Tim Hortons in China: Amid a Price War in Coffee

In January 2024, a roaring price war was sweeping the coffee industry in China. The war was triggered by a price competition between two largest coffee chains in the market, centering on a ¥9.9 per cup promotion and eventually engulfing almost every coffee shop. Industry-wide profit margins were compressed and countless independent coffee shops and smaller chains collapsed.This presented Yongchen Lu, the chief executive officer of TL International Limited (Tims China), with a dilemma. As the master franchisee of Tim Hortons in China, Lu’s company was one of the few premier brands in the market. The relentless price war pressed Tims China to follow suit and cut prices to protect its market share, but Lu was concerned that such drastic cuts would jeopardize the brand equity he had painstakingly built. Should Tims China join the price war and if so, how should it engage?