cent, and two to four per cent in the US.
Then the company applies a four per cent price hike in Canada and a three per cent hike south of the border.
Fascinating how the price hikes parallel sales growth, isn’t it.
Too bad Tim Hortons’ actions can’t parallel its words the same way.