The proposed takeover of Tim Hortons by Burger King (BK) has left large sections of Americans and Canadians aghast. For just as Burger King is quintessentially American so is Tim Hortons a storied and beloved Canadian brand. There is a general sense of dismay among pundits accross both sides of the border for Americans feel that the proposed move of BK's headquarters to Canada for "tax inversion" is an act of betrayal while Tim Hortons attempt to expand in America and global markets with the real estate presence of BK will somehow dilute the charm of Tim Hortons coffee, according to Canadians.
Just as Americans fire up their grills for the Labor day weekend with chilled Budweiser beer, there is talk of boycotting Burger King. And by the way, Budweiser is a Belgian company as mentioned in an earlier post. The larger question is - will consumers care? Here are some thoughts:
- Consumers care about value: Marketing is about creating,communicating,delivering and pricing for value. The marketing (4 P's in the definition of marketing). The question is whether the combined entity be able to deliver value.
- Competing in American fast food is tough: All manner of financial manoeverring is great, but competing in the American fast food or cofee is tough. That is why Burger King is no. 3 after McDonald's and Wendy's. You not only have to get your supply chain right but you have to mobilize franchises and front line service employees to perform- at minimum wage.
- Dunkin Donot is tough coffee competition in America: Walk into an American office or college classroom in the morning and you see folks carrying Dunkin Donut coffee cups. Franchisees tell you that even at $1.5 million there is such huge consumer pull that hard work (16-18 hours a day) pays off as people start driving through for cofeee at 4 am.
- Consumer pull is through long years of brand building: Long years of brand building through advertising, franchise motivation and sustained efforts on the micro-level moving parts of a fast food business is the well known secret of the fast food business.
- Ownership does not matter: So long as the beer is Bud, consumers don't seem to care if the owner is Belgian. And by the way the owners of the combined entity for Burger King-Tim Hortons is Brazilian !
- Merger strategy is easy to come up with- implementation is hard: Merger strategy is easy and elegant, but it is much harder to get the combined entity to perform as numerous research shows.
Call it the hegemony of the corporate finance function where changing columns of an excel spreadsheet is the easiest thing to do, compared to getting a franchisee to buy into the vision of a combined entity. And it is at the franchisee that the rubber hits the road. Will the consumer feel the glow of the brands as they deal with the powerful synergy of Tim Hortons and Burger King? Time will tell. Contact StratoServe.