This one really has to make you scratch your head.
Just over a year ago I wrote in a post titled “Wendy’s: Tim Horton’s Spin Destroyed Long Term Value”:
“Given the popularity of the Tim Horton’s coffee and the overwhelming success McDonald’s (MCD) has had with it’s premium coffee offering, one has to wonder how much better off Wendy’s (WEN) would be if they were serving the coffee in their stores and at their drive-thru’s. One thing is for sure, they would not be any worse AND they would be driving traffic to their stores for the coffee”
Now we have word from the WSJ:
“Wendy’s International Inc. is pushing further into specialized coffee drinks with a major new coffee program in Mississippi and iced-coffee tests in three cities.
In the past few weeks, about 65 franchised Wendy’s locations in Mississippi have started serving a line of iced coffees as well as a concoction called a Frosty-cino. Separately, Wendy’s has been testing a different line of iced-coffee drinks in Phoenix, Pittsburgh and Kansas City, Mo., since the spring as part of its expansion into breakfast.
The moves come as fast-food chains are placing more emphasis on beverages, having seen how Starbucks Corp. and others have drawn customers with specialized drinks. McDonald’s Corp. (MCD) plans to add lattes, cappuccinos and other upscale coffee drinks at all of its U.S. locations by the end of next year.”
Again, I have to ask. how much better off would Wendy’s be if they had kept the Tim Horton’s chain, which by the way, already does all the things Wendy’s is now trying to do again from scratch. Tim Horton’s (THI) has increased revenue from $1.3b to $1.8b from FY 2005 to FY 2007 and will surpass $2.1 billion this year.
The spin of Tim Horton’s was the result of short term thinking and now, that thinking os going to begin to cost shareholders money.
Disclosure (“none” means no position):Long MCD, none
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