Coffee retailer Timothy’s puts bite on mmmuffin

Several mmmuffins locations are located very near to Timothy's outlets but they don't directly compete, McKinnon said. "It's a different concept. It has a different customer."

The Toronto Star
January 8, 2002

Coffee retailer Timothy’s puts bite on mmmuffin
Franchise chains to continue as separate brands
Steven Theobald

Timothy is now the mmmuffin man.

Specialty retailer Timothy's Coffees of the World Inc. has purchased the 90-store mmmuffins Canada Corp. chain, its second acquisition in just over a year.

The deal allows Timothy's to expand its presence immediately in the competitive coffee sector with a proven concept, said chief executive Becky McKinnon.

"It's certainly a hard market to break into with a new brand," said McKinnon, the controlling shareholder of privately held Timothy's.

McKinnon said she will retain the mmmuffins banners — mmmarvelous mmmuffins, mm Specialty Bakery & Beverage Co., Michel's Baguette and Muffin Break.

"Our feeling is that the stores probably need some updating and some modernizing of the mmmuffins menu," she added. "But the mmmuffins brand name has strong currency across Canada."

It may come as a surprise to some but according to market research firm NPD Group Canada Corp. Canadians eat more than twice as many muffins as doughnuts, an average of 20.3 muffins per person last year versus 8.1 doughnuts.

Like Timothy's, mmmuffins stores are operated as franchises.

In November, 2000, Timothy's bought the 52-store GrabbaJabba café chain to bolster its presence in Western Canada. Most have now been converted to the Timothy's banner, bringing the total to 162, including 21 in the United States.

Several mmmuffins locations are located very near to Timothy's outlets but they don't directly compete, McKinnon said.

"It's a different concept. It has a different customer."

Synergies come two-fold, she said.

‘Our feeling is that the stores probably need some updating and some modernizing of the mmmuffins menu. But the mmmuffins brand name has strong currency across Canada.’
— Becky McKinnon, controlling shareholder of Timothy's

First, mmmuffins has a commissary that will be used to produce currently outsourced baked goods sold at Timothy's.

Second, Timothy's coffee — it roasts its own — will replace the lower quality mmmuffins brew.

A better cup is exactly what the public is demanding from all coffee sellers, said Ailene MacDougall, vice-president of the food service information group at NPD Group Canada.

The surge in the number of specialty cafés in Canada — 6,487 locations at the end of 2000 — has produced a discriminating consumer, MacDougall said.

"It has raised expectations," she said. "People now expect the consistent quality."

McKinnon said she hasn't decided whether or not the coffee will be branded Timothy's at the muffin locations.

She said she is also considering offering mmmuffin-branded baked goods at Timothy's locations.

"We will be doing some testing for customer response."

McKinnon wouldn't disclose financial details of the deal announced yesterday.

Mmmuffins was purchased from Dallas-Based Richmont Corp., the investment arm of the Mary Kay Inc. cosmetics empire.

Richmont bought mmmuffins in 1983 from Toronto-based founder Michael Bregman.

Bregman, chairman of Second Cup Ltd., is himself in the middle of a takeover attempt. This one is hostile and prompted a shareholder rights plan, or poison pill, aimed at thwarting the takeover bid by Cara Operations Ltd.

Cara, which already owns 39 per cent of Second Cup shares, is getting a hearing today in front of the Ontario Securities Commission to argue to remove the poison pill.

Cara is offering $7.50 a share, or $42.5 million.


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