Monday, December 8, 2014

Canada Brace Up! Tim Hortons to hike prices on selected menus

David Friend, The Canadian Press

Your morning stop at Tim Hortons is about to get a bit more expensive.

The restaurant chain says it plans to raise prices for both coffee and breakfast sandwiches at its Canadian locations starting next Wednesday.

A cup of coffee will go up by 10 cents, on average, though the change will vary by region, and the price of a breakfast sandwich will also rise in all provinces except Ontario.

"We have been able to hold our pricing stable since spring of 2011, however due to rising operational costs there will be a moderate increase," spokeswoman Michelle Robichaud said in an email.

The cost of breakfast sandwiches, like bacon and egg on an English muffin and the turkey sausage sandwich, will go up 10 cents to $2.99 before tax.

The move comes as Tim Hortons (TSX:THI) says it faces "significantly higher operating costs," which include rising prices for coffee beans and meat on the commodities market.

But it's not just food prices that have been expensive for the company.

During the third quarter, Tim Hortons booked $27.3 million in costs related to Burger King's agreement to buy the company. The deal is worth more than US$11 billion in stock and cash, but still requires the approval of shareholders and regulators.

Earlier this month, Tim Hortons' chief financial officer, Cynthia Devine, hinted that a coffee price increase could be on the horizon as futures contracts for Arabica beans nearly doubled this year due to various factors, including lack of rain in Brazil.

"It's something that we will, and are, working on closely with our restaurant owners to understand what actions may be necessary," Devine said during the company's most recent financial results conference call on Nov. 5.

In October, the price of Arabica beans jumped to a two-and-a-half year high, as weather forecasts for the region suggested that next year's crop could be dramatically impacted.

Tim Hortons locks itself into long-term contracts with coffee suppliers, meaning most deals were negotiated more than a year ago, which gives it flexibility and protection from market fluctuations.

Other coffee companies have already pushed their prices higher, including Starbucks which made the move during the summer, Keurig K-Cup maker Green Mountain Coffee Roasters and J.M. Smucker, which makes the Folgers brand.

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